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Management's Discussion of Results of Operations (Excerpts)

For purposes of readability, Zenith attempts to strip out all tables in excerpts from the Management Discussion. That information is contained elsewhere in our articles. The idea of this summary is simply to review how well we believe Management does its reporting. Also, this highlights what Management believes is important.

In our Decision Matrix at the end of each article, a company with 0 to 2 gets a "-1", and 3 to 5 gets a "+1."

On a scale of 0 to 5, 5 being best, Zenith rates this company's Management's Discussion as a 5.


OPERATING RESULTS SUMMARY

Our operating results may be affected by, among other things, competitive 
factors, gaming tax increases, the commencement of new competitive gaming 
operations, construction at our facilities, general public sentiment regarding 
travel and leisure activities, including gaming, overall economic conditions 
and governmental policies affecting the disposable income of our patrons and 
weather conditions affecting our properties.

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 continually make upgrades to the facility and improve our 
products. With quality gaming, hotel and dining products, we believe the 
Atlantis is well positioned to benefit from future macro and local economic 
growth. Several national businesses have relocated or have announced plans to 
expand or relocate operations to Northern Nevada. While such economic activity 
could ultimately drive additional revenue and profit at Atlantis, we are 
experiencing the more immediate effect of increased labor costs which, combined 
with continued aggressive marketing programs by our competitors, have applied 
upward pressure on Atlantis operating costs.

Monarch Casino Black Hawk: Since the acquisition of Monarch Casino Black Hawk 
in April 2012, our focus has been to maximize casino and food and beverage 
revenues while upgrading the existing facility and laying the groundwork for 
the planed major expansion. There is currently no hotel on the property. In 
October 2012, we began a project to redesign and upgrade the existing Monarch 
Casino Black Hawk facility. In September 2013, we opened a new buffet. In 
August 2015, we completed the redesign and upgrade of the existing Monarch 
Casino Black Hawk, bringing to the facility’s interior the same quality, 
ambiance and finishes of the ongoing master planned expansion that will 
transform Monarch Casino Black Hawk into a full-scale casino resort. In the 
fourth quarter of 2013, we began work on a multi-phased expansion of the 
Monarch Casino Black Hawk, which we refer to herein as the “Monarch Black Hawk 
Expansion Plan.” The first phase of the Monarch Black Hawk Expansion Plan is 
completed. In November 2016, we opened for guest use our nine-story parking 
facility with about 1,350 spaces. Construction of a new hotel tower and casino 
expansion on the site where the old parking structure was sitting is under way. 
Once completed, the Monarch Black Hawk Expansion Plan will nearly double the 
casino space and will add a 23-story hotel tower with approximately 500 guest 
rooms and suites, an upscale spa and pool facility, three additional 
restaurants (increasing the total to four), additional bars and associated 
support facilities. We currently expect completion of the entire expansion in 
the second quarter of 2019.



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.



Capital expenditures for the nine-month periods ended September 30, 2017 and 
2016 totaled approximately $34.4 million and $19.8 million, respectively. 
During the nine-month period ended September 30, 2017, our capital expenditures 
related primarily to the new hotel tower and casino expansion at Monarch Casino 
Black Hawk, the acquisition of a parcel of land with an industrial warehouse in 
proximity to the Monarch Casino Black Hawk, the re-carpeting of the entire 
casino floor and more than one third of the hotel rooms at Atlantis, as well as 
acquisition of gaming and other equipment to upgrade and replace existing 
equipment at the Atlantis and the Monarch Casino Black Hawk. The capital 
expenditures were funded from operating cash flows. During the nine-month 
period ended September 30, 2016, our capital expenditures related primarily to 
the major redesign and upgrade of the Toucan Charlie’s Buffet, improvements to 
new additional parking spaces at Atlantis, continued work on the new parking 
garage at Monarch Casino Black Hawk as well as acquisition of gaming equipment 
to upgrade and replace existing equipment in the Atlantis and Monarch Casino 
Black Hawk.



Monarch Black Hawk Expansion Plan



We have commenced its Monarch Black Hawk Expansion Plan, which will convert 
Monarch Casino Black Hawk into a full-scale hotel casino resort spa.



In the fourth quarter of 2013, we began work on a multi-phased expansion of the 
Monarch Casino Black Hawk which involves construction of a new parking 
structure, demolition of the existing parking structure followed by the 
construction of a new hotel tower and casino expansion. In November 2016, the 
new nine-story parking structure, offering approximately 1,350 parking spaces, 
was completed and became available for use by Monarch Casino Black Hawk guests. 
Immediately following the new garage opening, we began work on demolition and 
removal of the old parking structure. This work, which included a controlled 
implosion of the old garage, was completed in the first quarter of 2017.



