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United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021
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
(State or Other Jurisdiction of
Incorporation or Organization)
3800 S. Virginia Street
Reno, Nevada
(Address of Principal Executive Offices)
88-0300760
(I.R.S. Employer
Identification No.)
89502
(ZIP Code)
Registrant’s telephone number, including area code: (775) 335-4600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Trading Symbols
Name of each exchange on which registered
Common Stock, $0.01 par value per share
MCRI
The Nasdaq Stock Market LLC
(Nasdaq-GS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ⌧
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, a 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:
adr
Large Accelerated Filer ⌧
Non-Accelerated Filer ☐
Smaller Reporting Company ☐
Accelerated Filer ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by checkmark 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ⌧
The aggregate market value of voting and non-voting common equity held by nonaffiliates as of June 30, 2021 (the last business day of the registrant's most completed second fiscal quarter), based
on the closing price as reported on The Nasdaq Stock Market (SM) of $66.17 per share, was approximately $963.9 million.
As of February 22, 2022, the registrant had 18,700,620 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant’s 2021 Annual Meeting of Stockholders, which Proxy Statement shall be filed with the Commission not later than 120 days after the end of the
fiscal year covered by this report, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
Item
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Table of Contents
Page
Number
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Stockholder’s Equity for the years ended December 31, 2021, 2020 and
2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Monarch Casino & Resort, Inc. and Subsidiaries Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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ITEM 1. BUSINESS
PART I
Monarch Casino & Resort, Inc. was incorporated in Nevada in 1993 and, along with its consolidated subsidiaries,
is referred to collectively in this Annual Report on Form 10-K as “Monarch,” “the Company,” “we,” “our,” and “us.”
Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and
the Monarch Casino Resort Spa Black Hawk (the “Monarch Black Hawk”), a hotel and 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. We also own Chicago Dogs
Eatery, Inc. and Monarch Promotional Association Inc., both of which were formed in relation to licensure
requirements for extended hours of liquor operation in Black Hawk, Colorado.
Our business strategy is to maximize revenues, operating income and cash flow 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 service and cost efficiencies.
The Atlantis Casino Resort Spa
The Atlantis is located approximately three miles south of downtown in the generally more affluent area of Reno,
Nevada. The Atlantis features approximately 61,000 square feet of casino space; 818 guest rooms and suites; eight
food outlets; two gourmet coffee and pastry bars and one snack bar; a 30,000 square-foot health spa and salon with an
enclosed year-round pool; two retail outlets offering clothing and gift shop merchandise; an 8,000 square-foot family
entertainment center; and approximately 52,000 square feet of banquet, convention and meeting room space. The
casino features approximately 1,400 slot and video poker machines; approximately 37 table games, including
blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge; and a poker room. The
Atlantis also offers a mobile race and sports betting app which is available to patrons who are physically located within
the state of Nevada.
Through an enclosed skywalk, Atlantis is the only hotel facility to be physically connected to the Reno-Sparks
Convention Center. The Reno-Sparks Convention Center offers approximately 500,000 square feet of leasable
exhibition, meeting room, ballroom and lobby space.
Operations at the Atlantis are conducted 24 hours a day, every day of the year. Business is seasonal in nature, with
higher revenues during the summer months and lower revenues during the winter months.
Atlantis Casino. The Atlantis offers what we believe to be higher than average payout rates on slot machines
relative to other Northern Nevada casinos. We seek to attract high-end players through high quality amenities and
services and by extension of gaming credit after a careful credit history evaluation.
Hotel and Spa. The Atlantis includes three contiguous high-rise hotel towers with a total of 818 rooms and suites.
The rooms on the top seven floors in the third tower are nearly 20% larger than the standard guest rooms and offer
restricted elevator access, and a private concierge service.
The Atlantis hotel rooms feature high end design and furnishings as well as nine-foot ceilings, which create an
open and spacious feel. The third hotel tower features a four-story waterfall with an adjacent year-round swimming
pool in a climate controlled, five-story glass enclosure, which shares an outdoor pool deck with a seasonal outdoor
swimming pool and year-round whirlpool. The Salon at Atlantis is a full-service salon overlooking the third-floor
sundeck and outdoor seasonal swimming pool and offers salon-grade products and treatments for hair, nails, skincare
and body services for both men and women. Our Spa Atlantis is a high-end health spa located adjacent to the
swimming area that offers treatments and amenities unique to our market. The hotel rooms on the spa floor feature
décor that is themed consistent with the spa. The hotel features glass elevators that rise the full 19 and 28 stories of the
respective towers providing panoramic views of the Reno area and the Sierra Nevada mountain range.
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The average occupancy rate, average daily room rate (“ADR”) and revenue per available room (“REVPAR”),
calculated by dividing total hotel revenue by total rooms available, at the Atlantis for the following periods were:
Occupancy rate
ADR
REVPAR
2021
82.10 %
Year Ended December 31,
2020
71.30 %
2019
88.44 %
$ 123.18
$ 114.85
$ 108.44
86.85
$
$
$
124.94
117.77
We continually monitor and adjust hotel room rates based upon demand and other competitive factors.
Restaurants and Dining. The Atlantis has eight restaurants, two gourmet coffee bars and one snack bar as
described below:
● The 475-seat, Toucan Charlie’s Buffet & Grille, which offers a wide variety of food selections from around
the globe including a carving station, live action Pho and Mongolian Bar-b-que, made-to-order salads, artisan
charcuterie with a variety of imported and domestic cheeses, and an expansive array of desserts from our in-
house bakery including house-made gelato;
● The 160-seat Atlantis Steakhouse, a fine dining destination featuring Allen Brothers prime steaks from
Chicago, fresh seafood, and numerous tableside presentations of classic steakhouse dishes;
● The Bistro Napa, featuring creative wine country cuisine served in a 140-seat main dining room with a
central wine cellar and an adjacent upscale 60-seat lounge;
● The Oyster Bar on the Sky Terrace offering pan roasts made-to-order, fresh seafood, cioppino, house made
chowder and bisques;
● Sushi Bar serving creative, made-to-order sushi rolls with a wide variety of raw and cooked options, all
offered in all-you-care-to-eat lunch and dinner settings. Combined, the Oyster Bar and Sushi Bar can
accommodate up to 137 guests;
● The 178-seat Purple Parrot coffee shop, which serves breakfast and American comfort food 24 hours a day;
● The 92-seat Red Bloom Asian kitchen, featuring a modern twist on authentic Asian crafted dishes inspired by
the Far East, including tasteful dishes from China, Japan, Korea, Singapore, Thailand and Vietnam.
● The 170-seat Manhattan Deli featuring authentic New York deli favorites like matzo ball soup, piled high
sandwiches, salads, house made soups, bagels and lox, New York style pizza and famous New York
cheesecake;
● Two gourmet coffee bars offering specialty coffee drinks, “grab and go” sandwiches, house made gelato and
freshly baked pastries; and
● The Chicago Dogs Eatery, a snack bar, serving Chicago-style hot dogs, pizza, ice cream and arcade-style
refreshments.
The Sky Terrace. The Sky Terrace is a unique structure with a diamond-shaped, blue glass body suspended
approximately 55 feet, and spanning 160 feet across South Virginia Street, Reno’s main thoroughfare. The Sky Terrace
connects the Atlantis with parking on our 16-acre site across South Virginia Street. The structure rests at each end on
two 100-foot tall Grecian columns with no intermediate support pillars. The interior of the Sky Terrace houses the
Oyster Bar, the Sushi Bar, a video poker bar, banks of slot machines and a lounge area.
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The Monarch Casino Resort Spa Black Hawk
Monarch Casino Resort Spa Black Hawk features approximately 60,000 square feet of casino space;
approximately 1,100 slot machines; approximately 40 table games; a live poker room; a keno counter and a sports
book. The resort also includes 10 bars and lounges, a gourmet coffee bar as well as four new dining options including a
twenty-four-hour full-service restaurant, 250-seat buffet-style restaurant, the Monarch Chophouse (a fine-dining
steakhouse), and Bistro Mariposa (a specialty restaurant). The resort offers 516 guest rooms and suites, banquet and
meeting room space, a retail store, a concierge lounge and an upscale spa and pool facility located on the top floor of
the tower. The resort is connected to a nine-story parking structure with 1,350 parking spaces, and valet parking, with
total property capacity of approximately 1,500 spaces. The Monarch Black Hawk also offers a mobile sports betting
app which is available to patrons who are physically located within the state of Colorado.
Location. Strategically located at the entrance to Black Hawk, Colorado, Monarch Black Hawk is the first
property encountered by visitors arriving from Denver and other major population centers via Highway 119.
Hotel and Spa. The Monarch Black Hawk includes a high-rise hotel tower with 516 rooms, 106 of which are
suites. The tower also includes a private concierge lounge and world-class spa and pool deck on its top floor.
The average occupancy rate, ADR and REVPAR at the Monarch Black Hawk for the following periods were:
Occupancy rate
ADR
REVPAR
Year Ended December 31,
2021
67.90 %
2020
(1)
29.60 %
$
$
182.78
132.75
$
$
177.63
52.97
(1) The phased opening of the hotel tower at Monarch Black Hawk began in November 2020.
Quality. Established as high-quality gaming resort in Colorado for gaming, dining and lodging.
Higher Tier Play. Through its superior product and service, the property is designed to attract and retain the
highest tier guests in the market.
Market Growth. The Colorado market is poised for gross gaming revenue expansion following the passage of
Colorado Amendment 77 on November 3, 2020, with which effective May 1, 2021, the betting limits (previously
capped at $100 per bet) were removed and new games (including baccarat, pai gow tiles and keno) were allowed.
Restaurants and Dining. Currently, the Monarch Black Hawk has four restaurants and a gourmet coffee bar, as
described below:
● The 250-seat Monarch Buffet, which offers a wide variety of food selections from around the globe including
a carving station, live action Pho and Mongolian Bar-b-que, artisan charcuterie, and an expansive array of
desserts;
● The 160-seat 24/7 restaurant, where guests can savor contemporary American and Asian cuisine in a
sophisticated yet comfortable atmosphere with an emphasis on fresh flavors and quality ingredients;
● The 110-seat Monarch Chophouse, a fine dining destination featuring 28 day aged, USDA prime cuts of beef
chosen for their superior marbling and flavor, fresh seafood, and Colorado lamb in an elegant atmosphere
with unsurpassed service and attention to detail;
● The 180-seat Bistro Mariposa, an elevated Southwest Cuisine restaurant; and
● Java, etc., a gourmet coffee bar offering specialty coffee drinks, “grab and go” sandwiches, house made
gelato and freshly baked pastries.
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Acquisition, Improvements and Additional Expansion Potential
We seek to identify and evaluate strategic expansion and acquisition opportunities through market and detailed
financial analyses. We develop overall master plans and then aim to execute each phase of the master plan after re-
evaluation of the current market conditions and comparison against other capital investment opportunities.
We have continuously invested in upgrading our facilities. Capital expenditures were $37.8 million in 2021, $46.4
million in 2020 and $134.9 million in 2019. During the last three years, capital expenditures related primarily to the
Monarch Black Hawk Expansion Plan, the major redesign and upgrade of several of the hotel suites at Atlantis, the
new Red Bloom Asian kitchen at Atlantis, the redesign and upgrade of the Atrium bar at Atlantis, ongoing capital
maintenance spending, and the acquisition of gaming equipment at both of our properties.
We have two potential options for expansion at our Atlantis property. First, we could further expand our existing
hotel and casino, thereby providing more hotel rooms, casino floor space, restaurants and other amenities. Second, we
could develop the 16-acre parcel of land that we own across South Virginia Street from the Atlantis. This site is
connected to the Atlantis by the Sky Terrace and is currently used for surface parking and special events related to the
Atlantis. Our 16-acre parcel of land meets all current Reno zoning requirements in the event we decide to build another
resort casino or entertainment facility. We also own additional land adjacent to our two large sites that would facilitate
expansion opportunities through administrative and other non-operational uses.
On August 28, 2015, we entered into a 20-year lease (the “Parking Lot Lease”) with Biggest Little Investments,
L.P. (“BLI”) with respect to a portion of the shopping center adjacent to the Atlantis property (the “Shopping Center”).
The Parking Lot Lease covering approximately 4.2 acres is used for approximately 300 additional convenient surface
parking spaces for Atlantis guests. See Item 8. Financial Statements and Supplementary Data – Notes to Consolidated
Financial Statements; See also NOTE 12. RELATED PARTY TRANSACTIONS.
Marketing Strategy
Reno/Sparks. Our marketing efforts are directed toward three broad consumer groups: leisure travelers,
conventioneers and Northern Nevada local residents.
The Reno/Sparks region is a major gaming and leisure destination with aggregate gaming revenues of
approximately $891 million (as reported by the Nevada Gaming Control Board for the twelve months ended
December 31, 2021).
Our Atlantis revenues and operating income are principally dependent on the level of gaming activity at the
Atlantis casino. Our predominant marketing goal is to utilize all of the Atlantis amenities to generate additional casino
play. Our secondary goal is to maximize revenues from our hotel, food and beverage, spa, convention and meeting
rooms, retail and other amenities.
We believe the Atlantis’ location south of downtown Reno (near the airport, near major freeway arteries and
physically connected to the Reno-Sparks Convention Center) makes the facility appealing to all three groups.
Leisure Travelers: The Reno/Tahoe region is a popular gaming and vacation destination. The principal segments
of Reno’s leisure traveler market are independent travelers, package tour and travel guests, guests we reach through
internet-based marketing and high-end players. We attempt to maximize our gaming revenues and hotel occupancy
through a balanced marketing approach that addresses each market segment.
Independent travelers generally make reservations directly with hotels of their choice, through independent travel
agents or through the internet. We strive to attract the middle to upper-middle income strata of this consumer segment
through advertising and direct marketing. This segment represents a large portion of the Atlantis’ guests.
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The package tour and travel segment consists of visitors who utilize travel packages offered by wholesale
operators. We market to this segment through relationships with select wholesalers, primarily to generate guest visits
and supplement mid-week occupancy.
We welcome domestic and international reservations on the Atlantis’ website www.atlantiscasino.com, and we are
featured on major package tour and travel websites.
We market to high-end players selectively through direct marketing and hosts. We utilize complimentary rooms,
food and beverage, special events and the extension of gaming credit to attract and maintain patronage from high-end
players.
Conventioneers: Convention business, like package tour and travel business, supplements occupancy during
lower-demand periods. Conventioneers also typically pay higher average room rates than non-conventioneers. We
selectively seek convention and meeting groups that we believe will materially enhance the Atlantis’ occupancy and
daily room rates, as well as those we believe will be more likely to utilize our gaming products. This segment was
significantly impacted by the COVID-19 pandemic and related state-imposed restrictions. We believe that the segment
will normalize after the pandemic crisis subsides. We are the only hotel-casino physically connected to the Reno-
Sparks Convention Center. In our view, Atlantis is uniquely positioned to capitalize on this segment. We believe the
Reno-Sparks Convention Center has created, and we expect will continue to create, additional guest traffic for the
Atlantis within this market segment that is presently underserved in the Reno area.
We market to all guest segments, including conventioneers, on the basis of the location, quality and ambiance of
the Atlantis facility, gaming values, friendly, efficient service, and the quality and relative value of Atlantis rooms,
food and beverage offerings, entertainment and promotions.
Northern Nevada Residents: We market to Northern Nevada residents on the basis of the Atlantis’ location and
accessibility, convenient surface parking, gaming values, ambiance, friendly efficient service, quality and relative
value of food and beverage offerings.
Black Hawk. Our marketing efforts are directed toward patrons from the Denver metropolitan area and Colorado
mountain areas. Black Hawk, Colorado is approximately 40 miles west of Denver.
The Denver metro area is an attractive market with a population of more than 3 million and a median household
income above the national average.
Commercial gaming in Colorado is constitutionally restricted to three mountain towns – Black Hawk, Central City
and Cripple Creek – which in 2021 represented 75%, 8% and 17% of total Colorado gaming revenue, respectively
(Colorado Division of Gaming statistical summaries). These state constitutional limitations and the scarcity of
available and developable land in Black Hawk create a strong barrier to new entries in the gaming market, limiting the
threat of potential new competition.
Denver International Airport is the 6th highest air traffic feeder market to Las Vegas (by originating passengers
only) in the United States with a 2.8% Compound Annual Growth Rate (“CAGR”) from 2015 to 2019, inspiring strong
potential to attract travelers to a well-appointed Black Hawk resort with the upside from the removal of the table game
betting limits and the expansion of game types offerings.
Our Monarch Black Hawk revenues and operating income are principally dependent on the level of gaming
activity in the Black Hawk market. Leveraging our premium location, product and service, we strive to continue to
grow market share by attracting not only gaming guests, but by introducing our new resort to attract new guests to the
market and our property. Our superior lodging, spa and dining products are predominantly intended to drive gaming
revenue.
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Our cross-property players’ club, “Monarch Rewards,” allows our guests to be eligible to receive rewards and
privileges based on the amount of their gaming play and non-gaming spend at both properties, while allowing us to
track play patterns through a computerized system. We use this information to determine appropriate levels of
complimentary awards and to guide our direct marketing efforts. We believe that Monarch Rewards significantly
enhances our ability to build guest loyalty and generate repeat and cross property guest visits.
Competition
Reno/Sparks. Gaming competition in the Reno area is intense. Based on information obtained from the
December 31, 2021 Gaming Revenue Report published by the Nevada Gaming Control Board, there are approximately
15 casinos in the Reno-Sparks area which each generated more than $12.0 million in annual gaming revenues.
We believe that the Atlantis’ primary competition for leisure travelers comes from other large-scale casinos that
offer amenities that appeal to middle to upper-middle income guests. We believe that some of our competitors have the
advantage of having significantly more guest rooms available for sale than we do. We compete for leisure travelers on
the basis of the desirability of our location, the quality and ambiance of the Atlantis facility, friendly and efficient
service, the quality and relative value of our rooms, food and beverage offerings, entertainment offerings, promotions
and gaming values. We believe that our location away from downtown Reno is appealing to first-time and more
affluent guests.
We believe that the Atlantis’ primary competition for conventioneers comes from other large-scale hotel casinos in
the Reno area that actively target the convention market segment, and from other cities in the western United States
with large convention facilities and substantial hotel capacity, including Las Vegas. We believe that some of our
competitors have the advantage of having significantly more guest rooms available for sale than we do. We compete
for conventioneers based on the desirability of our location, the quality and ambiance of the Atlantis facility, meeting
and banquet rooms designed to appeal to conventions and groups, friendly and efficient service, and the quality and
relative value of our rooms and food and beverage offerings. We believe that the Atlantis’ proximity to the Reno-
Sparks Convention Center, and the enclosed pedestrian sky bridge that connects the Atlantis directly with the Reno-
Sparks Convention Center facilities, afford us a distinct competitive advantage in attracting conventioneers.
We believe that the Atlantis’ competition for local guests comes primarily from other large-scale casinos located
outside of downtown Reno that offer amenities that appeal to middle to upper-middle income guests, and secondarily
with those casinos located in downtown Reno that offer similar amenities. We compete for local guests primarily on
the basis of the desirability of our location, the quality and ambiance of the Atlantis facility, friendly and efficient
service, the quality and relative value of our food and beverage offerings, entertainment offerings, promotions and
gaming values. We believe the Atlantis’ proximity to residential areas in south Reno and its abundant surface parking
provide us an advantage over the casinos located in downtown Reno in attracting local guests.
The Atlantis also competes for gaming guests with hotel casino operations located in other parts of Nevada,
especially Las Vegas and Lake Tahoe, and with hotel casinos located elsewhere throughout the United States and the
world. Major Native American owned facilities in central and northern California have been very successful, adversely
impacting many hotel casinos in Reno. We believe that the Atlantis also competes to a lesser extent with state-
sponsored lotteries, off-track wagering, card parlors and other forms of legalized gaming, particularly in northern
California and the Pacific Northwest. We believe our numerous amenities, such as a wide array of restaurants, banquet
facilities, spa and surface parking are key advantages in our ability to attract local guests that competitor facilities
cannot easily match without significant capital expenditures.
We also believe that the legalization of additional land-based casino gaming in or near any major metropolitan
area in the Atlantis’ feeder markets, such as San Francisco or Sacramento, could have a material adverse impact on our
business.
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The legalization of internet poker, sports betting and other forms of internet gaming in additional jurisdictions
throughout the United States could create further competition for the Atlantis.
Black Hawk. There is strong competition in the concentrated Black Hawk/Central City area gaming market
including approximately 21 casinos, which generated approximately $811 million in gaming revenues for the twelve
months ended December 31, 2021, according to the Colorado Division of Gaming.
The Black Hawk and Central City gaming markets are geographically isolated. The only other non-tribal gaming
market is Cripple Creek, which is seventy-five miles away. There are two federally recognized tribes in southwest
Colorado, both with gaming facilities, and both more than 350 miles from Denver. There have been proposals for the
development of Native American racetrack and video lottery terminal casinos throughout the state over the years. On
two occasions the owners of the Arapahoe Race Track, southeast of Denver, have funded state wide ballot initiatives to
allow casino style gaming at the race track. On both occasions, these measures were voted down by the electorate by
wide margins. As of December 31, 2021, none of the proposals have been adopted by the state’s electorate or by the
legislature. Should any form of additional gaming be authorized in the Denver metropolitan area, the Black Hawk and
Central City markets would be adversely affected.
We believe that the Monarch Black Hawk’s primary competition for visitors comes from other large-scale casinos
in the market which offer amenities that appeal to the guests’ entire vacation experience including hotel, broad dining
choices, as well as other amenities. We compete for patrons on the basis of the desirability of our location, which is the
first casino encountered when entering the area on the main thoroughfare, as well as the attractive setting, friendly and
efficient service, quality of our new hotel, spa and food and beverage offerings. With the opening of our resort, we now
offer 516 guest rooms and suites, additional bars and dining options, banquet and meeting room space, a retail store, a
concierge lounge and an upscale spa and pool facility located on the top floor of the tower.
Regulation and Licensing
We may not own, manage or operate a gaming facility unless we obtain proper licenses, permits and approvals.
Applications for a license permit or approval may generally be denied for reasonable cause. Most regulatory
authorities license, investigate, and determine the suitability of any person who has a material relationship with us.
Persons having material relationships include officers, directors, employees, and certain security holders. We believe
that we have obtained, applied for, or are in the process of applying for all necessary registrations, approvals, permits,
licenses, and findings of suitability with respect to such persons affiliated with our licensed gaming operations,
although the gaming authorities, in their discretion, may require additional persons to file applications for findings of
suitability.
