Business context and reporting period
Monarch Casino & Resort, Inc. operates the Atlantis Casino Resort Spa in Reno, Nevada, and Monarch Casino Resort Spa Black Hawk in Colorado. This is the Form 10-K for the fiscal year ended December 31, 2021, not a standalone fourth-quarter report; the supplied filing does not provide a clear set of Q4-only financial results.
Financial performance
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | 2021 | 2020 |
|---|---|---|
| Net revenue | $395.4 | $184.4 |
| Operating income | $89.9 | $15.3 |
| Operating margin | 22.7% | 8.3% |
| Net income | $68.5 | $23.7 |
| Diluted EPS | $3.53 | $1.25 |
| Cash from operating activities | $128.1 | $31.4 |
| Cash used in investing activities | $37.8 | $46.4 |
| Cash used in financing activities | $85.1 | $17.3 |
Revenue mix in 2021: casino $233.4; food and beverage $91.1; hotel $54.4; other $16.5. Net margin was approximately 17.3%, compared with 12.8% in 2020 (calculated from reported net income and revenue).
Balance sheet and liquidity at December 31, 2021
- Cash and cash equivalents: $33.5; current assets: $84.1; total assets: $690.5.
- Credit-facility principal outstanding: $90.0, down $92.5 during 2021. The balance sheet reports $20.0 current debt and $68.2 long-term debt net of issuance costs.
- Revolving facility availability: $69.4; no revolver borrowings. Credit facility maturity is September 3, 2023; scheduled principal payments over the next 12 months were estimated at $20.0.
- Construction accounts payable: $58.9. Income taxes receivable: $26.9, including an expected 2020 tax refund cited by management.
- Capital expenditures were $37.8 in 2021, versus $46.4 in 2020. The filing reports no cash or cash equivalents subject to market risk and no impairment charges for 2021.
Material changes versus 2020
- Revenue rose 114.4%, operating income increased to $89.9 million, and net income rose to $68.5 million. Comparisons reflect the approximately three-month property closures in 2020, restrictions after reopening, and the expansion at Black Hawk.
- Casino revenue increased 109.2%; food and beverage revenue increased 111.0%; hotel revenue increased 170.1%. Hotel performance also benefited from added Black Hawk rooms and higher reported occupancy and room rates.
- Black Hawk’s expanded hotel and casino opened in phases beginning in late 2020; the hotel tower and spa were fully open in Q1 2021. Additional gaming and sportsbook amenities opened during 2021, and a specialty restaurant opened in February 2022.
- Operating income benefited from higher activity, while depreciation and amortization increased to $38.4 million from $17.3 million, primarily from the completed Black Hawk expansion. Selling, general and administrative expense rose to $84.4 million but fell as a share of revenue to 21.4% from 32.7%.
- The 2020 net result included an $8.7 million income-tax benefit, principally related to the CARES Act and tax depreciation; 2021 included a $16.9 million tax provision. Therefore, net-income growth is not solely an operating comparison.
- Atlantis occupancy was 82.1% versus 71.3% in 2020; ADR was $123.18 versus $108.44 and RevPAR was $114.85 versus $86.85. Black Hawk occupancy was 67.9% versus 29.6%, ADR $182.78 versus $177.63, and RevPAR $132.75 versus $52.97; its hotel tower began phased opening in November 2020.
Outlook, risks and unusual items
- No formal revenue or earnings guidance is provided. Management said expected operating cash flows and available credit were sufficient for operations, debt obligations and planned capital expenditures for the 12 months following the filing, while noting material uncertainty, including COVID-19 and economic, competitive and regulatory factors.
- Management expected cash outflows for $58.9 million of outstanding construction retention and other expansion payments, partly offset by an expected $26.9 million tax refund. These are expectations disclosed in the filing, not guaranteed timing or outcomes.
- The Black Hawk expansion contractor, PCL Construction Services, and the Company are involved in litigation, with related subcontractor lien claims. The company recorded $5.1 million of construction-litigation expense in 2021 and stated it could not determine the probability of the outcome or reasonably estimate any loss or gain. The Denver Action trial was scheduled for September 6, 2022; a related lien action was stayed pending that case.
- Colorado removed the $100 single-bet limit and allowed additional game types effective May 1, 2021, following Amendment 77 and Black Hawk local approval. Management views this as an opportunity for market growth.
- Risks include pandemic-related demand or operating restrictions, inflation and labor shortages, competition, dependence on two resorts, construction claims and cost exposure, gaming regulation and licensing, and variable-rate debt. A 1-percentage-point rate increase on year-end debt would add about $0.9 million in annual interest expense, based on the filing.
- Auditor Ernst & Young issued an unqualified opinion on the financial statements and internal controls; it reported no critical audit matters. The company reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Review subsequent disclosures on PCL litigation, subcontractor liens, trial developments, and any resulting cash, earnings, or property impacts.
- Confirm payment timing and final amounts for the $58.9 million construction payable and receipt of the expected $26.9 million tax refund.
- Assess Black Hawk’s continuing ramp-up, post-expansion returns, and whether the Colorado betting-limit and game changes support sustained growth.
- Check liquidity, scheduled debt repayments, covenant compliance, and refinancing plans ahead of the September 2023 credit-facility maturity.
- Separate operating improvement from the effects of 2020 closures, expansion-related changes, and the unusually favorable 2020 tax benefit when comparing periods.