On February 8, 2017, the Company broke ground and construction on the 
foundation for the hotel tower and casino expansion is underway. The new 
23-story tower will nearly double the existing casino space and will include 
approximately 500 hotel rooms, an upscale spa and pool facility, three 
additional restaurants and additional bars. Tower floors will be opened as they 
are finished beginning with the casino expansion and additional restaurants. We 
currently expect completion of the entire tower in the second quarter of 2019 
at a total cost of approximately $229-$234 million. The cost is expected to be 
financed through a combination of operating cash flow and the Amended Credit 
Facility. We can provide no assurance that any project will be completed on 
schedule, if at all, or within established budgets, or that any project will 
result in increased earnings to us.



RESULTS OF OPERATIONS



Comparison of Operating Results for the Three-Month Periods Ended September 30, 
2017 and 2016



For the three months ended September 30, 2017, our net income totaled $9.0 
million, or $0.49 per diluted share, compared to net income of $7.8 million, or 
$0.45 per diluted share for the same period in 2016, reflecting a 15.3% 
increase in net income and an 8.9% increase in diluted earnings per share. Net 
revenues totaled $63.0 million in the third quarter of 2017, an increase of 
$5.9 million, or 10.4%, compared to the third quarter of 2016. Income from 
operations for the three months ended September 30, 2017 totaled $13.3 million 
compared to $12.3 million for the same period in 2016.



Casino revenue increased 10.7% in the third quarter of 2017 compared to the 
third quarter of 2016, as we continue to increase market share in two growing 
markets. Casino operating expense as a percentage of casino revenue decreased 
from 40.3% in the third quarter of 2016 to 39.3% in the same quarter of 2017 
primarily due to the increase in casino revenue in the third quarter of 2017 
combined with operating cost efficiencies.



Food and beverage revenue for the third quarter of 2017 increased 4.6% over the 
third quarter of 2016, due to a 5.6% increase in covers, offset by a 0.9% 
decrease in food and beverage revenue per cover. Food and beverage operating 
expense as a percentage of food and beverage revenue increased in the third 
quarter of 2017 to 41.0% compared to 39.4% for the same period in 2016 
primarily as a result of an increase in payroll and employee benefits expense.



Hotel revenue increased 6.0% in the third quarter of 2017 compared to the third 
quarter of 2016. Average daily room rate (“ADR”) of $86.78 in the third quarter 
of 2017 was $2.20 higher than the ADR of $84.58 in the third quarter of 2016 
and the occupancy of 97.8% during the third quarter of 2017 was slightly higher 
compared to 97.1% during the third quarter of 2016. Revenue per Available Room 
(“REVPAR”), calculated by dividing total room revenue (less service charges, if 
any) by total rooms available, was $96.51 and $91.03 for the three months ended 
September 30, 2017 and 2016, respectively. Hotel operating expense as a 
percentage of hotel revenue increased to 37.4% in the third quarter of 2017 as 
compared to 28.4% for the comparable prior year period primarily due to higher 
labor related expense and hotel repair and maintenance expense, as well as 
expenses related to the shuttle service and expanded valet services implemented 
at Monarch Casino Black Hawk.



Other revenue increased 10.4% in the third quarter of 2017 compared to the 
third quarter of 2016 driven primarily by increased arcade, spa and retail 
revenues.



Promotional allowances as a percentage of gross revenues decreased to 16.4% 
during the third quarter of 2017 compared to 17.6% in the comparable 2016 
quarter. This decrease was primarily due to higher revenues and increase in the 
profitability of the promotional programs.



Selling, General and Administrative (“SG&A”) expense increased to $16.4 million 
in the third quarter of 2017 from $14.4 million in the third quarter of 2016 
primarily due to a $1.2 million increase in salaries, wages and related 
benefits expense, $0.4 million increase in repairs and maintenance expense, 
$0.1 million increase in property taxes and $0.1 million increase in utilities. 
As a percentage of net revenue, SG&A expense increased to 26.0% in the third 
quarter of 2017 compared to 25.3% in the same period in 2016.



Depreciation and amortization expense increased to $3.7 million for the three 
months ended September 30, 2017 as compared to $3.6 million for the three 
months ended September 30, 2016. The increase is primarily a result of the 
additional depreciation expense related to the new parking garage at Monarch 
Casino Black Hawk, offset by the decrease in depreciation expense at Monarch 
Casino Black Hawk due to five-year assets (assets that are depreciated over a 5 
year time period) having become fully depreciated.