Licenses, permits, and approvals are revocable privileges, which are not transferable. Regulatory authorities may
at any time revoke, suspend, condition, limit, or restrict a license for reasonable cause. License holders may be fined
and, in some jurisdictions and under certain circumstances, gaming operation revenues can be forfeited. We may be
unable to obtain any licenses, permits, or approvals, or if obtained, they may not be renewed or may be revoked in the
future. In addition, a rejection or termination of a license, permit, or approval in one jurisdiction may have a negative
effect in other jurisdictions. Some jurisdictions require gaming operators licensed in that state to receive their
permission before conducting gaming in other jurisdictions.
In each jurisdiction in which we have gaming operations, the following conditions and restrictions apply:
● Periodic license fees and taxes must be paid to state and local gaming authorities;
● Certain officers, directors, key employees, and gaming employees are required to be licensed or otherwise
approved by the gaming authorities;
● Individuals who must be approved by a gaming authority must submit comprehensive personal disclosure
forms and undergo an exhaustive background investigation, the costs for which must be borne by the
applicant;
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● Changes in any licensed or approved individuals must be reported to and/or approved by the relevant gaming
authority;
● Failure to timely file the required application forms by any individual required to be approved by the relevant
gaming authority may result in that individual’s denial and the gaming licensee may be required by the
gaming authority to disassociate with that individual; and
● If any individual is found unsuitable by a gaming authority, the gaming licensee is required to disassociate
with that individual.
Nevada. The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming
Control Act and the regulations promulgated thereunder, referred to as the “Nevada Act,” and various local
regulations. Our gaming operations are subject to the licensing and regulatory control of the Nevada Gaming
Commission, the Nevada Gaming Control Board, and the Reno City Council, referred to collectively as the “Nevada
Gaming Authorities.”
The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations
of public policy that are concerned with, among other things:
● the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at
any time or in any capacity;
● the establishment and maintenance of responsible accounting practices and procedures;
● the maintenance of effective controls over the financial practices of licensees, including the establishment of
minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable
record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;
● the prevention of cheating and fraudulent practices; and
● the provision of a source of state and local revenues through taxation and licensing fees.
Changes in such laws, regulations and procedures could have an adverse effect on our gaming operations.
Golden Road Motor Inn, Inc. (“Golden Road”), our subsidiary which operates the Atlantis, is required to be
licensed by the Nevada Gaming Authorities. We are registered by the Nevada Gaming Commission as a publicly
traded corporation, or “Registered Corporation.” As such, we are required periodically to submit detailed financial and
operating reports to the Nevada Gaming Commission and to furnish any other information that the Nevada Gaming
Commission may require. Substantially all material loans, leases, sales of securities and similar financing transactions
by us must be reported to, or approved by, the Nevada Gaming Authorities. No person may become a major
stockholder of, or receive any percentage of profits from Golden Road without first obtaining licenses and approvals
from the Nevada Gaming Authorities.
The Nevada Act requires any person who acquires more than 5% of Monarch’s voting securities to report the
acquisition to the Nevada Gaming Commission. The Nevada Act requires that beneficial owners of more than 10% of
our voting securities apply to the Nevada Gaming Commission for a finding of suitability. The Nevada Gaming
Commission may also, in its discretion, require any other holders of our debt or equity securities to file applications to
be found suitable to own the debt or equity securities. The applicant must pay all costs of investigation incurred by the
Nevada Gaming Authorities in conducting any investigation.
We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to
have any other relationship with us, we:
● pay that person any dividend or interest upon voting securities;
● allow that person to exercise, directly or indirectly, any voting right conferred through securities held by
that person;
● pay remuneration in any form to that person for services rendered or otherwise; or
● fail to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for
cash at fair market value.
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Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than
10%, but not more than 25%, of our voting securities may apply to the Nevada Gaming Commission for a waiver of
such finding of suitability if the institutional investor holds the voting securities for investment purposes only.
Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered
to do so by the Nevada Gaming Commission or the Chair of the Nevada Gaming Control Board may be found
unsuitable.
We are required to maintain a current stock ledger in Nevada, and the Nevada Gaming Authorities may examine
the ledger at any time. If any securities are held in trust by an agent or a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may
be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining
the identity of the beneficial owner. The Nevada Gaming Commission may require our stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act.
We may not make a public offering of our securities without the prior approval of the Nevada Gaming
Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for purposes of constructing, acquiring or financing
gaming facilities. Any approval, if granted, does not constitute a finding, recommendation or approval by the Nevada
Gaming Authorities as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered.
Changes in our control through merger, consolidation, stock or asset acquisitions, management or consulting
agreements, or any act or conduct by a person whereby that person obtains control (including foreclosure on the
pledged shares), may not occur without the prior approval of the Nevada Gaming Commission. Entities seeking to
acquire control of a Registered Corporation must satisfy the Nevada Gaming Authorities in a variety of stringent
standards prior to assuming control of such Registered Corporation. The Nevada Gaming Commission may also
require controlling stockholders, officers, directors and other persons having a material relationship or involvement
with the entity proposing to acquire control, to be investigated and licensed or found suitable as part of the approval
process relating to the transaction.
The Nevada Legislature has declared that some corporate acquisitions opposed by management, repurchases of
voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Gaming
Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business
practices upon Nevada’s gaming industry and to further Nevada’s policy to:
● assure the financial stability of corporate gaming operators and their affiliates;
● preserve the beneficial aspects of conducting business in the corporate form; and
● promote a neutral environment for the orderly governance of corporate affairs.
We are, in certain circumstances, required to receive approval from the Nevada Gaming Commission before we
can make exceptional repurchases of voting securities above their current market price and before we can consummate
a corporate acquisition opposed by management. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the board of directors in response to a tender offer made directly to a Registered
Corporation’s stockholders for the purposes of acquiring control of the Registered Corporation.
Licensee fees and taxes, computed in various ways depending on the type of gaming or activity involved, are
payable to the State of Nevada and to the counties and cities in which the Nevada licensee’s respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable monthly, quarterly or
annually and are based upon either:
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● a percentage of the gross revenues received;
● the number of gaming devices operated; or
● the number of table games operated.
A live entertainment tax is also paid on admission charges where entertainment is furnished. Nevada licensees
that hold a license as an operator of a slot route, a manufacturer or a distributor also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required to be registered, or is under common
control with such persons, referred to as “Licensees,” and who is or proposes to become involved in a gaming venture
outside of Nevada is required to deposit with the Nevada Gaming Control Board, and thereafter maintain, a revolving
fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Gaming Control Board of their
participation in foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada
Gaming Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the
Nevada Act. Licensees are also subject to disciplinary action by the Nevada Gaming Commission if they knowingly
violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign
gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations,
engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a
person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.
Colorado. As prescribed by the Colorado Limited Gaming Act of 1991 (the “Colorado Act”), the ownership and
operation of limited stakes gaming facilities in Colorado are subject to the Colorado Gaming Regulations (the
“Colorado Regulations”) and final authority of the Colorado Limited Gaming Control Commission (the “Colorado
Commission”). The Colorado Act also created the Colorado Division of Gaming within the Colorado Department of
Revenue to license, supervise and enforce the conduct of limited stakes gaming in Colorado.
The Colorado Act declares public policy on limited stakes gaming to be that: (1) the success of limited stakes
gaming is dependent upon public confidence and trust that licensed limited stakes gaming is conducted honestly and
competitively, the rights of the creditors of licensees are protected and gaming is free from criminal and corruptive
elements; (2) public confidence and trust can be maintained only by strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or
distribution of gaming devices and equipment; (3) all establishments where limited gaming is conducted and where
gambling devices are operated, and all manufacturers, sellers and distributors of certain gambling devices and
equipment, must therefore be licensed, controlled and assisted to protect the public health, safety, good order and the
general welfare of the inhabitants of the state to foster the stability and success of limited stakes gaming and to
preserve the economy, policies and free competition in Colorado; and (4) no applicant for a license or other affirmative
Colorado Commission approval has any right to a license or to the granting of the approval sought. With limited
exceptions applicable to licensees that are publicly traded entities, no person may sell, lease, purchase, convey or
acquire any interest in a retail gaming or operator license or business without the prior approval of the Colorado
Commission.
In November 2020, Colorado voters passed Amendment 77 to the State Constitution (“Amendment 77”) allowing
voters in Central City, Black Hawk, and Cripple Creek to approve a maximum single bet of any amount, compared to
the previous $100 per bet limit that was in place and add additional game types beyond slot machines, blackjack,
poker, roulette, and craps. The measure permitted each of the three towns to hold a local election on whether to change
betting limits and/or add new games. Concurrently with the November 2020 election, Black Hawk voters passed such
a local ballot measure, and the Black Hawk City Council followed shortly thereafter by approving unrestricted single
bet limits and new popular table games. Those changes went into effect on May 1, 2021 and Black Hawk casinos are
now operating without betting limit restrictions and can add to their table games mix Pai Gow, Baccarat, Keno, and
Big 6 Wheel.
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Limited stakes gaming is confined to the commercial districts of these cities as defined by Central City on
October 7, 1981, by Black Hawk on May 4, 1978, and by Cripple Creek on December 3, 1973. In addition, the
Colorado law restricts limited stakes gaming to structures that conform to the architectural styles and designs that were
common to the areas prior to World War I and that conform to the requirements of applicable city ordinances
regardless of the age of the structures. Under the 1990 Colorado Amendment, no more than 35% of the square footage
of any building and no more than 50% of any one floor of any building may be used for limited stakes gaming. Persons
under the age of 21 cannot participate in limited stakes gaming. The Colorado Constitution provides for a tax on the
total amount wagered less all payouts to players at graduated annual rates. The gaming tax rates in effect as of July 1,
2008 can only be increased by amendment to the Colorado Constitution by voters in a statewide election. With respect
to games of poker, the tax is calculated based on the sums wagered that are retained by the licensee as compensation,
which must be consistent with the minimum and maximum amounts established by the Colorado Commission. The
graduated rates effective as of July 1, 2012 are:
● 0.25% up to and including $2 million of the subject amounts;
● 2.0% on amounts from $2 million to $5 million;
● 9.0% on amounts from $5 million to $8 million;
● 11.0% on amounts from $8 million to $10 million;
● 16.0% on amounts from $10 million to $13 million; and
● 20.0% on amounts over $13 million.
The City of Black Hawk also assesses monthly device fees that are based on the number of gaming devices
operated. These consist of an $87.50 fee per slot device, $350.00 per table device, and transportation fee of $3.68 for
each slots device and $14.72 for each table device.
The Colorado Commission has enacted Rule 4.5, which imposes requirements on publicly traded corporations
holding gaming licenses in Colorado and on gaming licenses owned directly or indirectly by a publicly traded
corporation, whether through a subsidiary or intermediary company. Such requirements automatically apply to any
ownership interest held by a publicly traded corporation, holding company or intermediary company thereof, where the
ownership interest directly or indirectly is, or will be upon approval of the Colorado Commission, 5% or more of the
entire licensee. In any event, if the Colorado Commission determines that a publicly traded corporation or a subsidiary,
intermediary company or holding company has the actual ability to exercise influence over a licensee, regardless of the
percentage of ownership possessed by such entity, the Colorado Commission may require the entity to comply with the
disclosure regulations contained in Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling persons commencing a public offering of
voting securities must notify the Colorado Commission no later than 10 business days after the initial filing of a
registration statement with the SEC. Licensed publicly traded corporations are also required to send proxy statements
to the Division of Gaming within five days after their distribution. Licensees to whom Rule 4.5 applies must include in
their charter documents provisions that restrict the rights of the licensees to issue voting interests or securities except in
accordance with the Colorado Act and the Colorado Regulations; limit the rights of persons to transfer voting interests
or securities of licensees except in accordance with the Colorado Act and the Colorado Regulations; and provide that
holders of voting interests or securities of licensees found unsuitable by the Colorado Commission may, within 60 days
of such finding of unsuitability, be required to sell their interests or securities back to the issuer at the lesser of the cash
equivalent of the holders’ investment or the market price as of the date of the finding of unsuitability. Alternatively, the
holders may, within 60 days after the finding of unsuitability, transfer the voting interests or securities to a suitable
person, as determined by the Colorado Commission. Until the voting interests or securities are held by suitable
persons, the issuer may not pay dividends or interest, the securities may not be voted and may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration in any form to the holders of the
securities.
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Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial ownership of (a) 5% or more of any class of
voting securities of a publicly traded corporation that is required to include in its articles of incorporation the Rule 4.5
charter language provisions; or (b) 5% or more of the beneficial interest in a gaming licensee directly or indirectly
through any class of voting securities of any holding company or intermediary company of a licensee, referred to as
“qualifying persons,” shall notify the Division of Gaming within 10 days of such acquisition and submit all requested
information. Such persons are subject to a finding of suitability as required by the Division of Gaming or the Colorado
Commission. Licensees also must notify any qualifying persons of these requirements. A qualifying person other than
an institutional investor whose interest equals 10% or more must apply to the Colorado Commission for a finding of
suitability within 45 days after acquiring such securities. Licensees must also notify any qualifying persons of these
requirements. Whether or not notified, qualifying persons are responsible for complying with these requirements.
A qualifying person who is an institutional investor under Rule 4.5 and who, individually or in association with
others, acquires, directly or indirectly, the beneficial ownership of 20% or more of any class of voting securities must
apply to the Colorado Commission for a finding of suitability within 45 days after acquiring such interests.
The Colorado Regulations provide for exemption from the requirements for a finding of suitability when the
Colorado Commission finds such action to be consistent with the purposes of the Colorado Act.
The Colorado Regulations require that every officer, director and stockholder of private corporations or equivalent
office or ownership holders for non-corporate applicants, and every officer, director or stockholder holding either a 5%
or greater interest or controlling interest of a publicly traded corporation or owners of an applicant or licensee, shall be
a person of good moral character and submit to a full background investigation conducted by the Division of Gaming
and the Colorado Commission. The Colorado Commission may require any person having an interest in a license to
undergo a full background investigation and pay the cost of investigation in the same manner as an applicant.
The sale of alcoholic beverages in gaming establishments is subject to strict licensing, control and regulation by
state and local authorities. Alcoholic beverage licenses are revocable and nontransferable. State and local licensing
authorities have full power to limit, condition, suspend for as long as six months or revoke any such licenses.
There are various classes of retail liquor licenses which may be issued under the Colorado Liquor Code. A gaming
licensee may sell malt, vinous or spirituous liquors only by the individual drink for consumption on the premises. An
application for an alcoholic beverage license in Colorado requires notice, posting and a public hearing before the local
liquor licensing authority prior to approval. The Colorado Department of Revenue’s Liquor Enforcement Division
must also approve the application. Monarch Black Hawk has been approved for a restaurant liquor license by both the
local Black Hawk licensing authority and the State Division of Liquor Enforcement.
In November 2019, Proposition DD was passed with a vote of the people allowing for legalizing sports betting in
Colorado, making Colorado one of many states now letting people place bets on sporting events since the Supreme
Court ruling struck down a law that banned sports betting in most U.S. states. With the passage of Proposition DD, and
the legislative bill passed by the Colorado General Assembly in May 2019 (the “Colorado Sports Act”), the Colorado
Limited Gaming Control Commission and the Colorado Division of Gaming are the statutory authority over the
regulation of the legalized sports betting in Colorado. The Colorado Sports Act establishes three categories of sports
wagering licenses: (1) Master License (awarded to casinos to offer both retail and online sports betting), (2) Sports
Betting Operator (awarded to the operator running an on-premise sports book at the casino), and (3) Internet Sports
Betting Operator. The Colorado Commission approved Sports Betting Rule 3, effective March 16, 2020, to enable
applications, investigations, and licensure as related to sports betting. Rule 3 authorizes the additional license
classifications Vendor Major License and Vendor Minor License. On February 20, 2020, Monarch Black Hawk was
issued a Master License.
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On February 20, 2020, the Colorado Commission voted unanimously to approve the new Sports Betting Rules and
Regulations. Authorized sports betting includes (1) any individual or team sport or athletic event in which the outcome
is not determined solely by chance, whether amateur or professional, including an Olympic or international sport or
athletic event and any collegiate sports event (2) any portion of an authorized sport or athletic event, including the
individual performance statistics of athletes in a sports event or combination of sports events, and (3) an authorized
sanctioned motor sport. Sports’ betting is prohibited on a high school sports event, a video game that is not sanctioned
by a sports’ governing body or equivalent as an electronic competition or proposition bets on collegiate sports. Sports’
betting went live in Colorado on May 1, 2020. Sports betting is allowed in Colorado casinos as well as approved
mobile apps provided the bettor is within the State of Colorado while the bet is made.
Compliance with Environmental Laws
In 2021, the Company did not incur any material capital expenses for maintaining compliance with applicable
environmental laws and does not expect to incur such in 2022.
Requirements to comply with environmental laws may have an impact on capital expenditures, earnings, and our
competitive position in the future. See Item 1A, “RISK FACTORS.”
Human Capital
As of December 31, 2021, we employed approximately 2,650 employees.
We believe that our team is the most important asset in our organization. During 2020 and 2021, our team
members worked together to navigate through the unprecedented challenges of the COVID-19 pandemic. During the
period our operations at both properties were suspended for approximately three months, some team members were
temporarily furloughed, but no team member was laid off. The Company continued to provide benefits, including
medical, dental and vision insurance, throughout the suspension period. After resuming operations and welcoming our
team members back to the properties, the health and wellbeing of our team members has been our priority. We set up
strict protocols for sanitizing work stations, using dividers where possible, masking and social distancing, checking
team members’ temperatures on a regular base, and for COVID-19 testing.
Our management focus is on employee retention and we use retention rate to evaluate it. We also perform “exit
interviews” for employees exiting the company, to understand better what matters most to our team members and
improve our polices.
The Company regularly conducts diversity and inclusion training for its Team Members as part of new-hire
onboarding and ongoing Team Member/Leadership education sessions.
We continuously work on enhancing employees benefits and provide to our employees competitive to the market
and industry employee benefit package. The Company also offers Team Members up to $6,000 in annual tuition
reimbursement for educational courses and/or certifications related to their performance. The company also offers a
scholarship for children and grandchildren of its team members, which is based on academic performance and
financial need, and is intended to provide collegiate opportunities to first generation college students.
Available Information
Our principal executive offices are located at 3800 S. Virginia Street, Reno, Nevada 89502; telephone (775) 335-
4600. Our website address is www.monarchcasino.com. We make available, free of charge, on or through our website,
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission
(“SEC”). The information found on, or otherwise accessible through our website is not incorporated by reference into,
nor does it form a part of, this Form 10-K, or any other document that we file with the SEC.
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ITEM 1A. RISK FACTORS
Our business prospects are subject to various risks and uncertainties that impact our business. You should
carefully consider the following discussion of risks, and the other information provided in this annual report on
Form 10-K. The risks described below are not the only ones facing us; however, they do represent all material risks
currently known to us. Additional risks that are presently unknown to us or that we currently deem immaterial may
also impact our business.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS PARTICULARLY SENSITIVE TO WEAK DISCRETIONARY CONSUMER SPENDING
Consumer demand for entertainment and other amenities at hotel-casino properties and casino properties, such as
ours, are particularly sensitive to downturns in the economy and the corresponding impact on discretionary consumer
spending on leisure activities and corporate spending on conventions and trade shows. We market to and rely upon the
patronage of customers from the Reno and Denver metropolitan areas, as well as leisure traveler and conventioneer
guests. Changes in discretionary consumer spending or consumer preferences in these, and other geographic markets,
brought about by factors such as perceived or actual general economic conditions, the impact of high energy and food
costs, the increased cost of travel, the potential for bank failures, decreased disposable consumer income and wealth, or
fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer, thus
imposing practical limits on pricing and negatively impacting our results of operations and financial condition.
WE FACE RISKS RELATED TO PANDEMIC DISEASES, SUCH AS THE CORONAVIUS, WHICH COULD MATERIALLY AND
ADVERSELY AFFECT TRAVEL, CONVENTIONS, HOTEL STAYS AND/OR LOCAL VISITORS, EMPLOYEES AND OUR SUPPLY
CHAIN AND RESULT IN REDUCED DEMAND FOR OUR PROPERTIES AND COULD HAVE A MATERIAL ADVERSE EFFECT ON
US.
Our business has in the past and could be materially and adversely affected in the future by the effect of, or the
public perception of a risk of, a pandemic disease on the travel, convention and leisure industries. The COVID-19
pandemic has disrupted and is expected to continue to disrupt our business, financial results, cash flows and liquidity
for an extended period of time. We expect the impact of these disruptions, including the extent of their adverse impact
on our financial results, will be dictated by the length of time that such disruptions continue. After government
mandated closures in early 2020, we were allowed to open the Atlantis on June 4, 2020, and Monarch Black Hawk
Casino on June 17, 2020. We cannot predict whether there will be subsequent closing orders due to pandemic spikes or
other reasons or whether additional or changed conditions, or restrictions may occur or continue, nor the effects of any
such conditions. Once travel, social distancing and self-quarantine restrictions are modified or cease to be necessary,
demand for our properties may remain weak for a significant length of time and we cannot predict if and when the
gaming and non-gaming activities of our properties will return to pre-outbreak levels of volume or pricing. Future
demand for properties may be negatively impacted by the adverse changes in the perceived or actual economic
climate, including higher unemployment rates, declines in income levels and loss of personal wealth or reduced
business spending for meetings, incentives, conventions and exhibitions resulting from the impact of the COVID-19
pandemic.
Our businesses would also be impacted should the disruptions from the COVID-19 pandemic lead to prolonged
changes in consumer behavior. There are certain limitations on our ability to mitigate the adverse financial impact of
these matters, such as the fixed costs at our properties. The COVID-19 pandemic also makes it more challenging for
management to estimate the future performance of our businesses, particularly over the near to medium term. These
events may continue to disrupt our ability to staff our business, could continue to disrupt our operations or construction
projects and, if the global response to contain the COVID-19 pandemic escalates or is unsuccessful, would have a
material adverse effect on our business, financial condition, results of operations and cash flows.
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If we are required to raise capital in the future, our access to and cost of financing will depend on, among other
things, global economic conditions, conditions in the global financing markets, the availability of sufficient financing,
our prospects and our credit ratings. If our credit ratings were to be downgraded, or general market conditions were to
ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of debt financing would be
negatively impacted. In addition, the terms of future debt agreements could include more restrictive covenants, or
require incremental collateral, which may restrict our business operations or be unavailable due to our covenant
restrictions then in effect. There is no guarantee that our current debt financings will be enough to fund our obligations,
or that they will be available on terms consistent with our expectations. Our current facility contains restrictive
covenants that impose significant operating and financial restrictions and various financial covenants. We cannot
assure you that the impact of the COVID-19 pandemic will not impact our ability to comply with the financial
covenants in the future, nor can we assure you that we would be able to obtain waivers or modifications from our
lenders in the event of noncompliance in the future.
WE ARE ENTIRELY DEPENDENT ON TWO RESORTS FOR ALL OF OUR CASH FLOW, WHICH SUBJECTS US TO GREATER
RISKS THAN A GAMING COMPANY WITH MORE OPERATING PROPERTIES
We are currently entirely dependent upon our Atlantis Casino Resort and our Monarch Black Hawk for all of our
operating cash flow. As a result, we are subject to a greater degree of risk than a gaming company with more operating
properties or greater geographic diversification. The risks to which we have a greater degree of exposure include the
following:
● changes in local economic and competitive conditions;
● labor supply disruptions or shortages;
● inflationary pressures on labor and supplies;
● disruptions in our supply chain;
● changes in local and state governmental laws and regulations, including gaming laws and regulations, and the
way in which those laws and regulations are applied;
● natural and other disasters, including pandemics, epidemics, or outbreaks of infectious or contagious diseases
such as the COVID-19 pandemic;
● continuing actions by government officials at the federal, state and/or local level with respect to steps to be
taken in connection with the COVID-19 pandemic, including, without limitation, temporary or extended
shutdowns, travel restrictions, social distancing and shelter-in-place orders;
● an increase in the cost of maintaining our properties;
● a decline in the number of visitors to Reno or Black Hawk; and
● a decrease in gaming and non-casino activities at our resorts.
Any of the factors outlined above could negatively affect our results of operations and our ability to generate
sufficient cash flow to make payments or maintain our covenants with respect to our debt.
CERTAIN OF OUR STOCKHOLDERS OWN LARGE INTERESTS IN OUR CAPITAL STOCK AND MAY SIGNIFICANTLY
INFLUENCE OUR AFFAIRS
John Farahi and Bob Farahi, our officers and directors, together with John’s and Bob’s brother Ben Farahi,
beneficially own in the aggregate approximately 32% of our outstanding common stock, inclusive of options held by
them which are exercisable within 60 days. As such, members of the Farahi family, if voting together, have the ability
to significantly influence our affairs, including the election of the board of directors and, except as otherwise provided
by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger,
consolidation, or sale of assets.
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TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE
CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL
Our ability to make payments on and to refinance our indebtedness and to fund future capital expenditures and
expansion efforts will depend upon our ability to generate cash. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. On September 3,
2020, we entered into the Fourth Amended and Restated Credit Agreement with Wells Fargo Bank, N.A., as
administrative agent and certain banks (the “Fourth Amended Credit Facility”), which amended and restated our
$250.0 million credit facility, dated as of July 20, 2016 (the “Prior Credit Facility”). On April 30, 2021, the Company
entered into an amendment to the Fourth Amended Credit Facility (collectively, with all prior amendments, the
“Amended Credit Facility”). Our failure to generate sufficient cash flows from operations or to obtain future
borrowings may impact our ability to repay our indebtedness as it matures and to fund our other liquidity needs. In
such cases, we may have to adopt alternatives, such as reducing or delaying planned expenses and capital
expenditures, selling assets or obtaining additional equity or debt financing or joint venture partners. These financing
strategies may not be affected on satisfactory terms, if at all.
COVENANT RESTRICTIONS UNDER OUR AMENDED CREDIT FACILITY MAY LIMIT OUR ABILITY TO OPERATE OUR
BUSINESS AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS
Our Amended Credit Facility contains covenants that restrict our ability to, among other things, incur additional
debt, make distributions, make investments, grant liens on our assets to secure debt, enter into transactions with
affiliates and effect mergers or acquisitions, as well as covenants that relate to our Monarch Black Hawk Expansion.
Although the covenants in our Amended Credit Facility are subject to various exceptions, we cannot assure you that
these covenants will not adversely affect our ability to finance future operations or capital needs or to engage in other
activities that may be in our best interest. In addition, our long-term debt requires us to maintain specified financial
ratios and satisfy certain financial condition tests, which may require that we take action to reduce our debt or to act in
a manner contrary to our business objectives. A breach of any of the covenants in the agreement governing our
Amended Credit Facility could result in a default under such agreement. Our ability to comply with these covenants
may be affected by general economic conditions, industry conditions, and other events beyond our control, including
difficulties or delay in the completion of our Monarch Black Hawk Expansion. As a result, we cannot assure you that
we will be able to comply with these covenants. If an event of default under the agreement governing our Amended
Credit Facility occurs, the lenders thereunder could elect to declare all amounts outstanding thereunder, together with
accrued interest, to be immediately due and payable. In addition, our Amended Credit Facility is secured by first
priority security interests in substantially all of our assets. If we are unable to pay all amounts declared due and
payable in the event of a default, the lenders could foreclose on these assets.
OUR VARIABLE RATE INDEBTEDNESS SUBJECTS US TO INTEREST RATE RISK, WHICH COULD CAUSE OUR DEBT
SERVICE OBLIGATIONS TO INCREASE SIGNIFICANTLY
An increase in market interest rates would increase our interest expense arising on our indebtedness. The interest
rate under our Amended Credit Facility is a base rate plus a margin ranging from 0.0% to 1.0%, the Prime Rate or
LIBOR plus a margin ranging from 1.0% to 2.0%. As a result, we are exposed to interest rate risk. If interest rates
increase, our debt service obligations under the Amended Credit Facility will increase even when the amount borrowed
remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, would
correspondingly decrease.
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UNCERTAINTY RELATING TO THE LIKELY PHASING OUT OF LIBOR MAY RESULT IN OUR PAYING INCREASED INTEREST
UNDER OUR CREDIT FACILITIES.
In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will no longer
persuade or compel banks to submit rates for the calculation of LIBOR after 2021. As a result, the continuation
of LIBOR on its current basis is not guaranteed after 2021. The administrator of LIBOR has announced it will consult
on its intention to cease the publication of the one week and two-month USD LIBOR settings immediately following
the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the
LIBOR publication on June 30, 2023. Extending the publication of certain USD LIBOR tenors until June 30, 2023
would allow most legacy USD LIBOR contracts to mature before LIBOR experiences disruptions.
Borrowings under our Amended Credit Facility bears interest at a rate determined using LIBOR as the reference
rate. At this time, it is not possible to predict the effect that any discontinuance, modification or other reform of
LIBOR or any other reference rate, or the establishment of alternative reference rates, may have on LIBOR, other
benchmarks, or LIBOR-based debt instruments such as our Amended Credit Facility. However, the use of alternative
reference rates or other reforms could cause the interest rates payable under our Amended Credit Facility to be
substantially higher than we would otherwise have expected.
INTENSE COMPETITION EXISTS IN THE GAMING INDUSTRY, AND WE EXPECT COMPETITION TO CONTINUE TO
INTENSIFY
The gaming industry is highly competitive for both customers, employees and management. We compete with
numerous casinos and hotel-casinos, with other non-gaming resorts and vacation destinations, with various other
entertainment businesses, and with any new forms of gaming, including internet gaming, that has been or may be
legalized. The casino entertainment business is characterized by competitors that vary considerably in their size,
quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and
capabilities, level of amenities, management talent and geographic diversity. We compete directly with other casino
facilities operating in the immediate and surrounding market areas in which we operate. In some markets, we also face
competition from nearby markets. In a broader sense, our gaming operations face competition from all manner of
leisure and entertainment activities, including shopping, athletic events, television, movies, concerts, and travel.
As competitive pressures increase, other casinos may intensify their marketing efforts. Increased competitive pressures
in our local markets could adversely impact our ability to continue to attract local residents to the Atlantis and the
Monarch Black Hawk or require us to use more expensive, and therefore, less profitable, promotions to compete.
With fewer new markets opening for development, competition in existing markets has intensified. We have
invested in expanding the Atlantis and renovating and expanding the Monarch Black Hawk. Our competitors have also
expanded their facilities and developed new facilities. These expansions, the increases in the number of properties and
aggressive marketing strategies of our competitors have increased competition in our markets, and this intense
competition can be expected to continue. In addition, competition may intensify if our competitors implement
aggressive pricing and promotional activities in order to attract customers.
If our competitors operate more successfully than we do, if they attract customers away from us, if they are more
successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in
jurisdictions that give them operating advantages from differences or changes in gaming regulations or taxes, or if
additional hotels and casinos are established in and around our markets, we may lose market share or the ability to
attract or retain employees. In particular, the expansion of casino gaming in or near any geographic area from which
we attract or expect to attract a significant number of our customers could have a significant adverse effect on our
business, financial condition and results of operations.
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We also believe that the legalization of additional casino gaming in or near any major metropolitan area in the
Atlantis’ or Monarch Black Hawk’s key marketing areas could have a material adverse impact on our business. In
addition, there have been proposals for the development of Native American, racetrack and video lottery terminal
casinos throughout the state of Colorado over the years, although none of the proposals has been adopted by the state’s
electorate or legislature. Twice, the owners of the Arapahoe Race Track, southeast of Denver, have funded state wide
ballot initiatives to allow casino style gaming at the race track. Both measures were voted down by wide margins. As
of December 31, 2021, none of the proposals have been adopted by the state’s electorate or by the legislature. Should
any form of additional gaming be authorized in the Denver metropolitan area, Monarch Black Hawk could be
adversely affected.
In addition, Native American gaming facilities in some instances operate under less stringent regulatory
requirements than those imposed on our properties, which could provide them a competitive advantage in our markets.
Moreover, we face competition from internet and other account wagering gaming services, which would allow their
guests to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, and this could
have a material adverse effect on our business, financial condition, operating results and prospects. The legalization of
internet poker and other forms of internet gaming could create further competition for our operations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO MAINTAIN THE REPUTATION OF OUR RESORTS.
The success of our business relies on the positive public perceptions of our resorts, the quality of the amenities
and the level of service we provide. Any deterioration in our reputation could have a material adverse effect on our
business, results of operations and cash flows. Our reputation could be negatively impacted by our failure to deliver a
high-quality resort and entertainment experience to our customers. Our reputation may also suffer as a result of
negative publicity regarding the Company or our resorts, regardless of the accuracy of such publicity.
OUR EXPANSION AND RENOVATION PROJECTS MAY FACE SIGNIFICANT RISKS INHERENT IN CONSTRUCTION PROJECTS
Our development projects we may undertake will be subject to the many risks inherent in the expansion or
renovation of an existing enterprise or construction of a new enterprise, including unanticipated design, construction,
regulatory, environmental and operating problems and lack of demand for our projects.
We have not entered into a guaranteed maximum price (“GMP”) amendment as contemplated in the construction
contract with our Monarch Black Hawk general contractor. We have numerous disagreements with our Monarch Black
Hawk general contractor, including disagreements over costs, schedule delays, and other construction related matters.
Such disagreements have resulted in litigation with our Monarch Black Hawk general contractor, as discussed in this
annual report.
The disputes with the Monarch Black Hawk Expansion general contractor have resulted in and may continue to
result in:
● disputes and claims over the quality and management of the construction;
● disputes and claims over design and construction defects;
● disputes and claims over payments, construction costs, staffing costs, damages and other financial
responsibility; and
● disruptions of relationships with the general contractor, subcontractors, vendors and others.
In addition, our current and future projects could also experience:
● delays and significant cost increases;
● delays in obtaining or inability to obtain necessary permits, licenses and approvals;
● lack of sufficient, or delays in the availability of, financing;
● shortages of materials;
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● shortages of skilled labor, work stoppages or labor disputes;
● poor performance or nonperformance by any third parties on whom we place reliance;
● unforeseen construction scheduling, engineering, environmental, permitting, construction or geological
problems, including defective plans and specifications;
● weather interference, floods, fires or other casualty losses; and
● COVID-19 related delays.
The completion dates of any of our projects could differ significantly from expectations for construction-related or
other reasons.
In connection with the expansion of the Monarch Black Hawk and the related disputes described above, our
general contractor PCL and certain subcontractors have provided Monarch with purported notice of their intent to file a
liens against the Monarch Black Hawk and some subcontractors have recorded such liens. An action to enforce such
liens against the Monarch Black Hawk was filed in the District Court for Gilpin County, CO, as discussed in more
detail herein, which may impact our operations on the property and result in us incurring significant expenses relating
to defending against such actions.
Actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our
initial project costs and construction periods are based upon budgets, conceptual design documents and construction
schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these
costs can increase over time as the project is built to completion.
We may have a limited amount of capital resources to fund cost overruns. If we cannot pay cost overruns through
cash sources or financing on a timely basis, the completion of one or more projects may be delayed until adequate
funding is available. We can provide no assurance that any project will be completed on time, if at all, or within
established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or
failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial
condition and results of operations.
OUR EXPANSION AND RENOVATION ACTIVITIES MAY DISRUPT OUR OPERATIONS
Although we plan our expansion and renovation projects to minimize disruption of our existing business
operations, these projects require, from time to time, all or portions of affected existing operations to be closed or
disrupted. Any significant disruption in operations of a property could have a significant adverse effect on our
business, financial condition and results of operations.
FAILURE OF THE RENO-SPARKS CONVENTION CENTER TO BOOK AND ATTRACT CONVENTION BUSINESS COULD
ADVERSELY IMPACT OUR BUSINESS AT THE ATLANTIS
The Atlantis is the closest hotel-casino to the Reno-Sparks Convention Center and the enclosed pedestrian sky
bridge, that connects the Atlantis directly with the Reno-Sparks Convention Center, has afforded us a distinct
competitive advantage in attracting its conventioneers, who typically pay higher average room rates than non-
conventioneers. However, if the Reno-Sparks Convention Center does not succeed in booking the anticipated level of
conventions, we will not, in turn, benefit from the patronage of such conventioneers. As a result, our results of
operations could be adversely impacted.
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IF WE ARE UNABLE TO OBTAIN FINANCING FOR OUR EXPANSION AND RENOVATION PROJECTS AND OTHER CAPITAL
EXPENDITURES, SUCH PROJECTS WILL BE JEOPARDIZED
We intend to finance our future expansion and renovation projects, as well as our other capital expenditures,
primarily with cash flow from operations and borrowings under our available credit facilities. If we are unable to
finance our future expansion and renovation projects, or our other capital expenditures, we will have to adopt one or
more alternatives, such as reducing, delaying or abandoning planned expansion and renovation projects as well as
other capital expenditures, selling assets, restructuring debt, considering obtaining equity financing or joint venture
partners, or modifying our credit facilities. These sources of funds may not be sufficient to finance our expansion,
development, investment and renovation projects, and other financing may not be available on acceptable terms, in a
timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur
additional indebtedness.
RISING OPERATING COSTS AT OUR GAMING PROPERTIES COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS
The operating expenses associated with our properties could increase due to, among other reasons, the following
factors:
● current broad-based inflation on the economy;
● supply chain issues;
● changes in federal, state or local tax or regulations, including state gaming regulations or gaming taxes, could
impose additional restrictions or increase our operating costs;
● aggressive marketing and promotional campaigns by our competitors for an extended period of time could
force us to increase our expenditures for marketing and promotional campaigns in order to maintain our
existing customer base or attract new customers;
● increases in costs of labor;
● expenditures for repairs, maintenance, and to replace equipment necessary to operate our business;
● our reliance on slot play revenues and any additional costs imposed on us from vendors;
● availability and cost of the products and services we provide our customers, including food, beverages, retail
items, entertainment, hotel rooms and spa;
● availability and costs associated with insurance;
● price increases for electricity, natural gas and other forms of energy;
● adverse impacts of the COVID-19 pandemic on our business, construction projects, financial condition and
operating results;
● actions by government officials at the federal, state and/or local level with respect to steps to be taken,
including, without limitation, temporary or extended shutdowns, travel restrictions, social distancing and
shelter-in-place orders, in connection with the COVID-19 pandemic;
● our ability to manage guest safety concerns caused by COVID-19;
● our ability to effectively manage and control expenses during temporary or extended shutdown periods;
● impact of temporary or extended shutdowns on our ability to maintain compliance with the terms and
conditions of our credit facilities and other material contracts;
● construction factors, including delays, disruptions, availability of labor and materials, increased costs of labor
and materials, contractor disagreements, zoning issues, environmental restrictions, soil and water conditions,
weather and other hazards, site access matters, building permit issues and other regulatory approvals or
issues;
● ongoing disagreements over costs of and responsibility for delays and other construction related matters with
our Monarch Black Hawk general contractor, PCL Construction Services, Inc., including, as previously
reported, the litigation against us and liens by such contractor;
● affirmative and extensive counterclaims for construction defects, breach of contract, breach of warranty,
fraud, fraudulent inducement, negligence and other construction related claims that we have filed against the
Monarch Black Hawk contractor, PCL Construction Services, Inc., in the above-mentioned litigation in
which litigation the parties are currently conducting discovery, and investigation of the claims by and against
us is therefore ongoing;
● our potential need to post bonds or other forms of surety to support our legal remedies;
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● risks related to development and construction activities (including disputes with and defaults by contractors
and subcontractors; construction, equipment or staffing problems and delays; shortages of materials or skilled
labor; environmental, health and safety issues; weather and other hazards, site access matters, and
unanticipated cost increases);
● our ability to generate sufficient operating cash flow to help finance our expansion plans and subsequent debt
reduction;
● changes in laws mandating increases in minimum wages and employee benefits;
● changes in laws and regulations permitting expanded and other forms of gaming in our key markets;
● the effects of local and national economic, credit and capital market conditions on the economy in general
and on the gaming industry and our business in particular;
● the effects of labor shortages on our market position, growth and financial results;
● the potential of increases in state and federal taxation to address budgetary and other impacts of the COVID-
19 pandemic;
● the potential of increased regulatory and other burdens to address the direct and indirect impacts of COVID-
19 pandemic; and
● guest acceptance of our expanded facilities once completed and the resulting impact on our market position,
growth and financial results.
If our operating expenses increase without any offsetting increase in our revenues, our results of operations would
suffer.
FAILURE TO MAINTAIN THE INTEGRITY OF OUR INFORMATION TECHNOLOGY SYSTEMS, PROTECT OUR INTERNAL
AND CUSTOMER INFORMATION FROM CYBERSECURITY OR OTHER RISKS, OR COMPLY WITH APPLICABLE PRIVACY
AND DATA SECURITY REGULATIONS COULD ADVERSELY AFFECT US
We rely extensively on our computer systems to process customer transactions, manage customer data, manage
employee data and communicate with third-party vendors and other third parties, and we access the internet to use our
computer systems. Our operations require that we collect and store customer data, including credit card numbers and
other personal information, for various business purposes, including marketing and promotional purposes. We also
collect and store personal information about our employees. Threats to information technology systems associated with
cybersecurity risks and cyber incidents or attacks continue to grow. Breaches of our security measures or information
technology systems or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary
information or sensitive personal information or confidential data about us, or our customers, or our employees
including the potential loss or disclosure of such information as a result of hacking or other cyber-attack, computer
virus, fraudulent use by customers, employees or employees of third party vendors, trickery or other forms of
deception or unauthorized use, or due to system failure, could expose us, our customers, our employees or other
individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us,
damage our casino or brand names and reputations or otherwise harm our business. We rely on proprietary and
commercially available systems, software, tools and monitoring to provide security for processing, transmission and
storage of customer information, such as payment card, employee information and other confidential or proprietary
information. Our data security measures are reviewed and evaluated regularly, however they might not protect us
against increasingly sophisticated and aggressive threats. The cost and operational consequences of implementing
further data security measures could be significant.
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Additionally, the collection of customer and employee personal information imposes various privacy compliance
related obligations on our business and increases the risks associated with a breach or failure of the integrity of our
information technology systems. The collection and use of personal information is governed by privacy laws and
regulations enacted in the United States and other jurisdictions around the world. Privacy regulations continue to
evolve and on occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy laws
and regulations may increase our operating costs and/or adversely impact our ability to market our products, properties
and services to our customers. In addition, non-compliance with applicable privacy laws and regulations by us (or in
some circumstances non-compliance by third party service providers engaged by us) may also result in damage of
reputation, result in vulnerabilities that could be exploited to breach our systems and/or subject us to fines, payment of
damages, lawsuits or restrictions on our use or transfer of personal information.
OUR GAMING OPERATIONS RELY HEAVILY ON TECHNOLOGY SERVICES AND AN UNINTERRUPTED SUPPLY OF
ELECTRICAL POWER
Any unscheduled disruption in our technology services or interruption in the supply of electrical power could
result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our gaming operations. Such
interruptions may occur as a result of, for example, a failure of our information technology or related systems,
catastrophic events or rolling blackouts. Our systems are also vulnerable to damage or interruption from earthquakes,
floods, fires, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks and
similar events.
OUR BUSINESS IS SUBJECT TO RESTRICTIONS AND LIMITATIONS IMPOSED BY GAMING AND OTHER REGULATORY
AUTHORITIES THAT COULD ADVERSELY AFFECT US
The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. The
State of Nevada, the State of Colorado and the applicable local authorities require various licenses, registrations,
permits and approvals to be held by us and our subsidiaries. The Nevada Gaming Commission and the Colorado
Commission may, among other things, limit, condition, suspend, revoke or decline to renew a license or approval to
own the stock of our subsidiaries for any cause deemed reasonable by such licensing authority. If we violate gaming
laws or regulations, substantial fines could be levied against us, our subsidiaries and the persons involved, and we
could be forced to forfeit a portion of our assets. The suspension, revocation or non-renewal of any of our licenses or
the levy on us of substantial fines or forfeiture of assets would have a material adverse effect on our business, financial
condition and results of operations.
To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals
necessary for the operation of our current gaming activities. However, gaming licenses and related approvals are
deemed to be privileges under Nevada and Colorado law. We cannot assure you that our existing licenses, permits and
approvals will be maintained or extended.
In addition to gaming regulations, we are also subject to various federal, state, and local laws and regulations
affecting businesses in general. These laws and regulations include, but are not limited to, environmental matters,
employment, currency transactions, taxation, construction, zoning, construction and land-use laws, marketing and
advertising, smoking, and regulations governing the serving of alcoholic beverages.