Interest expense, net of amounts capitalized, increased to $161.0 thousand in 
the third quarter of 2017 from $130.0 thousand in the third quarter of 2016 
primarily due to higher bank commitment fees related to the Amended Credit 
Facility.



Comparison of Operating Results for the Nine-Month Periods Ended September 30, 
2017 and 2016



For the nine months ended September 30, 2017, our net income totaled $21.1 
million, or $1.16 per diluted share, compared to net income of $18.1 million, 
or $1.03 per diluted share, for the same period in 2016, reflecting a 16.8% 
increase in net income and 12.6% increase in diluted earnings per share. Net 
revenues totaled $174.7 million in the nine-month period of 2017, reflecting an 
increase of $13.2 million, or 8.2%, compared to the same period in 2016. Income 
from operations for the nine months ended September 30, 2017 totaled $32.5 
million compared to $28.4 million for the same period in 2016, representing an 
increase of $4.2 million or 14.7%.



Casino revenue increased 7.6% in the first nine months of 2017 compared to the 
first nine months of 2016. Casino operating expense as a percentage of casino 
revenue decreased to 40.6% in the first nine months of 2017 compared to 41.8% 
in the first nine months of 2016 due to higher casino revenue combined with 
operating cost efficiencies.



Food and beverage revenue for the first nine months of 2017 increased 6.3% over 
the first nine months of 2016, due to a 3.8% increase in covers and a 2.4% 
increase in average revenue per cover. In 2016, Toucan Charlie’s Buffet was 
closed for redesign and upgrade for 70 days, which unfavorably affected the 
2016 total food and beverage covers. Food and beverage operating expense as a 
percentage of food and beverage revenue in the first nine months of 2017 and 
2016 was flat at 41.1% as a result of the repair and maintenance expenses 
related to the Atlantis buffet redesign and upgrade at the beginning of 2016 
offset by an increase in payroll and employee benefits expenses in 2017 due to 
a labor shortage in both operating units’ markets.



Hotel revenue increased 6.5% due to an increase in ADR to $82.56 in the first 
nine months of 2017 compared to $80.76 in the first nine months of 2016 and an 
increase in occupancy to 91.2% during the first nine months of 2017 compared to 
89.7% during the first nine months of 2016. REVPAR was $85.37 and $79.89 for 
the nine months ended September 30, 2017 and 2016, respectively. Hotel 
operating expense as a percentage of hotel revenue increased to 37.5% in the 
first nine months of 2017 as compared to 30.1% for the comparable prior year 
period due to higher payroll and employee benefits expense and repair and 
maintenance expense in the first nine months of 2017, combined with expenses 
related to the shuttle service and expanded valet services implemented at 
Monarch Casino Black Hawk.



Other revenue increased 7.7% in the first nine months of 2017 compared to the 
first nine months of 2016 driven primarily by increased arcade, commission and 
spa revenues.



Promotional allowances as a percentage of gross revenues decreased to 17.2% 
during the first nine months of 2017 from 17.9% in the comparable 2016 period 
primarily as a result of the increase in gross revenues and increase in the 
profitability of the promotional programs.



SG&A expense increased by $4.0 million to $46.1 million in the first nine 
months of 2017 primarily due to: (i) a $2.6 million increase in salaries, wages 
and employee benefit expenses; (ii) a $0.8 million increase in repair and 
maintenance expense and properties’ improvement expenses, (iii) a $0.3 million 
increase in property tax expense related to the new parking garage at Monarch 
Casino Black Hawk, (iv) a $0.2 million increase in advertising expense, and (v) 
a $0.1 million increase in charitable contributions. As a percentage of net 
revenue, SG&A expense increased to 26.4% in the first nine months of 2017 from 
26.1% in the first nine months of 2016.



Depreciation and amortization expense increased to $11.4 million for the nine 
months ended September 30, 2017 as compared to $11.1 million for the nine 
months ended September 30, 2016 primarily as a result of the additional 
depreciation expense related to the new parking garage at Monarch Casino Black 
Hawk.



Interest expense, net of amounts capitalized increased to $639.0 thousand in 
the first nine months of 2017 from $275.0 thousand in the first nine months of 
2016 primarily as a result of the higher bank commitment fees related to the 
Amended Credit Facility and higher amortization of deferred loan costs expense 
related to the Amended Credit Facility.



In 2016, the Company completed the hotel towers’ doors replacement capital 
project at the Atlantis and as a result, the Company wrote off the remaining 
net book value of the existing doors, incurring a $0.6 million loss on the 
disposal.