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The Bank Secrecy Act, enforced by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury
Department, requires us to report currency transactions in excess of $10,000 occurring within a gaming day, including
identification of the guest by name and social security number, to the Internal Revenue Service (“IRS”). This
regulation also requires us to report certain suspicious activity, including any transaction that exceeds $5,000 that we
know, suspect or have reason to believe involves funds from illegal activity or is designed to evade federal regulations
or reporting requirements. Periodic audits by the IRS and our internal audit function assess compliance with the Bank
Secrecy Act, and substantial penalties can be imposed against us if we fail to comply with this regulation. In
recent years, the U.S. Treasury Department has increased its focus on Bank Secrecy Act compliance throughout the
gaming industry. Recent public comments by FinCEN suggest that casinos should make efforts to obtain information
on each customer’s sources of income. This could adversely impact our ability to attract and retain casino guests.
CLIMATE CHANGE, CLIMATE CHANGE REGULATIONS AND GREENHOUSE GAS EFFECTS MAY ADVERSELY IMPACT OUR
OPERATIONS.
There is a growing consensus that greenhouse gas (“GHG”) emissions continue to alter the composition of the
global atmosphere in ways that are affecting and are expected to continue affecting the global climate. We may become
subject to legislation and regulation regarding climate change, and compliance with any new rules could be difficult,
burdensome and costly. Concerned parties, such as legislators and regulators, stockholders and nongovernmental
organizations, as well as companies in many business sectors, are considering ways to reduce GHG emissions. Many
states have announced or adopted programs to stabilize and reduce GHG emissions and in the past federal legislation
has been proposed in Congress. If such legislation is enacted, we could incur increased energy, environmental and
other costs and capital expenditures to comply with the limitations. Unless and until legislation is enacted and its terms
are known, we cannot reasonably or reliably estimate its impact on our financial condition, results of operations, or
ability to compete. Further, regulation of GHG emissions may limit our guests’ ability to travel to our properties as a
result of increased fuel costs or restrictions on transport related emissions. Climate change could have a material
adverse effect on our financial condition, results of operations and cash flow. We have described the risks to us
associated with extreme weather events in the risk factors below.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY LEGISLATION PROHIBITING TOBACCO SMOKING.
Legislation in various forms to ban indoor tobacco smoking has been enacted or introduced in jurisdictions in
which we operate. Colorado imposes such restrictions; our Nevada gaming areas are not currently subject to tobacco
restrictions. If additional restrictions on smoking are enacted in jurisdictions in which we operate, we could experience
a decrease in gaming revenue. This is particularly the case if such restrictions are not applicable to all competitive
facilities in that gaming market.
IF GAMING TAXES AND FEES INCREASE, OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED
The federal government has, from time to time, considered a federal tax on casino revenues and may consider
such a tax in the future. State and local authorities raise a significant amount of revenue through taxes and fees on
gaming activities. From time to time, legislators and officials have proposed changes in tax laws, or in the
administration of such laws, affecting the gaming industry. In addition, an economic downturn could intensify the
efforts of state and local governments to raise revenues through increases in gaming taxes or other fees. If the state
and/or local governments where our properties are located were to increase gaming taxes and fees, our results of
operations could be adversely affected.
IF WE LOSE OUR KEY PERSONNEL, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED
We depend on the continued performances of John Farahi and Bob Farahi, our Chief Executive Officer and our
President, respectively, and their management team. If we lose the services of the Farahi brothers, or other senior
Atlantis or Monarch Black Hawk management personnel, and cannot replace such persons in a timely manner with
competent and experienced personnel, our business could be materially adversely affected.
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OUR BUSINESS MAY BE ADVERSELY IMPACTED IF WE ARE UNABLE TO ADEQUATELY STAFF OUR OPERATIONS
From time to time, the competition for employees increases. During such times, new and growing business in the
area may create job opportunities that at times have exceeded the area’s supply of qualified employees. If we are
unable to attract and retain qualified employees, or if competition for employees results in materially increased wages,
our ability to maintain and grow our business could be adversely impacted.
WE OWN FACILITIES THAT ARE LOCATED IN AREAS THAT EXPERIENCE EXTREME WEATHER CONDITIONS
Extreme weather or weather-related conditions, including snowstorms and forest or range fires may interrupt our
operations, damage our properties and reduce the number of customers who visit our facilities in the affected areas. If
there is a prolonged disruption at either our Atlantis or Monarch Black Hawk properties due to extreme weather or
weather-related conditions, our results of operations and financial condition could be materially adversely affected. For
example, extreme snow in and around the Black Hawk area often leads to closure of US 6 and I-70, the roads between
Denver and Black Hawk. An excessive number of snow days in a fiscal period has, in the past, and would, in the
future, have a negative effect on our guest visitations and adversely affect our revenue, results of operation and
financial results for the reporting period.
While we maintain insurance coverage that may cover certain of the costs and loss of revenue that we incur as a
result of some extreme weather or weather-related conditions, our coverage is subject to deductibles and limits on
maximum benefits. We cannot assure you that we will be able to fully collect, if at all, on any claims resulting from
extreme weather or weather-related conditions. If any of our properties are damaged or if their operations are disrupted
as a result of extreme weather or weather-related conditions in the future, or if extreme weather or weather-related
conditions adversely impacts general economic or other conditions in the areas in which our properties are located or
from which they draw their patrons, our business, financial condition and results of operations could be materially
adversely affected.
WE ARE SUBJECT TO ENVIRONMENTAL LAWS AND POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
We are subject to various federal, state and local environmental laws and regulations that govern our operations,
including emissions and discharges into the environment, and the handling and disposal of hazardous and
nonhazardous substances and wastes. Failure to comply with such laws and regulations could result in costs for
corrective action, penalties or the imposition of other liabilities or restrictions. As we acquire properties, we may not
know the full level of exposure that we may have undertaken despite appropriate due diligence.
We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of
hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or
operator of property may be liable for the costs of remediating contaminated soil or groundwater on or from its
property, without regard to whether the owner or operator knew of, or caused, the contamination, as well as incur
liability to third parties impacted by such contamination. The presence of contamination, or failure to remediate it
properly, may adversely affect our ability to use, sell or rent property. The Monarch Black Hawk is located within an
area of historic mining activity and near superfund sites that have been the subject of state and federal clean-up
actions. Although the Monarch Black Hawk is not part of a superfund site, the fact that such sites are in the vicinity
and that mining activities occurred throughout the area, it is possible that as a result of our ownership and operation of
Monarch Black Hawk (on which mining may have occurred in the past), we may incur costs related to this matter in
the future. Furthermore, there may have been soil or groundwater contamination at certain of our properties resulting
from current or former operations. We cannot assure that these matters or other matters arising under environmental
laws will not have a material adverse effect on our business, financial condition, or results of operations in the future.
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CHANGES IN REGULATIONS ON LAND USE REQUIREMENTS COULD ADVERSELY IMPACT OUR BUSINESS
Changes in regulations on land use requirements with regard to development of new hotel casinos in the proximity
of the Atlantis and the Monarch Black Hawk could have an adverse impact on our business, results of operations, and
financial condition. A relaxation in such regulations could make it easier for competitors to enter our markets. A
tightening of such regulations could adversely impact our future expansion opportunities.
OUR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY HIGH-END PLAYERS’ WINNINGS OR THEIR FAILURE
TO REPAY FUNDS EXTENDED ON CREDIT
Although not the major focus of our marketing efforts, we have selectively targeted high-end players. Should one
or more of these high-end players win large sums in our casino, or should a material amount of credit extended to such
players not be repaid, our results of operations could be adversely impacted.
WE FACE THE RISK OF FRAUD AND CHEATING
Our gaming customers may attempt or commit fraud or cheat in order to increase winnings. Acts of fraud or
cheating could involve the use of counterfeit chips or other tactics, possibly in collusion with our employees. Internal
acts of cheating could also be conducted by employees through collusion with dealers, surveillance staff, floor
managers or other casino or gaming area staff. Failure to discover such acts or schemes in a timely manner could result
in losses in our gaming operations. In addition, negative publicity related to such schemes could have an adverse effect
on our reputation, potentially causing a material adverse effect on our business, financial condition, results of
operations and cash flows.
THE CONCENTRATION AND EVOLUTION OF THE SLOT MACHINE MANUFACTURING INDUSTRY COULD IMPOSE
ADDITIONAL COSTS ON OUR OPERATIONS
A majority of our gaming revenue is attributable to slot machines operated at our gaming facilities. It is important,
for competitive reasons, that we offer popular and technologically advanced slot machine games to our customers.
In recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most
popular games, instead requiring participation lease arrangements. Participation slot machine leasing arrangements
typically often require the payment of a fixed daily rental or a percentage payment of coin-in or net win. Generally, a
participation lease is substantially more expensive over the long term than the cost to purchase a new machine.
For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease
arrangements that are more expensive than our current costs associated with the continued operation of our existing
slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased
investment and participation lease costs, it could hurt our profitability.
RISKS RELATING TO OWNERSHIP OF COMMON STOCK
OUR COMMON STOCK PRICE MAY FLUCTUATE SUBSTANTIALLY, AND A STOCKHOLDER’S INVESTMENT COULD
DECLINE IN VALUE
The market price of our common stock may fluctuate substantially due to many factors, such as those described in
the Risk Factors described herein and others, including:
● actual or anticipated fluctuations in our results of operations;
● announcements of significant acquisitions or other agreements by us or by our competitors;
● our sale of common stock or other securities in the future;
● trading volume of our common stock;
● conditions and trends in the gaming and destination entertainment industries;
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● changes in the estimation of the future size and growth of our markets;
● general economic conditions, including, without limitation, changes in the cost of fuel and air travel; and
● fears of impact on leisure and general travel due to pandemic concerns, include the coronavirus.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to companies’ operating performance. Broad market and industry factors may
materially harm the market price of our common stock, regardless of our operating performance. In the past, following
periods of volatility in the market price of a company’s securities, stockholder derivative lawsuits and/or securities
class action litigation has often been instituted against that company. Such litigation, if instituted against us, could
result in substantial costs and a diversion of management’s attention and resources.
WE HAVE THE ABILITY TO ISSUE ADDITIONAL EQUITY SECURITIES, WHICH WOULD LEAD TO DILUTION OF OUR
ISSUED AND OUTSTANDING COMMON STOCK
If we issue additional equity securities or securities convertible into equity securities, it would result in dilution of
our existing stockholders’ equity interests in us. Our Board of Directors has the authority to issue, without vote or
action of stockholders, preferred stock in one or more series, and has the ability to fix the rights, preferences, privileges
and restrictions of any such series. Any such series of preferred stock could contain dividend rights, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of
holders of our common stock. If we issue convertible preferred stock, a subsequent conversion may dilute the current
common stockholders’ interest.
If our holders of outstanding options and rights to purchase shares of our common stock exercise their options or
rights, and sell the underlying shares of common stock we issue upon such exercise, our stockholders may experience
substantial dilution and the market price of our shares of common stock could decline. Further, the perception that such
securities might be exercised could adversely affect the trading price of our shares of common stock. In addition,
during the time that such securities are outstanding, they may adversely affect the terms on which we could obtain
additional capital.
WE DO NOT INTEND TO PAY CASH DIVIDENDS. AS A RESULT, STOCKHOLDERS WILL BENEFIT FROM AN INVESTMENT IN
OUR COMMON STOCK ONLY IF IT APPRECIATES IN VALUE
We have never paid a cash dividend on our common stock, and we do not plan to pay any cash dividends on our
common stock in the foreseeable future. We currently intend to retain any future earnings to finance our operations and
further expansion and growth of our business, including acquisitions. As a result, the success of an investment in our
common stock will depend upon any future appreciation in its value. We cannot guarantee that our common stock will
appreciate in value or even maintain the price at which stockholders have purchased their shares.
GENERAL RISKS
OUR CAPITAL EXPENDITURES MAY NOT RESULT IN THE EXPECTED IMPROVEMENTS IN OUR BUSINESS OR FINANCIAL
RESULTS
We have expended a significant amount of capital on our multi-phased Monarch Black Hawk Expansion. We
continuously invest in the upgrade and maintenance of our facilities to present a fresh, high quality product to our
guests. Our ability to realize the expected returns on these capital investments depends on a number of factors,
including, general economic conditions, changes to construction plans and specifications, delays in obtaining or
inability to obtain necessary permits, licenses and approvals, disputes with contractors, disruptions to our business
caused by construction and other unanticipated circumstances or cost increases.
While we believe that the overall budgets for our planned capital expenditures are reasonable, these costs are
estimates and the actual costs may be higher than expected. In addition, we cannot assure you that these investments
will be sufficient or that we will realize our expected returns on our capital investments, or any returns at all. If we fail
to realize our expected returns on capital investments, it could materially adversely affect our business, financial
condition and results of operations.
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CHANGES IN LEGISLATION AND REGULATION OF OUR BUSINESS COULD HAVE AN ADVERSE EFFECT ON OUR
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS
Regulations governing the conduct of gaming activities and the obligations of gaming companies in any
jurisdiction in which we have or in the future may have gaming operations are subject to change and could impose
additional operating, financial, competitive or other burdens on the way we conduct our business.
In particular, certain areas of law governing new gaming activities, such as the federal and state law applicable to
sports betting, are new or developing in light of emerging technologies. New and developing areas of law may be
subject to the interpretation of the government agencies tasked with enforcing them. In some circumstances, a
government agency may interpret a statute or regulation in one manner and then reconsider its interpretation at a later
date. No assurance can be provided that government agencies will interpret or enforce new or developing areas of law
consistently, predictably, or favorably. Moreover, legislation to prohibit, limit or add burdens to our business may be
introduced in the future in states where gaming has been legalized. In addition, from time to time, legislators and
special interest groups have proposed legislation that would expand, restrict or prevent gaming operations or which
may otherwise adversely impact our operations in the jurisdictions in which we operate. Any expansion of gaming or
restriction on or prohibition of our gaming operations or enactment of other adverse regulatory changes could have a
material adverse effect on our operating results.
OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COVER ALL POSSIBLE LOSSES THAT OUR PROPERTIES
COULD SUFFER. IN ADDITION, OUR INSURANCE COSTS MAY INCREASE AND WE MAY NOT BE ABLE TO OBTAIN THE
SAME INSURANCE COVERAGE IN THE FUTURE
Although we have general property insurance covering damage caused by a casualty loss (such as fire and natural
disasters), each such policy has certain exclusions. In addition, our property insurance is in an amount that may be less
than the expected replacement cost of rebuilding the applicable complex if there was a total loss. Our level of
insurance coverage may not be adequate to cover all losses in the event of a major casualty. In addition, certain
casualty events, such as public health emergencies, including pandemics such as the COVID-19, labor strikes, nuclear
events, acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism,
deterioration or corrosion, insect or animal damage and pollution, might not be covered at all under our policies.
Therefore, certain acts, events or conditions could expose us to heavy, uninsured losses.
In addition, although we currently have insurance coverage for occurrences of terrorist acts and for certain losses
that could result from these acts, our terrorism coverage is subject to the same risks and deficiencies as those described
above for our general property coverage. The lack of sufficient insurance for these types of acts could expose us to
heavy losses in the event that any damages occur, directly or indirectly, as a result of terrorist attacks or otherwise,
which could have a significant negative impact on our operations.
In addition to the damage caused to our property by a casualty loss (such as fire, natural disasters, acts of war or
terrorism), we may suffer business disruption as a result of these events or be subject to claims by third parties injured
or harmed. While we carry business interruption insurance and general liability insurance, this insurance may not be
adequate to cover all losses in such event.
We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need
to reduce our policy limits or agree to certain exclusions from our coverage. Among other factors, it is possible that
homeland security concerns, other catastrophic events or any change in government legislation governing insurance
coverage for acts of terrorism could materially adversely affect available insurance coverage and result in increased
premiums on available coverage (which may cause us to elect to reduce our policy limits) and additional exclusions
from coverage. Among other potential future adverse changes, in the future we may elect not to, or may not be able to,
obtain any coverage for losses due to acts of terrorism.
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Our debt instruments and other material agreements require us to maintain a certain minimum level of insurance.
Failure to satisfy these requirements could result in an event of default under these debt instruments or material
agreements, which would have a material adverse effect on our financial condition, results of operations or cash flows.
NATURAL OR MAN-MADE DISASTERS, AN OUTBREAK OF HIGHLY INFECTIOUS DISEASE, TERRORIST ACTIVITY, GUN
VIOLENCE OR WAR MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND CASH
FLOWS
Natural disasters, man-made disasters and outbreaks of highly infectious diseases such as the COVID-19 may
result in decreases in travel to and from, and economic activity in, areas in which we operate, and may adversely affect
the number of visitors to our properties. In addition, catastrophic events, such as terrorist and war activities in the
United States and elsewhere, have had a negative effect on travel and leisure expenditures, including lodging, gaming
and tourism. If any of the foregoing events occur in the future, they could disrupt our operations, including our ability
to staff our business adequately, damage our reputation and have a material adverse effect on our business, results of
operations and cash flows. Although we have insurance coverage with respect to some of these disasters or events, we
cannot assure you that any such coverage will be sufficient to indemnify us fully against all direct and indirect costs,
including any loss of business that could result from substantial damage to, or partial or complete destruction of, any of
our properties.
WE ARE SUBJECT TO RISKS RELATED TO CORPORATE SOCIAL RESPONSIBILITY.
Governments, investors, customers, employees and other stakeholders are increasingly focusing on corporate
environmental, social and governance (“ESG”) practices and disclosures, and expectations in this area are rapidly
evolving and growing. Our reputation and the value of our brand may be significantly affected if we fail to act
responsibly in a number of areas including diversity and inclusion, community engagement and philanthropy,
environmental sustainability, climate change, responsible gaming, supply chain management, and workplace conduct.
Our failure to adopt and implement responsible ESG policies could also impact employee engagement and retention
and the willingness of customers and our partners to do business with us, which could have a material adverse effect
on our business, results of operations and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There were no unresolved comments from the SEC staff at the time of filing this Form 10-K.
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ITEM 2. PROPERTIES
As of December 31, 2021, our properties consist of:
Reno, Nevada Properties:
(a) An approximately 13-acre site on which the Atlantis is situated, including the hotel towers, casino, restaurant
facilities and surrounding parking.
(b) An approximately 16-acre site, adjacent to the Atlantis and connected to the Atlantis by the Sky Terrace,
which includes approximately 11 acres of paved parking used for customer, employee and valet parking. The
remainder of the site is undeveloped. This site is compliant with all casino zoning requirements and is suitable and
available for future expansion of the Atlantis facilities, parking, or complementary resort casino and/or entertainment
amenities. We have not determined the ultimate use of this site.
(c) An approximately 2.6-acre site across Virginia Street from the Atlantis which is utilized as administrative
offices (“the Administrative Site”) for Atlantis staff.
(d) An approximately 5.3-acre site with a 14,376 square foot building across Coliseum Way from the Atlantis.
The building is currently rented and the land is unused.
(e) Approximate 2.3-acre, 0.45-acre and 0.23-acre sites adjacent to the Administrative Site which are currently
unused.
(f) Leased land consisting of approximately 37,400 square-feet adjacent to the Atlantis serving as a driveway
entrance to the Atlantis. For a further description of the lease terms, see Item 8. Financial Statements and
Supplementary Data – Notes to Consolidated Financial Statements, Notes 5 and 12.
(g) Leased land consisting of approximately 4.2 acres adjacent to the Atlantis serving as a surface parking lot for
the Atlantis. The lease term ends in 2035. For a further description of the lease terms, see Item 8. Financial Statements
and Supplementary Data – Notes to Consolidated Financial Statements, Notes 5 and 12.
Black Hawk, Colorado Properties:
(h) An approximate 3.4-acre site on which the Monarch Black Hawk is situated including the hotel tower, casino,
conference facilities, resort facilities, restaurant facilities and surrounding parking.
(a) An approximate 9.0-acre parcel of land with an industrial building, located between Denver and Monarch
Casino Resort Spa Black Hawk, in Clear Creek County, Colorado, which is used as a warehouse.
Our Amended Credit Facility is secured by liens on substantially all of our real and personal property.
ITEM 3. LEGAL PROCEEDINGS
This information is incorporated by reference from Item 8. Financial Statements and Supplementary Data – Notes
to Consolidated Financial Statements, Note 11 of this Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information. Our common stock trades on The Nasdaq Stock Market under the symbol MCRI.
Stockholders. As of February, 15, 2022, there were approximately 62 stockholders of record of our common stock.
Dividends. We have never paid dividends on our common stock. We intend to retain earnings and use free cash
flow to finance our operating activities, for capital expenditures and to pay down our debt. We do not anticipate paying
cash dividends on our common stock in the foreseeable future. Our Amended Credit Facility also contains provisions
that require the achievement of certain financial ratios before we can pay or declare dividends to our stockholders. See
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Notes to Consolidated Financial Statements,
Note 6.
Unregistered Sales of Equity Securities.
None.
STOCK PERFORMANCE GRAPH
The following chart reflects the cumulative total shareholder return (change in stock price plus reinvested
dividends) of a $100 investment in our common stock from the five-year period from December 31, 2016 through
December 31, 2021, in comparison to the Standard & Poor’s 500 Composite Stock Index and the Standard & Poor’s
1500 Casinos & Gaming Index. The comparisons are not intended to forecast or be indicative of possible future
performance of our common stock.
The following performance graph shall not be deemed to be "filed" for purposes of Section 18 of the Exchange
Act, nor shall this information be incorporated by reference into any future filing under the Securities Act or the
Exchange Act, except to the extent that we specifically incorporate it by reference into a filing.
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Source: S&P Global Market Intelligence
© 2022
Repurchases
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 the repurchase of up to 3,000,000 shares of our
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 us to acquire any particular amount of common
stock and the Repurchase Plan may be suspended at any time at our discretion, and it will continue until exhausted.
The actual timing, number and value of shares repurchased under the Repurchase Plan will be determined by
management at its discretion and will depend on a number of factors, including the market price of our common stock,
general market economic conditions and applicable legal requirements. We had made no purchases under the
Repurchase Plan as of December 31, 2021.
On January 19, 2022, under the authority of the Repurchase Plan, the Company purchased 100,000 shares for $6.5
million in a privately negotiated transaction.
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ITEM 6. SELECTED FINANCIAL DATA
Removed and Reserved.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to assist in the understanding of our results of operations and our present
financial condition. The consolidated financial statements and the accompanying notes contain additional detailed
information that should be referred to when reviewing this material.
Cautionary Note on Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, (the “Exchange Act”) regarding our expectations and beliefs concerning
the cost, financing and impact of our Monarch Black Hawk Expansion; additional revenue opportunities as a result of
project and budget modifications for our Monarch Black Hawk Expansion; additional capital projects; future
expansion and acquisition opportunities; positioning of our properties to benefit from future macro and local economic
growth; business prospects; business strategies and outlook; competitive advantages and sources of competition;
marketing strategy; approvals and licensing requirements; employee relations; capital requirements; anticipated source
of funds and adequacy of such funds to meet our debt obligations and capital requirements; financial condition, legal
matters and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-
looking statements. We note that many factors could cause our actual results and experience to change significantly
from the anticipated results or expectations expressed in our forward-looking statements. When words and expressions
such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,”
“forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions
are used in this Form 10-K, as well as statements containing phrases such as “in our view,” “we cannot assure you,”
“although no assurance can be given,” or “there is no way to anticipate with certainty,” forward-looking statements are
being made. Example of forward-looking statements include, among others, statements we make regarding: (i) our
belief that we have sufficient liquidity to fund any remaining construction and litigation costs and ongoing capital
expenditures; (ii) our belief that our business is well-positioned to benefit from any post-pandemic recovery; (iii) our
expectation regarding the availability of future acquisition opportunities; (iv) our beliefs regarding the quality of our
products and guest services in Reno and Black Hawk; (v) our expectations regarding our guests' acceptance of the
expanded casino, new hotel and enhanced amenities at Monarch Casino Resort Spa Black Hawk; (vi) our expectations
regarding our future position in, and share of, the high-end segment of the market and the quality of service we provide
to our guests; (vii) our expectations regarding the litigation relating to the construction of the Monarch Black Hawk
expansion and related liens recorded by the general contractor and certain subcontractors against the Monarch Black
Hawk; and (viii) our belief regarding the proximity that the Reno-Sparks Convention Center will have for the Atlantis.
Actual results and future events and conditions may differ materially from those described in any forward-looking
statements. Therefore, you should not rely on any of these forward-looking statements.
Various risks and uncertainties may affect the operation, performance, development and results of our business
and could cause future outcomes to change significantly from those set forth in our forward-looking statements,
including the following factors:
● our ability to successfully implement our business and growth strategies;
● our ability to successfully defend against and remove the liens recorded against the Monarch Black
Hawk by the general contractor and certain subcontractors with respect to the expansion and renovation
of the property;
● adverse impacts of the COVID-19 pandemic on our business, construction projects, financial condition
and operating results;
● actions by government officials at the federal, state and/or local level with respect to steps to be taken,
including, without limitation, temporary or extended shutdowns, travel restrictions, social distancing and
shelter-in-place orders, in connection with the COVID-19 pandemic;
● our ability to manage guest safety concerns caused by COVID-19;
● our ability to effectively manage and control expenses during any future shutdown periods;
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● impact of any future shutdowns on our ability to maintain compliance with the terms and conditions of
our credit facilities and other material contracts;
● our ability to negotiate relief options and necessary amendments to our Amended Credit Facility, if
required;
● access to available and reasonable financing on a timely basis;
● our ability to maintain strong working relationships with our regulators, employees, lenders, suppliers,
insurance carriers, customers, and other stakeholders;
● impact of any uninsured losses;
● changes in guest visitation or spending patterns due to health or other concerns;
● construction factors, including delays, disruptions, availability of labor and materials, increased costs of
labor and materials, contractor disagreements, zoning issues, environmental restrictions, soil and water
conditions, weather and other hazards, site access matters, building permit issues and other regulatory
approvals or issues;
● ongoing disagreements over costs of and responsibility for delays and other construction related matters
with our Monarch Black Hawk general contractor, PCL Construction Services, Inc., including, as
previously reported, the litigation against us by such contractor;
● affirmative and extensive counterclaims for construction defects, breach of contract, breach of warranty,
fraud, fraudulent inducement, negligence and other construction related claims that we have filed against
the Monarch Black Hawk contractor, PCL Construction Services, Inc., in the above-mentioned litigation
in which litigation the parties are currently conducting discovery, and investigation of the claims by and
against us is therefore ongoing;
● our potential need to post bonds or other forms of surety to support our legal remedies;
● risks related to development and construction activities (including disputes with and defaults by
contractors and subcontractors; construction, equipment or staffing problems and delays; shortages of
materials or skilled labor; environmental, health and safety issues; weather and other hazards, site access
matters, and unanticipated cost increases);
● changes in laws mandating increases in minimum wages and employee benefits;
● changes in laws and regulations permitting expanded and other forms of gaming in our key markets;
● the effects of labor shortages on our market position, growth and financial results;
● current broad-based inflation on the economy, including wage inflation;
● the potential of increases in state and federal taxation to address budgetary and other impacts of the
COVID-19 pandemic;
● the potential of increased regulatory and other burdens to address the direct and indirect impacts of
COVID-19 pandemic;
● guest acceptance of our expanded facilities once completed and the resulting impact on our market
position, growth and financial results;
● competition in our target market areas;
● our dependence on two resorts;
● our ability to realize the anticipated benefits of our expansion and renovation projects, including the
Monarch Black Hawk Expansion;
● our ability to effectively manage expenses to optimize our margins and operating results;
● risks related to our present indebtedness and future borrowings and our ability to meet our debt
obligations and comply with our loan covenants;
● adverse trends in the gaming industries;
● changes in patron demographics;
● general market and economic conditions, including but not limited to, the effects of local and national
economic, credit and capital market conditions, housing and energy conditions on the economy in
general and on the gaming and lodging industries in particular;
● access to capital and credit, including our ability to finance future business requirements;
● our ability to generate sufficient operating cash flow to finance our expansion plans and fund working
capital;
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● the impact of rising interest rates and our ability to refinance debt as it matures at commercially
reasonable rates or at all;
● disruptions and shortages in the supply chain;
● the impact that any discontinuance, modification or other reform of LIBOR, or the establishment of
alternative reference rates, may have on our LIBOR-based debt instruments such as our Amended Credit
Facility;
● 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;
● our ability to comply with existing laws and regulations to which we are subject;
● our 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;
● impact of natural disasters, severe weather, terrorist activity and similar events;
● 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;
● risks, uncertainties and other factors described from time to time in this and our other Securities and
Exchange Commission (“SEC” or “Commission”) filings and reports;
● the effects of macro and micro economic conditions on employment growth in the economy in general;
● the effects of labor shortages on our ability to grow our business and to expand our market share in each
of our key markets;
● our ability to generate sufficient cash flow and manage our expenses to deleverage the Company;
● guest acceptance of our expanded facilities at Monarch Black Hawk once completed and the resulting
impact on our market position, growth and future financial results; and
● the impact of the events occurring in Eastern Europe and a possible Russian invasion of Ukraine.
For a more detailed description of certain Risk Factors affecting our business, see Item 1A, “Risk Factors.”
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 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, we own separate parcels of land located next to the Atlantis and a parcel of land with an industrial
warehouse located between Denver, Colorado and Monarch Casino Resort Spa Black Hawk. We also own 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.
Our business strategy is to maximize revenues, operating income and cash flow primarily through our casino, food
and beverage, and hotel operations at the Atlantis and Monarch Black Hawk. We focus on delivering exceptional
service and value to our guests. Our hands-on management style focuses on customer service and cost efficiencies.
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FACTORS IMPACTING OUR RESULTS OF OPERATIONS
Our operating results may be affected by, among other things, competitive factors, gaming tax increases, mandated
minimum wages, the commencement of new gaming operations, construction at our facilities, general public sentiment
regarding travel, overall economic conditions and governmental policies affecting the disposable income of our
patrons, widespread public health emergencies including pandemics such as the global coronavirus (COVID-19)
pandemic, terrorism and weather conditions affecting our properties, as well as those matters discussed in Item 1A.
“RISK FACTORS” above.
The following significant factors and trends should be considered in analyzing our operating performance:
Atlantis: Our business strategy is to maximize revenues, operating income and cash flow primarily through our casino,
food and beverage operations and hotel operations. We focus on delivering exceptional service and value to our guests.
Our hands-on management style focuses on customer service and cost efficiencies 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. 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 profit margins.
Monarch Casino Resort Spa Black Hawk: Since the acquisition of the Monarch Black Hawk property in April 2012,
our focus has been to maximize casino and food and beverage revenues while upgrading the existing facility and
working on the major expansion. In the fourth quarter of 2020 we began the phased opening of our hotel tower and
expanded casino floor. In 2021 we significantly completed the phased opening of our hotel tower, casino expansion
and the redesign and upgrade of the legacy building, which transformed our Monarch Black Hawk property into a full-
scale casino resort spa. The property now features approximately 60,000 square feet of casino space, approximately
1,200 slot machines, approximately 40 table games, a sports lounge and poker room, 10 bars and lounges, and four
new dining options, including a twenty-four-hour full-service restaurant, 250-seat buffet-style restaurant, the Monarch
Chophouse (a fine-dining steakhouse), and Bistro Mariposa (a specialty restaurant). The resort offers 516 guest rooms
and suites, banquet and meeting room space, a retail store, a concierge lounge and an upscale spa and pool facility
located on the top floor of the tower. 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 certain Key Performance Indicators (“KPI”) to manage our operation and measure our performance.
Gaming revenue KPI: Our management reviews on a consistent basis the volume metrics and hold percentage
metrics for each gaming area. The main volume measurements are slot coin-in, table games drop, sportsbook write and
keno write. Slot coin-in represents the dollar amount wagered in slot machines, including free promotional wagers.
Table games drop represents the total amount of cash and net markers deposited in the table drop box. Keno write and
sportsbook write represents the dollar amount wagered at our counters, along with sportsbook write made through our
mobile wagering system. Volume metrics are important in managing the business, as our gaming win is affected by
actual hold percentage, which in general varies from the expected hold percentage and historical hold percentage.
Gaming win represents the amount of wagers retained by us. Hold percentage represents win as a percentage of slot
coin-in, table game drop, sportsbook write, or keno write. Our win and hold percentages are calculated before
discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related
to goods and services provided to patrons on a complimentary basis.
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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.
Operating margins: Our management is consistently focused on controlling expenses and finding cost savings,
without affecting the quality of the product we offer and our guests’ services and experience. We measure our
performance using expense margin, which is a percentage of direct expenses, including labor, cost of product and any
other operating expenses related to the gaming, food and beverage, or hotel operation to the net gaming, food and
beverage, or hotel revenues. Selling, general and administrative (“SG&A”) margin represents SG&A expenses for a
period as a percentage of total net revenue for a period. In managing the food and beverage operation we use Cost Of
Goods Sold (“COGS”) percentage, which represents a percentage of product cost to the food and beverage revenue
and is a measurement of commodity prices and menu sales prices.
Our management evaluates the KPI as compared to prior periods, the peer group, or market, as well as for any
trends.
RESULTS OF OPERATIONS
Impact of the COVID-19 Pandemic
Monarch’s operating results for the year ended December 31, 2021 and 2020 were impacted by the COVID-19
pandemic.
In March 2020, the World Health Organization declared the rapidly growing COVID-19 outbreak a global
pandemic. On March 16, 2020, in an effort to contain the virus, the state of Colorado mandated a temporary shutdown
of all casinos including Monarch Black Hawk and, on March 17, 2020, the state of Nevada mandated the temporary
closure of all casinos including the Atlantis in Reno. Our Nevada and Colorado properties partially reopened with
limited operations on June 4, 2020 and June 17, 2020, respectively. Therefore, the annual financial results comparison
set forth below should be read with the 2020 partial period closures in mind.
Following the reopening of our operations in 2020 and through 2021, we continued to operate under government-
imposed capacity restrictions on our operations and various COVID-19 safety protocols. We were continually
adjusting our operations to the restrictions in occupancy and social distancing requirements, which included reduced
seating at table games and in all restaurants, and a decreased number of active slot machines on the casino floors. The
convention business at Atlantis was adversely affected by the state-mandated gathering limits. We have experienced
hotel stay and convention booking cancellations, and since the reopening, guest visitation and hotel and convention
bookings have been inconsistent.
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Our financial results, particularly for 2020, were significantly impacted by the unprecedented government-
mandated closure of our Nevada and Colorado properties in response to the COVID-19 pandemic, which lasted
approximately three months, and the related operational changes we were required to make to comply with
government mandated restrictions as well as changes in customer demand and overall travel and leisure industry.
In July 2021, due to reports of increased COVID-19 cases apparently driven by the Delta variant, Nevada state
government officials reintroduced mask mandates for all persons in certain public indoor locations, including casino
resorts such as the Atlantis, which lasted until the beginning of 2022.
We are operating in an environment of high uncertainty and there may be additional government restrictions
placed on all of our services, such as gaming, restaurants, spas and salons, entertainment venues and convention and
meeting space, which could lead to lower demand and revenue. Such restrictions could also increase our costs,
decrease our operating margins and have a material adverse effect on our operations, cash flows and financial results.
While we have incurred significant disruptions from the COVID-19 pandemic, we are unable to accurately predict
the full impact that COVID-19 will have due to numerous uncertainties and the dynamic nature of the circumstances,
including the duration and severity of the disease, the possibility of the outbreak levels seen to return, the long-term
impact on demand following the reopening of our casinos, and other actions or restrictions that may be taken by
governmental authorities, the impact thereof to the general U.S economy and to our customers. We will continue to
evaluate the nature and extent of the impact to our business, results of operations, and financial condition.
Monarch Casino Resort Spa Black Hawk expansion
Our financial results for the year ended December 31, 2021 benefited from the phased opening of operations at
our newly transformed Monarch Black Hawk, which opening began in the fourth quarter of 2020. The new hotel,
including a spa and pool on the top floor, were fully opened in the first quarter of 2021. In May, 2021, we opened our
new poker room and in mid-December we opened our new sportsbook, lounge and bar and additional casino space at
the legacy part of the building. With the opening of our expanded casino floor at the beginning of 2021, we increased
the number of slot machines by approximately 190 and table games by 10, compared to the pre-COVID active gaming
devices at Monarch Black Hawk. Monarch Black Hawk operations continue to ramp up.
Comparison of Operating Results for the Years Ended December 31, 2021 and 2020
For 2021, our net income totaled $68.5 million, or $3.53 per diluted share, compared to net income of $23.7
million, or $1.25 per diluted share for the same period of 2020, reflecting a 189.2% increase in net income and 182.4%
increase in diluted earnings per share. Net income and diluted earnings per share comparisons were impacted by the
$8.7 million tax benefit recognized in 2020. Net revenue for the years ended December 31, 2021 and 2020 were
$395.4 million and $184.4 million, respectively, reflecting an increase of $211.0 million, or 114.4%. Income from
operations for the year ended December 31, 2021 totaled $89.9 million compared to $15.3 million for the same period
in 2020, representing an increase of $74.6 million, or 488.5%.
Casino revenue increased 109.2% in the year ended December 31, 2021, compared to the same period of 2020 and
was driven primarily by the increase in gaming devices in 2021 with the opening of expanded casino at Monarch Black
Hawk. In addition, 2020 gaming revenue was impacted by the pandemic-related properties closure and capacity and
other regulatory limitations, which remained in effect following the properties’ reopening in June 2020. Casino
operating expense as a percentage of casino revenue increased to 32.2% for the year ended December 31, 2021,
compared to 30.5% in 2020 primarily due to an increase in promotional expenses at Monarch Black Hawk and an
increase in gaming taxes with the increase in gaming revenue at Monarch Black Hawk.
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Food and beverage revenue increased 111.0% in the year ended December 31, 2021 over the same period in 2020,
due to a 97.4% increase in covers, combined with a 6.9% increase in average revenue per cover. In 2021 we increased
the F&B seating capacity with the opening of our new F&B outlets in Monarch Black Hawk. In 2020, in addition to
the pandemic-related shutdown of our properties for approximately three months, we also had one of our restaurants
and one of our bars at Atlantis closed for redesign and upgrade for approximately six months. Food and beverage
operating expense as a percentage of food and beverage revenue in the year ended December 31, 2021 was 79.8%
compared to 83.7% over the same period in 2020. Food and beverage operating expense as a percentage of food and
beverage revenue decreased as a result of an effort to align menu prices with increased commodity prices and labor
costs.
Hotel revenue increased 170.1% in the year ended December 31, 2021 over the same period in 2020 due to
increase in available rooms by 15.8 thousand, higher hotel occupancy of 76.7% in 2021 compared to 69.8% for the
period the hotel was open in 2020 and higher ADR of $141.17 for the year ended December 31, 2021, compared to
$109.46 for the year ended December 31, 2020. REVPAR was $119.03 in 2021 and $82.06 for the period hotel was
open in 2020. Hotel operating expense as a percent of the hotel revenue for the year ended December 31, 2021 was
40.7% compared to 50.2% for the same period in 2020. The decrease in the hotel expense margin was primarily due to
the increase in ADR and REVPAR.
Other revenue increased 72.6% in 2021 compared to 2020 driven by increase in commission revenues, spa
revenue, arcade revenue and retail revenue, driven by the expanded operation in Monarch Black Hawk in 2021 and by
the properties closures for approximately three months and limited operations due to COVID-19 related state
restrictions after opening in 2020.
SG&A Expense increased to $84.4 million in the year ended December 31, 2021 from $60.4 million in the same
period of 2020 due to: i) a $10.2 million increase in salaries, wages and related employee benefits expense; ii) a $6.5
million increase in advertising and promotional expenses; iii) a $1.8 million increase in utility expense; iv) a $1.6
million increase in taxes and licenses; v) a $0.4 million increase in employee relations; and v) a $3.5 million in other
expenses. The increase in expense in all categories above is primarily a result of the expanded operation at Monarch
Black Hawk. As a percentage of net revenue, SG&A expense decreased to 21.4% in 2021 from 32.7% in 2020.
Depreciation and amortization expense increased to $38.4 million for the year ended December 31, 2021, as
compared to $17.3 million for the same period in 2020 primarily due to the addition of the hotel building and furniture,
fixtures and equipment assets with the completion of the expansion project in Monarch Black Hawk.
During the year ended December 31, 2021, we recognized $5.1 million in construction litigation expense related
to the lawsuit filed by the Monarch Black Hawk Expansion construction project general contractor against the
Company and our countersuit against the general contractor, $0.1 million in equipment, supplies and employee testing
expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations;
and $0.1 million loss on disposal of assets, offset by $0.3 million of litigation proceeds and $0.1 million of insurance
claims proceeds. During the year ended December 31, 2020, we recognized $2.8 million in pre-opening expense
related to the opening of the new hotel and expanded casino in Black Hawk, $1.6 million in construction litigation
expense related to the lawsuit filed by the Monarch Black Hawk Expansion construction project general contractor
against the Company and our countersuit against the general contractor, $1.4 million in Colorado legislation lobbying
expenses, $0.7 million in equipment, supplies and employee testing expenses directly attributable to the COVID-19
pandemic for reopening of the properties and incremental to normal operations and $0.2 million in unamortized debt
issuance cost write off and loss on disposition of assets. These expenses are included in Other operating items, net in
the Consolidated Statement of Operations.
During the year ended December 31, 2021, we decreased the outstanding balance under our credit facility by
$92.5 million to $90.0 million as of December 31, 2021. During 2021, we expensed $4.5 million interest. During 2020,
we capitalized a majority of the interest paid and accrued, as most of the draws were used to finance the Monarch
Black Hawk expansion plan. Interest expense, net of amounts capitalized, in 2020 was $0.3 million. See further
discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.
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Comparison of Operating Results for the Years Ended December 31, 2020 and 2019
Refer to ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS included in the Company’s annual report on Form 10-K for the year ended
December 31, 2020.
CAPITAL SPENDING AND DEVELOPMENT
We seek to continuously upgrade and maintain our facilities in order to present a fresh, high quality product to our
guests. In addition, we have invested, in our Monarch Black Hawk Expansion Plan. Capital expenditures during the
years ended December 31, 2021 and 2020 were as follows (in thousands):
Atlantis
Monarch Black Hawk
Corporate
2021
2020
$ 16,075
21,733
—
$ 37,808
$ 7,548
38,255
621
$ 46,424
During the years ended December 31, 2021 and 2020, capital expenditures related primarily to the work on the
Monarch Black Hawk Expansion Plan, the introduction of Red Bloom Asian Kitchen restaurant and Atrium bar and
lounge at Atlantis and the redesign and upgrade of the suites on the top floors of the concierge hotel tower at Atlantis,
as well as the acquisition of gaming equipment to upgrade and replace existing equipment at both properties.
Monarch Black Hawk Expansion Plan
In 2013, we began work to convert the Monarch Black Hawk into a full-scale casino resort spa. The multi-phased
expansion of the Monarch Casino Resort Spa Black Hawk involved construction of a new parking structure,
demolition of the existing parking structure, construction of a new hotel tower and casino expansion and redesign and
upgrade of a part of the legacy facility.
In November 2016, the new nine-story parking structure, offering approximately 1,350 parking spaces, was
completed and became available for use by Monarch Black Hawk guests. The demolition and removal of the old
parking structure, which included a controlled implosion of the old garage, was completed in the first quarter of 2017.
On February 8, 2017, we broke ground on the hotel tower and casino expansion.
In the fourth quarter of 2020, we began the phased opening of our new hotel tower and casino expansion, which
increased the casino space and added a 23-story hotel tower with 516 guest rooms and suites, banquet and meeting
room space, a retail store, a concierge lounge, an upscale spa and pool facility located on the top floor of the tower,
three new restaurants, and additional bars and lounges. In 2021, we added a poker room, a keno counter, a sportsbook,
sports lounge and bar, as well as additional slot machines in the legacy facility. In February 2022, we completed the
Monarch Black Hawk expansion with the opening of a new specialty restaurant.
We are confident 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 derive accelerated market share and revenue growth.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are cash provided by operations and, for capital expansion projects, borrowings
available under our Amended Credit Facility.
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Operating Activities
For the year ended December 31, 2021, net cash provided by operating activities totaled $128.1 million, an
increase of $96.7 million, or 307.4%, compared to the same period of the prior year. This increase was primarily due
to: i) a $44.8 million increase in Net income; ii) $22.7 million related to decrease in income tax receivable, offset by a
$9.2 million decrease in deferred tax, both as a result of an accelerated depreciation for tax purposes on the assets put
in service in 2020 with the opening of a hotel tower and expanded casino in Monarch Black Hawk; iii) a $21.3 million
increase in depreciation and amortization, including amortization of deferred loan costs; iv) a $16.9 million change in
working capital; and v) a $0.2 million increase in stock-based compensation expense.
Investing Activities
Net cash used in investing activities totaled $37.8 million and $46.4 million in the years ended December 31, 2021
and 2020, respectively. Net cash used in investing activities during the years ended December 31, 2021 and 2020
consisted primarily of cash used for the new hotel tower and casino expansion at Monarch Casino Resort Spa Black
Hawk, for renovation projects at Atlantis, and for the acquisition of gaming and other equipment at both properties.
Financing Activities
Net cash used in financing activities of $85.1 million in 2021 represented $92.5 million principal payments under
the credit facility, offset by $7.4 million of proceeds from stock options exercise, net of payroll taxes from net
exercises. Net cash provided by financial activities in 2020 represented $13.7 million principal payments, net of the
borrowings under the credit facility, $2.9 million long-term debt refinancing cost and $0.7 million of net proceeds from
stock options exercise.
We expect that the Company’s cash position in the next several quarters will be negatively impacted by the
outstanding construction retention and other payments related to the Monarch Black Hawk Expansion project of $58.9
million, which are reflected in “Construction Accounts Payable” on the balance sheet as of December 31, 2021.
We expect that the Company’s cash position in the next few quarters will be positively impacted by the expected
tax refund for 2020 fiscal year of $26.9 million, which is reflected in “Income taxes receivable” on the balance sheet as
of December 31, 2021.
Purchase obligations of materials and supplies used in the normal operation of our business represent
approximately $10.8 million as of December 31, 2021 and all are cancelable by us upon providing a 30-day notice.
Amended Credit Facility
On September 3, 2020, we entered into the Fourth Amended and Restated Credit Agreement with Wells Fargo
Bank, N.A., as administrative agent and certain banks (the “Fourth Amended Credit Facility”). On April 30, 2021, the
Company entered into an amendment to the Fourth Amended Credit Facility (collectively, with all prior amendments,
the “Amended Credit Facility”).
The maturity date of the Amended Credit Facility is September 3, 2023. The Amended Credit Facility increases
the aggregate principal amount to $270 million. The $270 million Amended Credit Facility consists of: a $200 million
Term Loan Facility and a $70 million Revolving Credit Facility, together with an option to increase the facility by up
to an additional $75 million Revolving Credit Facility.
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We are required to make quarterly principal payments under the Term Loan Facility on each Term Loan
Installment Date, commencing on December 31, 2020, in an amount equal to (x) the percentage set forth opposite the
applicable period during which such Term Loan Installment Date occurs (i.e., 1.25% for the period from December 31,
2020 to September 30, 2021, and 2.50% for the period from December 31, 2021 and thereafter) multiplied by (y) $200
million. The estimated amount of the mandatory principal payments due in the next twelve months is $20 million.
As of December 31, 2021, we had an outstanding principal balance of $90 million under the Term Loan Facility, a
$0.6 million letter of credit and no borrowings under the Revolving Credit Facility; $69.4 million remained available
for borrowing.
Borrowings are secured by liens on substantially all of the Company’s real and personal property.
In addition to other customary covenants for a facility of this nature, as of December 31, 2021, we are required to
maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 4.50:1 and Fixed Charge
Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.15:1. As of December 31, 2021, our Total
Leverage Ratio and Fixed Charge Coverage Ratio were 0.7:1 and 5.7:1.
The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.00% to 2.00%, or a
base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 1.00%, or the Prime
Rate. The applicable margins vary depending on Company’s leverage ratio. Commitment fees are equal to the daily
average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175% to 0.325%,
based on our leverage ratio.
At December 31, 2021, our interest rate was based on LIBOR and our leverage ratio was such that pricing for
borrowings under the Amended Credit Facility was LIBOR plus 1.0%. On December 31, 2021, the Term Loan Facility
interest rate was 1.11%, computed as LIBOR of 0.11% plus interest margin of 1.0%. The carrying value of the debt
outstanding under the Amended Credit Facility approximates fair value because the interest fluctuates with the lender’s
prime rate or other market rates of interest.
On the terms and subject to some conditions, the Company may, at any time before the Maturity Date, request an
increase of the Revolving Credit Facility, provided that each such increase is equal to $15.0 million or an integral
multiple of $1.0 million in excess and, after giving effect to the requested increase, the aggregate amount of the
increases in the total revolving loan commitment shall not exceed $75.0 million.
We may prepay borrowings under the Amended Credit Facility revolving loan without penalty (subject to certain
conditions and certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable
interest period). Once reduced or cancelled, the Revolving Credit Facility may not be increased or reinstated without
the prior written consent of all lenders.
As of December 31, 2021, $68.2 million “Long-term debt, net” in the Company’s consolidated balance sheets
represents the $90.0 million outstanding loan amount under the Amended Credit facility, net of $1.8 million
unamortized debt issuance costs and $20.0 million mandatory principal payment that are due in next twelve months
and are presented as “Current portion of long-term debt” in the Current liabilities section of the Company’s
consolidated balance sheets.
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We believe that the expected cash flows from operating activities and the $69.4 million available under our
Amended Credit Facility as of December 31, 2021 will be sufficient to support our current operations, meet our debt
obligations and fulfill our capital expenditure plans for the twelve months from the filing of Form 10-K for the year
ended December 31, 2021; however, we are surrounded by uncertainty about COVID-19, as well as financial,
economic, competitive, regulatory, and other factors, many of which are beyond our control. If we are unable to
generate sufficient cash flow in the upcoming months or if our cash needs exceed the Company’s 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in
the United States (“GAAP”). Certain of our policies, including the estimated useful lives assigned to our assets and the
calculation of the capitalized interest, the determination of the allowance for doubtful accounts and allowance for
unredeemed gift certificates, self-insurance reserves, deferred revenue, the calculation of income tax liabilities and the
calculation of stock-based compensation, require that we apply significant judgment in defining the appropriate
assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of
uncertainty. Our judgments are based on historical experience, terms of existing contracts, observation of trends in the
industry, information provided by customers and information available from other outside sources, as appropriate.
There can be no assurance that actual results will not differ from our estimates. To provide an understanding of the
methodologies applied, our significant accounting policies are discussed where appropriate in this discussion and
analysis and in the Notes to Consolidated Financial Statements.
The consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany
balances and transactions are eliminated.
Allowance for Doubtful Accounts
We extend short-term credit to our gaming customers. Such credit is non-interest bearing and is due on demand. In
addition, we also have receivables due from hotel guests and convention groups and events, which are primarily
secured with a credit card at the time a customer makes a reservation or checks in. An allowance for doubtful accounts
is established for all of our receivables based upon our historical collection and write-off experience, and taking into
consideration the 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 a high collection risk receivable. We write off our
uncollectible receivables once all efforts have been made to collect such receivables. The book value of receivables
approximates fair value due to the short-term nature of the receivables.
Casino Revenues
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. The players club performance obligations result
in recognition of deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are
expected to be redeemed for. 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 us. Cash discounts and other cash incentives to guests
related to gaming play are recorded as a reduction to gaming revenue.
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Income Taxes
Income taxes are recorded in accordance with the liability method pursuant to authoritative guidance. Under the
asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are
applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is
recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred income tax
liability or asset is recognized for the estimated future tax effects attributable to temporary differences and
carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the
enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of
deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence,
are not expected to be realized.
Our income tax returns are subject to examination by tax authorities. We assess potentially unfavorable outcomes
of such examinations based on accounting standards for uncertain income taxes. Under the accounting guidance, we
may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a
greater than 50.0% likelihood of being realized upon ultimate settlement. It also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting in interim periods and disclosure.
Stock-based Compensation
We account for stock-based compensation in accordance with authoritative guidance which establishes standards
for the accounting for transactions in which an entity exchanges its equity instruments for goods and services or incurs
a liability in exchange for goods and services that are based on the fair value of the entity’s equity instruments or that
may be settled by the issuance of those equity instruments. It requires an entity to measure the costs of employee
services received in exchange for an award of equity instruments based on the grant-date fair value of the award and
recognize that cost over the service period. We calculate the grant-date fair value using the Black-Scholes valuation
model.
The Black-Scholes valuation model requires the input of highly subjective assumptions which include the
expected term of options granted, risk-free interest rates, expected volatility, and expected rates of dividends. We
estimate an expected term for each stock option grant based on the weighted-average time between grant date and
exercise date and the risk-free interest rate assumption was based on U.S. Treasury rates appropriate for the expected
term. We use historical data and projections to estimate expected volatility and expected employee behaviors related to
option exercises and forfeitures.
RECENTLY ISSUED ACCOUNTING STANDARDS
A variety of proposed or otherwise potential accounting standards are currently under review and study by
standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such
proposed standards, we have not yet determined the effect, if any, the implementation of any such proposed or revised
standards would have on the Company’s Consolidated Financial Statements.
Reference Rate Reform: In March 2020, the FASB issued temporary accounting guidance to ease the accounting
effects of reform to the London Interbank Offered Rate (“LIBOR”) and other reference rates. The guidance contains
optional expedients and exceptions that apply to accounting for contract modifications, hedging relationships, and
other transactions affected by reference rate reform. The guidance is effective for all entities as of March 12, 2020
through December 31, 2022, and may be applied from the beginning of an interim period or prospectively from a date
within an interim period that includes or is subsequent to March 12, 2020. The Company does not expect the adoption
to have a material impact on its Consolidated Financial Statements.
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Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued amended accounting guidance
to simplify the accounting for income taxes. The amendment eliminates certain exceptions related to the approach for
intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of
deferred tax liabilities for outside basis differences. The amendment also simplifies other aspects of the accounting for
income taxes. We adopted this amended accounting guidance in 2021. The amendment has no impact on our financial
position and results of operations.
ITEM 7A. 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 December 31, 2021, we had $90 million of outstanding debt
under our Amended Credit Facility which bears interest at variable rates. A hypothetical 1% increase in the interest
rate on the balance outstanding under the Amended Credit Facility on December 31, 2021 would result in an increase
in our annual interest cost of approximately $0.9 million.
We do not have any cash or cash equivalents as of December 31, 2021 which are subject to market risk.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Monarch Casino & Resort, Inc. and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Monarch Casino & Resort, Inc. and
subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the
related notes and financial statement schedule listed in the Index at Item 15(a) (2) (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2022
expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. We determined that there are no critical audit matters.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2003.
Las Vegas, Nevada
February 28, 2022
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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
2021
Year Ended December 31,
2020
2019
Revenues
Casino
Food and beverage
Hotel
Other
Net revenues
Operating expenses
Casino
Food and beverage
Hotel
Other
Selling, general and administrative
Depreciation and amortization
Other operating items, net
Total operating expenses
Income from operations
Other expense
Interest expense, net of amounts capitalized
Income before income taxes
(Provision) benefit for income taxes
Net income
Earnings per share of common stock
Net income
Basic
Diluted
Weighted average number of common shares
and potential common shares outstanding
Basic
Diluted
$
$
$
$
$
$
$
$
233,413
91,080
54,374
16,510
395,377
75,258
72,684
22,106
7,668
84,427
38,428
4,929
305,500
89,877
(4,506)
85,371
(16,883)
68,488
3.68
3.53
18,617
19,427
$
$
$
$
111,550
43,162
20,133
9,568
184,413
34,020
36,123
10,104
4,465
60,395
17,324
6,711
169,142
15,271
(273)
14,998
8,680
23,678
1.30
1.25
18,218
18,877
128,010
72,578
35,222
13,356
249,166
45,259
57,367
13,123
6,543
69,312
14,875
3,112
209,591
39,575
1
39,576
(7,760)
31,816
1.77
1.70
18,025
18,684
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
ASSETS
Current assets
Cash and cash equivalents
Receivables, net
Income taxes receivable
Inventories
Prepaid expenses
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt
Accounts payable
Construction accounts payable
Accrued expenses
Short-term lease liability
Total current liabilities
Deferred income taxes
Long-term lease liability
Long-term debt, net
Total liabilities
Stockholders’ equity
December 31, 2021 December 31, 2020
$
$
$
33,526 $
8,881
26,946
7,159
7,552
84,064
580,807
25,111
477
—
690,459 $
$
20,000
18,575
58,891
42,967
745
141,178
19,617
13,498
68,152
242,445
28,310
3,736
24,894
7,823
8,393
73,156
572,507
25,111
973
130
671,877
12,500
11,655
49,771
34,705
813
109,444
13,220
13,984
167,162
303,810
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
—
—
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300
shares issued; 18,764,540 outstanding at December 31, 2021; 18,426,130
outstanding at December 31, 2020
Additional paid-in capital
Treasury stock, 331,760 shares at December 31, 2021; 670,170 shares at
December 31, 2020
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
191
41,426
(4,341)
410,738
448,014
690,459 $
191
34,498
(8,872)
342,250
368,067
671,877
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
Balance, December 31, 2018
Exercise of stock options, net
Stock-based compensation expense
Net income
Balance, December 31, 2019
Exercise of stock options, net
Stock-based compensation expense
Capital contribution
Net income
Balance, December 31, 2020
Exercise of stock options, net
Stock-based compensation expense
Net income
Balance, December 31, 2021
Total
3,099
222,362
284,747
Treasury
Stock
—
—
— 31,816
Retained
Earnings
Common Stock
Shares
979
—
— — 4,125
— —
Additional
Paid-in
Outstanding Amount Capital
17,919,021 $ 191 $ 30,111 $ 286,756 $ (15,876) $ 301,182
4,078
—
4,125
— 31,816
18,141,383 $ 191 $ 35,215 $ 318,572 $ (12,777) $ 341,201
(745)
3,855
—
—
78
— 23,678
18,426,130 $ 191 $ 34,498 $ 342,250 $ (8,872) $ 368,067
7,399
—
4,060
— 68,488
18,764,540 $ 191 $ 41,426 $ 410,738 $ (4,341) $ 448,014
(4,650)
3,855
78
— 23,678
—
— —
—
— —
—
— —
— —
—
—
—
2,868
4,060
— 68,488
—
—
338,410
3,905
4,531
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2020
2019
2021
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Amortization of deferred loan costs
Stock-based compensation
Provision for bad debts
Loss on disposition of assets
Write off of unamortized debt issuance costs
Non-cash operating lease expense
Deferred income taxes
Changes in operating assets and liabilities:
Receivables
Income taxes receivable
Inventories
Prepaid expenses
Accounts payable
Accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of assets
Change in construction accounts payable
Acquisition of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Payroll taxes from net exercise of stock options
Proceeds from exercise of stock options
Long-term debt borrowings
Principal payments on long-term debt
Loan issuance cost
Net cash (used in) provided by financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized
Cash paid for income taxes
Conversion of long-term deposit to short term deposit
$ 68,488 $ 23,678
31,816
38,428
990
4,060
245
136
—
(16)
6,527
(5,390)
(2,052)
664
841
6,920
8,262
128,103
17,324
764
3,855
159
63
95
(1)
15,774
1,563
(24,709)
(1,088)
(1,247)
(5,382)
596
31,444
14,875
538
8,203
189
—
—
14
1,344
1,093
94
(3,043)
(730)
5,855
2,998
63,246
22
9,120
(46,928)
(37,786)
31
42,243
(88,667)
(46,393)
72
(9,624)
(125,367)
(134,919)
(730)
8,129
—
(92,500)
—
(85,101)
(4,428)
3,760
10,813
(24,563)
(2,862)
(17,280)
5,216
28,310
(32,229)
60,539
$ 33,526 $ 28,310 $
—
—
105,500
(3,750)
—
101,750
30,077
30,462
60,539
$
3,069 $
$ 12,410 $
— $
$
380 $
— $
$
908
—
6,322
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. was incorporated in 1993. Through its wholly-owned subsidiary, Golden Road
Motor Inn, Inc. (“Golden Road”), Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in
Reno, Nevada (the “Atlantis”). In addition, Monarch’s wholly owned subsidiaries, High Desert Sunshine, Inc. (“High
Desert”), Golden East, Inc. (“Golden East”) and Golden North, Inc. (“Golden North”), each owns separate parcels of
land located proximate to the Atlantis. Monarch’s wholly owned subsidiary Monarch Growth Inc. (“Monarch
Growth”), formed in 2011, owns and operates Monarch Casino Resort Spa Black Hawk, a hotel and casino in Black
Hawk, Colorado (the “Monarch Black Hawk”). Monarch owns a parcel of land with an industrial warehouse located
between Denver, Colorado and Monarch Casino Resort Spa 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 consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany
balances and transactions are eliminated. Reference to the number of square feet or acreage are unaudited and
considered outside the scope of our independent registered public accounting firm’s audit of our consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board.
Unless otherwise indicated, “Monarch,” “Company,” “we,” “our,” and “us,” refer to Monarch Casino &
Resort, Inc. and its subsidiaries.
Impact of COVID-19:
In March 2020, a global pandemic was declared due to an outbreak of a new strain of coronavirus (“COVID-19”).
In an effort to contain the virus, on March 16, 2020 the state of Colorado mandated a temporary shutdown of all
casinos including Monarch Black Hawk and on March 17, 2020 the state of Nevada mandated the temporary closure of
all casinos including Atlantis Casino Resort Spa in Reno. The COVID-19 pandemic has had, and may continue to
have, an adverse effect on the Company's results of operations.
Use of Estimates
In preparing financial statements in conformity with U.S. Generally Accepted Accounting Principles, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during
the year. Actual results could differ from those estimates.
Segment Reporting
The accounting guidance for disclosures about segments of an enterprise and related information requires separate
financial information to be disclosed for all reporting segments of a business. The Company determined that the
Company’s two operating segments, Atlantis and Monarch Black Hawk, meet all of the aggregation criteria stipulated
by ASC 280-10-50-11. The Company views each property as an operating segment and the two operating segments
have been aggregated into one reporting segment.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in bank, as well as money market funds with an original
maturity of 90 days or less.
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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
Property and Equipment, net consists of the following (in thousands):
Land
Land improvements
Buildings
Buildings improvements
Furniture and equipment
Construction in progress
Right of use assets
Leasehold improvements
Less accumulated depreciation and amortization
Property and equipment, net
December 31, 2021
December 31, 2020
$
$
32,986
9,898
474,571
55,432
235,233
8,211
14,246
3,848
834,425
(253,618)
580,807
$
$
32,986
9,847
471,819
33,681
229,052
6,257
14,784
3,848
802,274
(229,767)
572,507
Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and
equipment is depreciated principally on a straight line basis over the estimated useful lives as follows:
Land improvements
Buildings
Building improvements
Furniture
Equipment
15 - 40 years
30 - 40 years
5 - 40 years
5 - 10 years
3 - 20 years
The Company recorded $37.9 million, $16.1 million and $13.7 million depreciation expense for the years ended
December 31, 2021, 2020 and 2019, respectively.
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 quarterly. 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 years ended December 31, 2021, 2020 and 2019, there were no impairment charges.
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Goodwill:
The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC
Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to
skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth
quarter of each year, or whenever events or circumstances make it more likely than not that impairment may have
occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino
properties is considered to be a reporting unit.
Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business
combinations in April 2012. As of December 31, 2021, we had goodwill totaling $25.1 million related to the purchase
of Monarch Casino Resort Spa Black Hawk, Inc.
The Company assessed its goodwill balance for impairment using the quarterly assessment. Based on the
impairment assessment, we do not believe that it is more likely than not that the fair value of the reporting unit is less
than the carrying amount. Accordingly, the two-step impairment test is not necessary. The evaluations used to assess
the Company’s goodwill for impairment incorporate inherent uncertainties that are difficult to predict in the current
economic environment. When evaluating for impairment, we make numerous highly subjective and judgmental
estimates and assumptions, all of which are subject to a variety of risks and uncertainties, and many of which are based
on significant unobservable inputs. The most significant assumptions and inputs used in evaluating for impairment are
projected short-term and long-term operating results and cash flows, projected capital expenditures, estimated long-
term growth rates and the weighted-average cost of capital of market participants, adjusted for the risk profile of the
assets being evaluated. The timing and trajectory of the expected post-pandemic economic recovery is unknown, and
accordingly, estimates and assumptions are likely to change as more information becomes available.
The Company believes that it has made reasonable estimates and judgments in performing its analysis in light of
the risks and uncertainties surrounding the COVID-19 pandemic. However, if the excess of fair value over the carrying
amount declines by a significant amount in the future as a result of changes in actual and projected operating results or
other internal or external economic factors, the Company could be required to recognize goodwill impairment charges
in future periods.
Capitalized Interest
The Company capitalizes interest costs associated with debt incurred in connection with major construction
projects. When no debt is specifically identified as being incurred in connection with a construction project, the
Company capitalizes interest on amounts expended on the project at the Company’s average borrowing cost. Interest
capitalization is ceased when the project is substantially complete. The Company had not capitalized any interest in
2021. The Company capitalized $6.8 million and $5.8 million during the years ended December 31, 2020 and 2019,
respectively. Capitalized interest of $16.5 million, related to the Monarch Black Hawk expansion project, was
allocated to the fixed assets placed in service at the project completion date in the fourth quarter of 2020 and is
amortized over the respective assets’ recovery period.
Debt Issuance Costs
Costs incurred in connection with the issuance of long-term debt are amortized to interest expense over the term of
the related debt agreement utilizing the effective interest rate method. Unamortized amounts of debt issuance costs are
recorded as a reduction of the outstanding debt and included in “Long-term debt, net”.
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On September 3, 2020, the Company refinanced its credit facility. The unamortized costs related to the existing
credit facility as of August 31, 2020 were $476 thousand. As the credit facility is a loan syndication with separate debt
instruments existing between the debtor and the individual creditors participating in the syndication, in accordance
with ASC 470-50, the Company expensed $95 thousand, representing a portion of unamortized debt issuance cost,
allocated to the lenders that left the syndication and deferred the rest of the unamortized debt issuance cost of the
existing credit facility, together with the issuance costs of the new facility.
As of December 31, 2021, debt issuance costs, net of amortization, were $1.8 million.
Self-insurance Reserves
We are currently self-insured up to certain stop loss amounts for Atlantis workers’ compensation and certain
medical benefit costs provided to all of our employees. As required by the state of Colorado, we are fully-insured for
Monarch Black Hawk workers’ compensation costs. The Company reviews self-insurance reserves at least quarterly.
The reserve is determined by reviewing the actual expenditures for the previous twelve-month period and reports
prepared by the third-party plan administrator for any significant unpaid claims. The Company engages a third-party
actuarial firm at least once per year for a more precise reserves review and calculation. The reserve is an amount
estimated to pay both reported and unreported claims as of the balance sheet date, which management believes is
adequate.
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
(“ASU”) 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 December 31, 2021, and 2020, the Company had estimated the obligations related to the players’ club
program at $9.4 million and $9.8 million, respectively, which is included in Accrued Expenses in the Liabilities and
Stockholders’ Equity section in the Consolidated Balance Sheets.
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Food and Beverage, Hotel and Other (retail) Revenues: Food and Beverage, Hotel and Other Revenues in general
are recognized when products are delivered or services are performed. The Company recognizes revenue related to the
products and services associated with the players points’ redemptions at the time products are delivered or services are
performed, with corresponding reduction in the deferred revenue, at SSP. Other complimentaries in conjunction with
the gaming and other business are also valued at SSP. Hotel revenue is presented net of non-third-party rebates and
commissions. The cost of providing these complimentary goods and services are included as expenses within their
respective categories.
Other Revenues: Other revenues (excluding retail) primarily consist of commissions received on ATM
transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its
relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel
wagering, which are also recorded on a net basis.
Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities
are accounted for on a net basis and are not included in revenues or operating expenses. In addition, tips and other
gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also
accounted for on a net basis and are not included in revenues or operating expenses.
Casino Jackpots
The Company does not accrue a liability for base jackpots because it has the ability to avoid such payment as
gaming devices can legally be removed from the gaming floor without payment of the base amount. When the
Company is unable to avoid payment of a jackpot such as the incremental jackpot amounts of progressive-type slot
machines, due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is
accrued over the time period in which the incremental progressive jackpot amount is generated commensurate with a
corresponding reduction in casino revenue.
Gaming Taxes
The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject
to applicable jurisdictional adjustments. These gaming taxes are an assessment on the Company’s gaming revenue and
are recorded as casino expense in the accompanying Consolidated Statements of Income. These taxes totaled $45.5
million, $17.2 million and $23.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Advertising Costs
All advertising costs are expensed as incurred. Advertising expense, which is included in selling, general and
administrative expense, was $9.3 million, $4.5 million and $5.0 million for the years ended December 31, 2021, 2020
and 2019, respectively.
Other Operating items, net
Other operating items, net, in general consist of miscellaneous operating charges. For the year ended December
31, 2021, Other operating items, net, was $4.9 million and included: $5.1 million in professional service fees relating
to our construction litigation; $0.1 million in equipment, supplies and employee testing expenses directly attributable
to the pandemic for reopening of the properties and incremental to normal operations; and $0.1 million loss on disposal
of assets, offset by $0.3 million of litigation proceeds and $0.1 million of insurance claims proceeds. For the year
ended December 31, 2020, Other operating items, net, was $6.7 million and included: $2.8 million in pre-opening
expenses relating to the Monarch Black Hawk Expansion project; $1.6 million in professional service fees relating to
our construction litigation; $1.4 million in Colorado legislation lobbying expenses; $0.7 million in equipment, supplies
and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to
normal operations; and $0.2 million in unamortized debt issuance cost write off and loss on disposal of assets.
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Income Taxes
Income taxes are recorded in accordance with the liability method pursuant to authoritative guidance. Under the
asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are
applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is
recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred income tax
liability or asset is recognized for the estimated future tax effects attributable to temporary differences, carryback and
carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the
enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of
deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence,
are not expected to be realized.
Under the accounting guidance, we may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than 50.0% likelihood of being realized upon ultimate settlement.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with the authoritative guidance requiring that
compensation cost relating to stock-based payment transactions be recognized in the Company’s consolidated
statements of income. The cost is measured at the grant date, based on the calculated fair value of the award using the
Black-Scholes option pricing model for stock options, and based on the closing share price of the Company’s stock on
the grant date for restricted stock awards. The cost is recognized as an expense over the employee’s requisite service
period (the vesting period of the equity award). The Company’s stock-based employee compensation plan is more fully
discussed in NOTE 10.
Earnings Per Share
Basic earnings per share are 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 (in thousands, except per share data):
2021
Per Share
Amount
Years ended December 31,
2020
Per Share
Amount
Shares
Shares
2019
Per Share
Amount
Shares
Basic
Effect of dilutive stock options
Diluted
18,617 $ 3.68 18,218 $ 1.30 18,025 $
659
19,427 $ 3.53 18,877 $ 1.25 18,684 $
(0.05)
(0.15)
810
659
1.77
(0.07)
1.70
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The following table represents weighted average number of shares that are antidilutive because the weighted
average assumed proceeds per share are greater than the options’ exercise prices:
Weighted Average Options to purchase shares of
common shares
Weighted Average Proceeds per Share
Expiration dates (month/year)
Fair Value of Financial Instruments
2021
274,741
Years ended December 31,
2020
1,086,244
2019
843,980
$ 76.84 - $ 102.01 $ 43.09 - $ 85.68
$ 44.55 - $ 59.07
11/2027-12/2030 11/2027-12/2029
12/2030-12/2031
The estimated fair value of the Company’s financial instruments has been determined by the Company, using
available market information and valuation methodologies. However, considerable judgment is required to develop the
estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
The carrying amounts of cash and cash equivalents, account receivables, accounts payable and accrued expenses
approximate fair value because of the short-term nature of these instruments. Additionally, the carrying value of our
long-term debt approximates fair value due to the variable nature of applicable interest rates and relative short-term
maturity.
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 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 a high collection risk receivables. As of December 31, 2021 and 2020, the Company has recorded a reserve
of $0.2 million and $0.1 million, respectively, for gaming and non-gaming 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.
The Company believes it is not exposed to any significant credit risk on cash and accounts receivable.
Certain Risks and Uncertainties
The Company’s operations are dependent on its continued licensing by the Nevada and Colorado gaming
regulatory bodies. The loss of a license could have a material adverse effect on future results of operations.
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The Company is dependent on the Northern Nevada and Denver, Colorado markets for a significant number of its
patrons and revenues. If economic conditions in these areas deteriorate or additional gaming licenses are awarded, the
Company’s results of operations could be adversely affected.
The Company is dependent on the U.S. economy in general, and any deterioration in the national economic,
energy, credit and capital markets could have a material adverse effect on future results of operations.
The Company is dependent on the travel industry and any disruption or restriction on national or international
travel and entertainment, like a pandemic disease or a risk of pandemic disease, could materially and adversely affect
our future results of operations.
The Company is dependent upon a stable gaming and admission tax structure in the locations in which it
operates. Any change in the tax structure could have a material adverse effect on future results of operations.
Impact of Recently Issued Accounting Standards
Reference Rate Reform: In March 2020, the Financial Accounting Standards Board (“FASB”) issued temporary
accounting guidance to ease the accounting effects of reform to the London Interbank Offered Rate (“LIBOR”) and
other reference rates. The guidance contains optional expedients and exceptions that apply to accounting for contract
modifications, hedging relationships, and other transactions affected by reference rate reform. The guidance is
effective for all entities as of March 12, 2020 through December 31, 2022 and may be applied from the beginning of
an interim period or prospectively from a date within an interim period that includes or is subsequent to March 12,
2020. The Company does not expect the adoption to have a material impact on its Consolidated Financial Statements.
Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued amended accounting guidance
to simplify the accounting for income taxes. The amendment eliminates certain exceptions related to the approach for
intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of
deferred tax liabilities for outside basis differences. The amendment also simplifies other aspects of the accounting for
income taxes. The Company adopted this amended accounting guidance in 2021. The adoption of this amendment had
no impact on Company’s financial position and results of operations.
A variety of proposed or otherwise potential accounting standards are currently under review and study by
standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such
proposed standards, we have not yet determined the effect, if any, the implementation of any such proposed or revised
standards would have on the Company’s Consolidated Financial Statements.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
Casino
Hotel
Other
Less allowance for doubtful accounts
60
December 31,
2021
2020
$ 4,291 $ 2,701
510
636
3,847
(111)
$ 8,881 $ 3,736
1,339
3,433
9,063
(182)
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The Company calculates an allowance for doubtful accounts by applying a percentage, estimated by management
based on historical aging experience, current economic conditions and management’s expectations of future economic
conditions, to the accounts receivable balance. The Company recorded bad debt expense of $245 thousand, $159
thousand and $189 thousand in 2021, 2020 and 2019, respectively.
The increase in accounts receivable in 2021 year-over-year is primarily a result of the expanded operation at
Monarch Black Hawk.
NOTE 3. GOODWILL AND INTANGIBLE ASSETS
Goodwill was $25.1 million at December 31, 2021 and 2020. The Company’s goodwill is related to the acquisition
of Monarch Black Hawk in 2012.
The Company’s finite-lived intangible assets at December 31, 2021 consist of assets related to Cloud Computing
Arrangement (CCA).
On January 1, 2020, the Company adopted ASU 2018-15, which aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs
incurred to develop or obtain for internal-use software. In the fourth quarter of 2020, the Company installed a new
hotel management system and capitalized as intangible assets $622 thousand, representing costs for coding, testing,
integration with other software and activities in the development stage. The CCA intangible assets are amortized over
5 years.
Estimated amortization expenses for the years ending December 31, 2022 through 2025 are as follows (in
thousands):
Year
2022
2023
2024
2025
Total
Expense
124
124
124
105
477
$
$
$
$
$
The Company’s finite-lived intangible assets at December 31, 2020 consist of assets related to CCA and assets
related to its customer relationships. The customer relationships net intangible asset was fully amortized during 2021.
Customer list intangible assets at December 31, 2021 and 2020 are (in thousands except years):
Customer list
Total intangible assets
Less accumulated amortization:
Intangible assets, net
Weighted-average life in years
2021
2020
$
$
11,111
(11,111)
—
—
$
$
11,111
(10,138)
973
0.6
In 2021, we recognized amortization expense of $0.5 million. Amortization expense of $1.2 million was
recognized for each of the years ended December 31, 2020 and 2019.
The Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine
whether events and circumstances warrant a revision to the remaining period of amortization.
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NOTE 4. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
Accrued salaries, wages and related benefits
Progressive slot machine and other gaming accruals
Accrued gaming taxes
Accrued interest
Other accrued liabilities
NOTE 5. ACCOUNTING FOR LEASES
December 31,
2021
$ 12,716 $
18,577
5,226
3
6,445
2020
9,833
16,699
2,774
14
5,385
$ 42,967 $ 34,705
The Company adopted ASU No. 2016-02, “Leases (Topic 842), (“ASC 842”)” which requires leases with
durations greater than twelve months to be recognized on the balance sheet.
For leases with terms greater than 12 months, the Company records the related asset and obligation at the present
value of the lease payments over the lease term. Many of the Company’s leases include rental escalation clauses,
renewal options and/or termination options that are factored into its determination of lease payments when appropriate.
As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease
components.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value;
however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate
its incremental borrowing rate to discount the lease payments based on information available at lease commencement.
As of December 31, 2021, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway
Lease (both as defined and discussed in NOTE 12. RELATED PARTY TRANSACTIONS), as well as certain billboard
leases.
The table below presents information related to the lease costs for operating leases during 2021 and 2020 (in
thousands):
Short-term lease costs
Long-term lease costs
Total lease costs
Year ended
Year ended
December 31, 2021
December 31, 2020
$
$
382
1,432
1,814
$
$
451
1,444
1,895
Upon adoption of the new lease standard, incremental borrowing rates used for existing leases were established
using the rates in effect as of the lease inception or modification date. The weighted-average incremental borrowing
rate of the leases presented in the lease liability as of December 31, 2021 and 2020 was 4.34% and 4.33%,
respectively.
The weighted-average remaining lease term of the leases presented in the lease liability as of December 31, 2021
and 2020 was 20.4 and 21.2 years, respectively.
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Following is the undiscounted cash flow for the next five years and total of the remaining years to the operating
lease liabilities recorded on the balance sheet (in thousands):
Year ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Less: amount of lease payment representing interest
Present value of future minimum payments
Less: current obligations under leases
Long-term lease obligations
Operating
Leases
1,342
1,072
1,072
1,072
1,072
15,868
21,498
(7,255)
14,243
(745)
13,498
$
$
Cash paid related to the operating leases presented in the lease liability for the twelve months ended December 31,
2021 and 2020 were $1.5 million and $1.4 million, respectively.
In addition, we lease gaming equipment and had paid $2.5 million, $1.2 million and $1.6 million in the years
ended December 31, 2021, 2020 and 2019, respectively. The lease cost is included in the operating expenses.
NOTE 6. LONG-TERM DEBT
On September 3, 2020, the Company entered into the Fourth Amended and Restated Credit Agreement with Wells
Fargo Bank, N.A., as administrative agent and certain banks (the “Fourth Amended Credit Facility”). On April 30,
2021, the Company entered into an amendment to the Fourth Amended Credit Facility (collectively, with all prior
amendments, the “Amended Credit Facility”).
The maturity date of the Amended Credit Facility is September 3, 2023. The Amended Credit Facility increases
the aggregate principal amount to $270 million. The $270 million Amended Credit Facility consists of: a $200 million
term loan (“Term Loan Facility”) and a $70 million revolving credit facility (“Revolving Credit Facility”), together
with an option to increase the Revolving Credit Facility by up to an additional $75 million.
The Company is required to make quarterly principal payments under the Term Loan Facility on each Term Loan
Installment Date, commencing on December 31, 2020, in an amount equal to (x) the percentage set forth opposite the
applicable period during which such Term Loan Installment Date occurs (i.e., 1.25% for the period from December 31,
2020 to September 30, 2021, and 2.50% for the period from December 31, 2021 and thereafter) multiplied by (y) $200
million. The estimated amount of the mandatory principal payments due in the next twelve months is $20 million.
Commencing with the delivery of the compliance certificate for fiscal year 2021, the Company may be required to
prepay borrowings under the Amended Credit Facility using excess cash flows for each fiscal year, depending on the
Company’s leverage ratio.
As of December 31, 2021, the Company had an outstanding principal balance of $90 million under the Term Loan
Facility, a $0.6 million letter of credit and no borrowings under the Revolving Credit Facility; $69.4 million remained
available for borrowing.
Borrowings are secured by liens on substantially all of the Company’s real and personal property.
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In addition to other customary covenants for a facility of this nature, as of December 31, 2021, the Company is
required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 4.50:1 and
Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.15:1. As of December 31, 2021,
the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.7:1 and 5.7:1.
The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.00% to 2.00%, or a
base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 1.00%, or the Prime
Rate. The applicable margins vary depending on Company’s leverage ratio. Commitment fees are equal to the daily
average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175% to 0.325%,
based on our leverage ratio.
At December 31, 2021, the Term Loan interest rate was 1.11%, or LIBOR plus interest margin of 1.00%. The
carrying value of the debt outstanding under the Amended Credit Facility approximates fair value because the interest
fluctuates with the lender’s prime rate or other market rates of interest.
On the terms and subject to some conditions, the Company may, at any time before the Maturity Date, request an
increase of the Revolving Credit Facility, provided that each such increase is equal to $15 million or an integral
multiple of $1 million in excess and, after giving effect to the requested increase, the aggregate amount of the increases
in the total revolving loan commitment shall not exceed $75 million.
The Company may prepay borrowings under the Amended Credit Facility revolving loan without penalty (subject
to certain conditions and certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the
applicable interest period). Once reduced or cancelled, the Revolving Credit Facility may not be increased or reinstated
without the prior written consent of all lenders. During the first nine months of 2021, the Company made a $67.0
million in optional prepayments on its Term Loan Facility in addition to $7.5 million in mandatory payments. During
the twelve months ended December 31, 2021, the Company made $80.0 million in optional prepayments on its Term
Loan Facility in addition to $12.5 million in mandatory payments.
As of December 31, 2021, $68.2 million “Long-term debt, net” in the Company’s consolidated balance sheet
represents the $90.0 million outstanding loan amount under the Amended Credit facility, net of $1.8 million
unamortized debt issuance costs and $20.0 million mandatory principal payment that are due in next twelve months
and are presented as “Current portion of long-term debt” in the Current liabilities section of the Company’s
consolidated balance sheet.
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NOTE 7. TAXES
Income Taxes
The Company’s income tax provision (benefit) consists of the following (in thousands):
Federal
State
Current tax provision (benefit)
Federal
State
Deferred tax provision (benefit)
Total tax provision (benefit)
Years ended December 31,
2021
2020
2019
$
10,091 $ (24,576) $
265
10,356
4,836
1,691
6,527
16,883 $
123
(24,453)
15,096
677
15,773
(8,680) $
$
6,080
336
6,416
1,215
129
1,344
7,760
In conformity with the ASC Topic 718, Compensation-Stock Compensation: Improvements to Employee
Share-based Payment Accounting (ASU 2016-09), all excess tax benefits and deficiencies are recognized as
income tax expense (income tax benefit) in the Company’s Consolidated Statement of Income. This may result in
increased volatility in the Company’s effective tax rate.
The income tax provision differs from that computed at the federal statutory rate as follows:
Federal tax at the statutory rate
State tax (net of federal benefit)
Permanent items
Tax credits
Excess tax benefits on stock-based compensation
Impact of CARES Act
Change in Tax Rate and Apportionment
Other
2019
Years ended December 31,
2021
2020
21.00 % 21.00 % 21.00 %
1.11 % 1.00 %
1.47 %
3.52 % 0.90 %
0.38 %
(0.25)%
(2.82)% (0.84)%
(3.14)% (17.89)% (2.49)%
— % (65.55)% — %
4.31 % — %
(1.56)% 0.04 %
19.78 % (57.88)% 19.61 %
0.34 %
(0.02)%
In 2021, the Company returned to a positive tax rate, recognizing income tax expense on pretax book income. The
effective tax rate is below the statutory rates due primarily to excess tax benefits on stock compensation. The negative
effective tax rate in 2020 is a result of the CARES Act granting the ability to carry back the net operating loss
generated as a result of recognizing accelerated tax depreciation of some assets put in service in 2020 back to prior
years with higher income tax rates, and the increase in excess tax benefits on stock-based compensation. In 2020, the
Company completed and opened to the public a substantial part of the new hotel and casino expansion project at
Monarch Black Hawk. This decrease was partially offset by the increase in nondeductible “permanent items” which
consisted primarily of the $1.4 million in Colorado legislation lobbying expenses.
In 2021, 2020 and 2019, the Company recorded against the tax expense $2.7 million, $2.7 million and $1.0
million tax benefit for employee stock-based compensation, respectively.
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The components of the deferred income tax assets and liabilities at December 31, 2021 and 2020, as presented in
the consolidated balance sheets, are as follows (in thousands):
DEFERRED TAX ASSETS
Stock-based compensation
Compensation and benefits
Accrued expenses
Right of use lease liability
Federal deduction on state taxes
Bad debt reserves
Charitable contribution carry-forwards
Other reserves
NOLs & credit carry-forwards
Deferred income tax asset
DEFERRED TAX LIABILITIES
Intangibles and amortization
Prepaid expenses
Fixed assets and depreciation
Right of use asset
Base stock
Federal deduction on state taxes
Deferred income tax liability
NET DEFERRED INCOME TAX (LIABILITY) ASSET
2021
2020
$
$
3,011
3,231 $
580
751
486
288
3,425
3,350
—
155
26
16
63
—
33
40
2,440
1,014
8,845 $ 10,064
$
— $
(86)
(1,234)
(1,547)
(18,136)
(23,504)
(3,422)
(3,351)
(249)
(60)
(27)
—
$ (28,462) $ (23,154)
$ (19,617) $ (13,090)
As of December 31, 2021, the Company has utilized all federal net operating loss (“NOL”) carryforwards. The
Company has general business credit (“GBC”) carryforwards of $0.3 million and $14.7 million of state NOL
carryforwards. The federal GBC carryforwards expire in 2023 through 2032. The state NOL carryforwards expire in
2030 through 2040.
The state NOL of $14.7 million and federal GBC carryforwards of $0.3 million, acquired as part of the Monarch
Black Hawk acquisition, are subject to Internal Revenue Code change of ownership limitations. Accordingly, future
utilization of the carryforwards is subject to an annual base limitation of $1.25 million that can be applied against
future taxable income.
The Company acquired NOLs of Monarch Black Hawk generated in tax years 2000 through 2012. The statute of
limitation for assessment for these NOL years is determined by reference to the year the NOL is used to reduce taxable
income. Consequently, the separate returns that included Monarch Black Hawk for 2001 through 2012 remain subject
to examination by taxing authorities. The Company’s income tax returns from 2018 forward are subject to examination
by the taxing authorities.
Accounting standards require that tax positions be assessed for recognition using a two-step process. A tax
position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit
that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet
date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred
income tax accounts. The Company’s policy regarding interest and penalties associated with uncertain tax positions is
to classify such amounts as income tax expense.
No uncertain tax positions were recorded as of December 31, 2021, 2020 and 2019. No change in uncertain tax
positions is anticipated over the next twelve months.
No interest expense or penalties for uncertain tax positions were recorded for years ended December 31, 2021,
2020 and 2019.
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NOTE 8. BENEFIT PLANS
Effective November 1, 1995, the Company adopted a savings plan, which qualifies under Section 401(k) of the
Internal Revenue Code. Under the plan, participating employees may defer up to 100% of their pre-tax compensation,
but not more than statutory limits. The Company’s matching contributions were approximately $611 thousand, $423
thousand, and $482 thousand for years ended December 31, 2021, 2020 and 2019, respectively.
NOTE 9. STOCK-BASED COMPENSATION
On May 21, 2014, we adopted the 2014 Equity Incentive Plan (the “2014 Plan”). The purposes of the 2014 Plan
are to attract and retain the best available personnel, to provide additional incentives to employees, directors and
consultants and to promote the success of the Company’s business. The 2014 Plan is an “omnibus plan” under which
stock options, stock appreciation rights, performance awards, dividend equivalents, restricted stock, and restricted
stock units can be awarded to employees, directors and consultants of the Company. The 2014 Plan serves as the
successor to our 1993 Employee Stock Option Plan, 1993 Executive Long-Term Incentive Plan and 1993 Directors’
Stock Option Plan (which plan terminated on June 13, 2013) (the “Predecessor Plans”). The 2014 Plan became
effective as of May 21, 2014, and the remaining two Predecessor Plans terminated on that date (except with respect to
awards previously granted under the Predecessor Plans that remain outstanding).
The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, and
the Amendment No. 1 and Amendment No. 2 to the 2014 Plan includes 3,400,000 new shares and the shares available
for grant or subject to outstanding awards under the Predecessor Plans. The share reserve as of December 31, 2021 is
979,600. By its terms, the 2014 Plan will expire in May 2024 after which no options may be granted unless the 2014
Plan is amended or replaced.
Pursuant to the terms of the 2014 Plan, either the Board of Directors or a committee designated by the Board of
Directors is authorized to administer the plan. The administrator has the authority, in its discretion, to select
employees, consultants and directors to whom awards under the 2014 Plan may be granted from time to time, to
determine whether and to what extent awards are granted, to determine the number of shares or the amount of other
consideration to be covered by each award (subject to certain limitations), to approve award agreements for use under
the 2014 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the
award), to amend the terms of any outstanding award granted under the 2014 Plan (subject to certain limitations), to
construe and interpret the terms of the 2014 Plan and awards granted, and to take such other action not inconsistent
with the terms of the 2014 Plan as the administrator deems appropriate.
A summary of the stock option activity as of and for the year ended December 31, 2021 is presented below:
Stock Options
Stock Option Shares outstanding at beginning of
period
Stock Option Shares granted
Stock Option Shares exercised
Stock Option Shares forfeited
Stock Option Shares expired
Stock Option Shares outstanding at end of period
Stock Option Shares exercisable at end of period
Weighted Average
Remaining
Exercise Contractual
Shares
Price
Term
Aggregate
Intrinsic
Value
2,194,779 $ 35.01
68.34
429,302
27.27
(382,716)
40.83
(236,666)
9.80
(5,000)
1,999,699
42.05
1,028,375 $ 29.26
—
—
—
—
—
—
—
—
—
—
6.5 yrs.$ 61,774,500
4.6 yrs.$ 45,958,184
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A summary of the status of the Company’s nonvested stock option shares as of, and for the year ended,
December 31, 2021 is presented below:
Nonvested Stock Option Shares
Nonvested at January 1, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Expense Measurement and Recognition
Shares
1,177,954 $
429,302
(399,266)
(236,666)
971,324 $
Weighted-Average
Grant Date Fair
Value
14.49
26.37
13.50
16.91
19.62
The Company recognizes stock-based compensation for all current stock option award grants and for the unvested
portion of previous stock option award grants based on grant date fair values. Unrecognized costs related to all stock
option awards outstanding at December 31, 2021 totaled approximately $14.9 million and is expected to be recognized
over a weighted average period of 2.8 years.
The Company uses historical data and projections to estimate expected employee, executive and director
behaviors related to stock option exercises and forfeitures.
The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes
valuation model incorporating the assumptions noted in the following table. Option valuation models require the input
of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option
valuation assumptions for options granted during each year were as follows (dollars in thousands, except weighted
average grant date fair value per share):
Weighted average expected volatility for options granted
Expected life (in years)
Directors’ plan
Executives plan
Employees plan
Weighted average risk-free rate
Year ended December 31,
2020
45.72 % 40.87 % 30.13 %
2019
2021
3.90
5.38
4.20
0.93 %
3.26
5.22
4.13
0.48 % 1.83 %
3.04
5.07
4.18
Weighted average grant date fair value per share of options granted
Total fair value of shares vested
Total intrinsic value of options exercised
Cash received for all stock option exercises
Tax benefit realized from stock awards exercised
$ 26.37
$ 5,389
$ 16,028
$ 10,435
$ 3,366
$ 17.33
$ 3,852
$ 15,258
$ 7,813
$ 3,204
$ 12.19
$ 2,407
$ 5,932
$ 4,060
$ 1,246
The risk-free interest rate is based on the U.S. Treasury security rate in effect as of the date of grant. The expected
lives of options are based on historical data of the Company. The Company has determined that an implied volatility is
more reflective of market conditions and a better indicator of expected volatility as compared to the Company’s
experience.
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Reported stock-based compensation expense was classified as follows (in thousands) and it is included in the
Operating expenses in the Consolidated Statement of Income:
For the Year ended December 31,
2021
2020
2019
Casino
Food and beverage
Hotel
Selling, general and administrative
Total stock-based compensation, before taxes
Tax benefit
Total stock-based compensation, net of tax
NOTE 10. STOCK REPURCHASE PLAN
$
236 $
125
191
3,508
4,060
(853)
205
211
109
3,600
4,125
(866)
$ 3,207 $ 3,045 $ 3,259
168 $
(26)
127
3,586
3,855
(810)
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, 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 December 31,2021,
the Company has made no purchases under the Repurchase Plan.
On January 19, 2022, under the authority of the Repurchase Plan, the Company purchased 100,000 shares for $6.5
million in a privately negotiated transaction.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Self-Insurance: The Company is self-insured for health care claims for eligible active employees. Benefit plan
administrators assist the Company in determining its liability for self-insured claims, and such claims are not
discounted. Monarch Black Hawk’s health plan has stop-loss insurance whereby the Company retains the first
$250,000 of liability for individual health care claims. The Company’s liability on the Atlantis health plan is limited to
the first $250,000 of claims plus 10% of claims above $250,000.
The Company is also self-insured for Atlantis workers’ compensation. The maximum liability for workers’
compensation under the Atlantis stop-loss agreement is $500,000 per claim. The Company is fully-insured for
Monarch Black Hawk workers compensation claims.
Legal dispute: On August 30, 2019, PCL Construction Services, Inc. (“PCL”) filed a complaint in District Court,
City and County of Denver, Colorado (the “Denver Action”), against the Company and its Colorado subsidiaries, in
connection with certain disputes regarding construction of the Company’s expansion of Monarch Black Hawk. The
complaint alleges, among other things, the defendants breached the construction contract with PCL and certain implied
warranties. On December 5, 2019, the Company and its Colorado subsidiaries filed an 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.
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The trial date for this matter has again been rescheduled and is now set for September 6, 2022, based on PCL’s
failure to produce relevant documents. The Court has entered a preliminary finding of bad faith against PCL based on
PCL’s failure to timely disclose the production failure upon PCL’s discovery of the same. Discovery in the action is
thus ongoing, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss
or gain, if any.
In connection with the expansion of the Monarch Black Hawk, as described above, PCL and certain
subcontractors have 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 District Court, County of Gilpin, Colorado
(the “Gilpin Action”), against the Company and its Colorado subsidiaries, in connection with the Company’s
expansion plans for the Monarch Black Hawk Property. The complaint essentially mirrors the claims and allegations
made by PCL in the Denver Action, as described above. The new lawsuit includes an additional claim, however, for
foreclosure of PCL’s purported mechanics’ lien against the Monarch Black Hawk Property. PCL also joined additional
subcontractors as defendants who have claimed a purported lien against the Monarch Black Hawk Property. 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, and have also filed counterclaims against PCL. The Company and its Colorado
subsidiaries filed an answer and counterclaims in the Gilpin Action on July 15, 2021. Monarch has also filed answers
to all cross claims, denying the claimants’ rights to relief. The Company and its Colorado subsidiaries intend to defend
against PCL’s claims and the cross claims filed by certain subcontractors, and will vigorously prosecute its
counterclaims for damages. The case was stayed pending the outcome of the Denver Action.
The Company recognized $5.1 million and $1.6 million in construction litigation expense relating to this lawsuit
for the twelve months ended December 31, 2021 and 2020, respectively, which are included in Other operating items,
net on the Consolidated Statements of Operations.
From time to time, we may be subject to other legal proceedings and claims in the ordinary course of
business. Management believes that the amount of any reasonably possible or probable loss for such other known
matters would not have a material adverse impact on our financial conditions, cash flows or results of operations;
however, the outcome of these actions is inherently difficult to predict.
NOTE 12. RELATED PARTY TRANSACTIONS
The shopping center adjacent to the Atlantis is owned by BLI. John Farahi and Bob Farahi, Co-Chairmen of the
Board and executive officers of the Company, and Ben Farahi each of whom has significant holdings 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.
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On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease
agreement with BLI for a portion of the Shopping Center, consisting of an approximate 46,000 square-foot commercial
building on approximately 4.2 acres of land adjacent to the Atlantis. The Parking Lot Lease gives the Atlantis the right
to use a parcel, approximately 4.2 acres, comprised of a commercial building and surrounding land adjacent to the
Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking.
The Company demolished the building and converted the land into approximately 300 additional surface parking
spaces for the Atlantis. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on
November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year
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. In 2021, the Company paid $695 thousand for rent and $28 thousand for operating expenses relating to this
lease. In 2020, the Company paid $695 thousand for rent and $27 thousand for operating expenses relating to this
lease. In 2019, the Company paid $695 thousand for rent and $32 thousand for operating expenses relating to this
lease. The right of use asset and lease liability balances as of December 31, 2021, recognized in the Consolidated
Balance Sheet, was $10.3 million.
In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet
from BLI 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 agreement. At the end of the renewal terms, the Company has the option to purchase the leased driveway section
of the Shopping Center. The annual rent for the each of the years 2021, 2020 was $404 thousand and for the year 2019
was $383 thousand. In addition, the Company paid $34 thousand, $23 thousand and $29 thousand, respectively, for
operating expenses related to this lease. The right of use asset and lease liability balances as of December 31, 2021,
recognized in the Consolidated Balance Sheet, was $3.7 million.
The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates
controlled by Farahi Family Stockholders and paid $194 thousand, $145 thousand and $150 thousand for the years
ended December 31, 2021, 2020 and 2019, respectively, for such leases.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K (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.
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We have established controls and procedures designed to ensure at a reasonable assurance level that information
required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated
and communicated to management, including the principal executive officer and the principal financial officer, to
allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the fourth quarter ended December 31, 2021, 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.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control system was designed to provide reasonable assurance to our management and Board of Directors
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures are being made only in accordance with authorizations of management and our
directors; and (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized
acquisition, use or disposition of assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations, including the possibility of
human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide
only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions,
the effectiveness of internal controls may vary over time.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.
In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (COSO) in Internal Control-Integrated Framework. Based on such assessment,
management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was
effective based on those criteria.
The Company’s independent registered public accounting firm has issued a report on the effectiveness of the
Company’s internal control over financial reporting. This report appears below.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Monarch Casino & Resort, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Monarch Casino & Resort, Inc. and subsidiaries’ (the Company) internal control over financial
reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020,
the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at
Item 15(a) (2) of the Company and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 28, 2022
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ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
This information is incorporated by reference from our Proxy Statement to be filed with the Commission in
connection with the 2022 Annual Meeting of Stockholders to be held on May 25, 2022. We expect to file the Proxy
Statement with the Commission not later than April 29, 2022.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from our Proxy Statement to be filed with the Commission in
connection with the 2022 Annual Meeting of Stockholders to be held on May 25, 2022. We expect to file the Proxy
Statement with the Commission not later than April 29, 2022.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Following is information related to our equity compensation plan.
Plan Category
Number of
securities to be
issued upon Weighted average
exercise price of
exercise of
outstanding
outstanding
options
options
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(a)
(b)
(c)
Equity compensation plans
approved by security holders (F1)
Equity compensation plans not
approved by security holders
Total
1,999,699
$
42.05
—
$
1,999,699
—
42.05
979,600
—
979,600
(F1) Includes the 1993 Directors’ Stock Option Plan, 1993 Employee Stock Option Plan and 1993 Executive Long-
Term Incentive Plan, as amended, and the 2014 Equity Incentive Plan.
Additional information required under this Item is incorporated by reference from our Proxy Statement to be filed
with the Commission in connection with the Annual Meeting of Stockholders to be held on May 25, 2022. We expect
to file the Proxy Statement with the Commission not later than April 29, 2022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
This information is incorporated by reference from our Proxy Statement to be filed with the Commission in
connection with the 2022 Annual Meeting of Stockholders to be held on May 25, 2022. We expect to file the Proxy
Statement with the Commission not later than April 29, 2022.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
This information is incorporated by reference from our Proxy Statement to be filed with the Commission in
connection with the Annual Meeting of Stockholders to be held on May 25, 2022. We expect to file Proxy Statement
with the Commission not later than April 29, 2022.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1). Financial Statements
Included in Part II, Item 8 of this report:
a) Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
b) Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019.
c) Consolidated Balance Sheets at December 31, 2021 and 2020.
d) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and
2019.
e) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019.
f) Notes to Consolidated Financial Statements.
(a)(2). Financial Statements Schedules (in thousands)
Schedule II – Valuation of Qualifying Accounts
All other schedules are omitted because they are not applicable, not required or the required
information is shown in the financial statements and notes thereto.
Schedule II. - VALUATION AND QUALIFYING ACCOUNTS
Year ended December 31,
2019
Allowance for doubtful accounts
2020
Allowance for doubtful accounts
2021
Allowance for doubtful accounts
Balance at
beginning
of year
Charged to
costs and
expenses
(F1)
Deductions
(F1)
Other
Balance at end
of year
$
$
$
245
100
111
$
$
$
189
159
245
$
$
$
(334) $ — $
(148) $ — $
(174) $ — $
100
111
182
(F1) The Company reviews receivables monthly and, accordingly, adjusts the allowance for doubtful accounts
monthly. The Company records write-offs annually. The amount charged to costs and expenses reflects the bad debt
expense recorded in the consolidated statements of income, while the amount recorded for deductions reflects the
adjustment to actual allowance for doubtful accounts reserve at the end of the period.
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(a)(3) Exhibits
Number
2.01
3.01
3.02
4.01
4.02
10.01+
10.02+
10.03+
10.04+
Exhibit Description
Stock Purchase Agreement dated as of September 29, 2011 by and among Monarch Casino &
Resort, Inc., Monarch Growth Inc. (a wholly owned subsidiary of Monarch Casino and
Resort, Inc.), Riviera Operating Corporation, Riviera Holdings Corporation and Riviera Black
Hawk, Inc. is incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K/A
(SEC File 0-22088) filed on October 4, 2011.
Articles of Incorporation of Monarch Casino & Resort, Inc., as filed with the Nevada Secretary
of State on June 11, 1993; Certificate of Change Pursuant to NRS 78.209, as filed with the
Nevada Secretary of State on March 17, 2005; Certificate of Correction, as filed with the
Nevada Secretary of State on March 17, 2006, are incorporated by reference to Exhibits 3.1 and
3.2 to the Company’s Form 8-K (SEC FILE 0-22088) filed on March 23, 2006.
Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993 and amended January 24,
1995, and March 27, 2009 and June 1, 2012 are incorporated herein by reference to
Exhibit 3.02 to the Company’s Form 10-K (SEC FILE 0-22088) for the year ended
December 31, 2012 filed on March 15, 2013.
Specimen Common Stock Certificate for the Common Stock of Monarch Casino & Resort, Inc.
is incorporated herein by reference to Exhibit 4.01 to the Company’s Form 10-K (SEC File 0-
022088) for the year ended December 31, 2018.
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934 is incorporated herein by reference to Exhibit 4.02 to the Company’s
Form 10-K (SEC File 0-22088) for the year ended December 31, 2019 filed on March 12, 2020.
Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors’ Stock Option Plan is
incorporated herein by reference to Exhibit 4.02 to the Company’s Form 10-K (SEC File 0-
022088) for the year ended December 31, 1998.
Monarch Casino & Resort, Inc. 1993 Employee Stock Option Plan, as amended, is incorporated
herein by reference to Appendix A to the Company’s Proxy Statement (SEC File 0-22088) filed
on March 25, 2011.
Monarch Casino & Resort, Inc. 1993 Executive Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Appendix B to the Company’s Proxy Statement (SEC File
0-22088) filed on March 25, 2011.
Seventh Amendment to the 1993 Executive Long-Term Incentive Plan is incorporated herein by
reference to Exhibit 10.4 to the Company’s Form 10-Q (SEC File 0-22088) for the quarterly
period ended September 30, 2013.
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Number
10.05+
10.06+
10.07+
10.08+
10.09
10.10
10.11
10.12
10.13
10.14
First Amendment to the Amended and Restated 1993 Director’s Stock Option Plan is
incorporated herein by reference to Exhibit 10.5 to the Company’s Form 10-Q (SEC File 0-
22088) for the quarterly period ended September 30, 2013.
Exhibit Description
Eighth Amendment to the 1993 Employee Stock Option Plan is incorporated herein by
reference to Exhibit 10.2 to the Company’s Form 10-Q (SEC File 0-22088) for the quarterly
period ended September 30, 2013.
2014 Equity Incentive Plan is incorporated herein by reference to Exhibit 10.1 to the
Company’s Form 8-K (SEC File 0-22088) filed on May 23, 2014.
2014 Equity Incentive Plan, as amended, is incorporated by reference to Appendix A to the
Company’s Proxy Statement (SEC File 0-22088) filed on April 22, 2019).
Trademark Agreement between Golden Road Motor Inn, Inc. and Atlantis Lodge, Inc., dated
February 3, 1996 is incorporated herein by reference to Exhibit 10.23 to the Company’s
Form 10-K (SEC File 0-22088) for the fiscal year ended December 31, 1995.
Lease Agreement and Option to Purchase dated as of January 29, 2004, between Golden Road
Motor Inn, Inc. as Lessee and Biggest Little Investments, L.P. as Lessor is incorporated herein
by reference to Exhibit 10.18 to the Company’s Form 10-K (SEC File 0-22088) filed on
March 12, 2004.
Lease Agreement dated as of August 28, 2015, between Golden Road Motor Inn, Inc. as Lessee
and Biggest Little Investments, L.P. as Lessor is incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K (SEC File 0-22088) filed September 3, 2015.
First Amendment to Lease Agreement and Option to Purchase dated as of August 25, 2015,
between Golden Road Motor Inn, Inc. as Lessee and Biggest Little Investments, L.P. as Lessor
is incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K (SEC FILE 0-
22088) filed September 3, 2015.
Fourth Amended and Restated Credit Agreement, dated as of September 3, 2020, among
Monarch Casino & Resort, Inc., Golden Road Motor Inn, Inc. and Monarch Growth Inc., as
Borrowers, the Lenders named therein, and Wells Fargo Bank, National Association, as
Administrative Agent, L/C Issuer and Swing Line Lender is incorporated herein by reference to
Exhibit 10.13 to the Company’s Form 80-K (SEC 0-22088) filed on September 4, 2020.
Amendment to Fourth Amended and Restated Credit Agreement, dated as of September 29,
2020, among Monarch Casino & Resort, Inc., Golden Road Motor Inn, Inc. and Monarch
Growth Inc., as Borrowers, the Lenders named therein, and Wells Fargo Bank, National
Association, as Administrative Agent, L/C Issuer and Swing Line Lender is incorporated herein
by reference to Exhibit 10.2 to the Company’s Form 10-Q (SEC 0-22088) filed on November 6,
2020.
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10.15
21.01
Amendment to Fourth Amended and Restated Credit Agreement, dated as of April 30, 2021,
among Monarch Casino & Resort, Inc., Golden Road Motor Inn, Inc. and Monarch Growth
Inc., as Borrowers, the Lenders named therein, and Wells Fargo Bank, National Association, as
Administrative Agent, L/C Issuer and Swing Line Lender is incorporated herein by reference to
Exhibit 10.3 to the Company’s Form 10-Q (SEC 0-22088) filed on May 7, 2021.
List of Subsidiaries of Monarch Casino & Resort, Inc. is incorporated herein by reference to
Exhibit 4.02 to the Company’s Form 10-K (SEC File 0-22088) for the year ended December 31,
2019 filed on March 12, 2020.
23.1*
Consent of Independent Registered Public Accounting Firm.
31.1*
31.2*
32.1**
32.2**
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.
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.
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.
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
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*
Inline XBRL Taxonomy Extension Presentation
104*
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Furnished herewith
+ Denote management contracts or compensatory plans or arrangements.
ITEM 16. FORM 10-K SUMMARY
None.
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Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
MONARCH CASINO & RESORT, INC.
(Registrant)
Date: February 28, 2022
By: /s/ EDWIN S. KOENIG
Edwin S. Koenig, Chief Accounting Officer
(Principal Financial and Accounting Officer and Duly
Authorized Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ JOHN FARAHI
John Farahi
/S/ BOB FARAHI
Bob Farahi
Co-Chairman of the Board of Directors
Chief Executive Officer (Principal
Executive Officer) and Director
February 28, 2022
Co-Chairman of the Board of
Directors,
President, Secretary and Director
February 28, 2022
/S/ EDWIN S. KOENIG
Edwin S. Koenig
Chief Accounting Officer (Principal
Financial Officer and Principal
Accounting Officer)
February 28, 2022
/S/ PAUL ANDREWS
Paul Andrews
/S/ YVETTE E. LANDAU
Yvette E. Landau
/S/ CRAIG F. SULLIVAN
Craig F. Sullivan
Director
Director
Director
February 28, 2022
February 28, 2022
February 28, 2022
81
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-233174, 333-219964, 333-
200102, 333-179158, 333-179159, 333-144254, 333-144253, 333-144252, 333-85412, 333-85418, and 333-85420)
pertaining to the 2014 Equity Incentive Plan, Monarch Casino & Resort. Inc. 1993 Directors’ Stock Option Plan, Monarch
Casino & Resort, Inc. 1993 Executive Long-Term Incentive Plan and Monarch Casino & Resort, Inc. 1993 Employee Stock
Option Plan of our reports dated February 28, 2022 with respect to the consolidated financial statements and schedule of
Monarch Casino & Resort, Inc. and subsidiaries, and the effectiveness of internal control over financial reporting of
Monarch Casino & Resort, Inc. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December
31, 2021.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 28, 2022
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 Annual Report on Form 10-K 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 (the registrant’s fourth fiscal quarter in the
case of an annual report) 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: February 28, 2022
By: /s/ John Farahi
John Farahi
Chief Executive Officer
EXHIBIT 31.2
Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Edwin S. Koenig, Chief Accounting Officer of Monarch Casino & Resort, Inc., certify that:
1.
I have reviewed this Annual Report on Form 10-K 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 (the registrant’s fourth fiscal quarter in the
case of an annual report) 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: February 28, 2022
/s/ Edwin S. Koenig
By:
Edwin S. Koenig
Principal Financial and Accounting Officer
EXHIBIT 32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, I, John Farahi, Chief Executive Officer of Monarch Casino & Resort, Inc. (the “Company”),
hereby certify, that, to my knowledge:
1. The Annual Report on Form 10-K for the year ended December 31, 2021 (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
February 28, 2022
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 Annual Report on Form 10-K for the year ended December 31, 2021 (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
February 28, 2022