Liquidity and Capital Resources



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



For the nine months ended September 30, 2017, net cash provided by operating 
activities totaled $34.7 million, an increase of $5.6 million, or 19.1% 
compared to the same period in the prior year. This increase was primarily the 
result of an increase in net income and an increase in depreciation and 
amortization expense, offset by an increase in working capital. The net cash 
provided by operating activities was also positively affected by the adoption 
of the ASU No. 2016-09, which changes the classification and presentation of 
the stock-based compensation in the Statement of Cash Flows.



Net cash used in investing activities totaled $34.3 million and $19.8 million 
during the nine months ended June 30, 2017 and 2016, respectively. Net cash 
used in investing activities during the first nine months of 2017 consisted 
primarily of cash used for the new hotel tower and casino expansion at Monarch 
Casino Black Hawk, the purchase of a parcel of land with an industrial 
warehouse in proximity to the Monarch Casino Black Hawk, the re-carpeting of 
the casino floor and hotel rooms at Atlantis, and for acquisition of gaming and 
other equipment at both properties. Net cash used in investing activities 
during the first nine months of 2016 consisted primarily of cash used for the 
new parking garage at Monarch Casino Black Hawk, the redesign and upgrade of 
Toucan Charlie’s Buffet at Atlantis, improvements to new additional parking 
spaces at Atlantis, and for acquisition of gaming and other equipment at both 
properties.



There were no financing activities during the first nine months of 2017. Net 
cash used in financing activities during the first nine months of 2016 was 
$11.1 million and represented $11.0 million in payments under our credit 
facility and $2.6 million in loan issuance cost, offset by $2.5 million in 
proceeds from stock option exercises, including excess tax benefit from options 
exercised.



Under the Amended Credit Facility, our available borrowing capacity is $250.0 
million with a maturity date of July 20, 2021. The proceeds from the Amended 
Credit Facility will be used to fund the Monarch Black Hawk Expansion Plan, for 
ongoing capital expenditure, for working capital needs and general corporate 
purposes and requirements.



As of September 30, 2017, we had borrowed $26.2 million of the principal under 
the Amended Credit Facility, and had a $0.6 million Standby Letter of Credit 
and $223.2 million remaining in available borrowings of the $250.0 million 
maximum principal available under the Amended Credit Facility. As of September 
30, 2017, there have been no withdrawals from the Standby Letter of Credit.



The total revolving loan commitment under the Amended Credit Facility will be 
automatically and permanently reduced to $50.0 million in the first full 
quarter after completion of the expansion project at the Monarch Casino Black 
Hawk and all then outstanding revolving loans up to $200.0 million under the 
Amended Credit Facility will be converted to a term loan at such time. We may 
be required to prepay borrowings under the Amended Credit Facility using excess 
cash flows depending on our leverage ratio no later than December 31, 2019. We 
have an option to permanently reduce the maximum revolving available credit at 
any time so long as the amount of such reduction is at least $0.5 million and 
in multiples of $50,000.



Borrowings are secured by liens on substantially all of our real and personal 
property.



In addition to other customary covenants for a facility of this nature, as of 
September 30, 2017, we are required to maintain a leverage ratio, defined as 
consolidated debt divided by Adjusted EBITDA, of no more than 3.5:1 and a fixed 
charge coverage ratio (Adjusted EBITDA divided by fixed charges, as defined in 
the Amended Credit Facility) of at least 1.15:1. As of September 30, 2017, the 
Company’s leverage ratio and fixed charge coverage ratios were 0.4:1 and 
41.3:1, respectively.

The interest rate under the Amended Credit Facility is LIBOR plus a margin 
ranging from 1.00% to 2.50%, or a base rate (as defined in the Amended Credit 
Facility) plus a margin ranging from 0.00% to 1.50%, or the Prime Rate. The 
applicable margins will vary depending on our leverage ratio. Commitment fees 
are equal to the daily average unused revolving commitment multiplied by the 
commitment fee percentage, ranging from 0.175% to 0.45%, based on our leverage 
ratio.



At September 30, 2017, 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 1.00%. At September 30, 2017, the one-month LIBOR interest rate 
was 1.24%. 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.



We may prepay borrowings under the Amended Credit Facility without penalty 
(subject to certain charges applicable to the prepayment of LIBOR borrowings 
prior to the end of the applicable interest period). Amounts prepaid may be 
re-borrowed so long as the total borrowings outstanding do not exceed the 
maximum principal available.



We believe that our existing cash balances, cash flow from operations and 
borrowings available under the Amended Credit Facility will provide us with 
sufficient resources to fund our operations, meet our debt obligations, and 
fulfill our capital expenditure plans over the next twelve months; however, our 
operations are subject to financial, economic, competitive, regulatory, and 
other factors, many of which are beyond our control. If we are unable to 
generate sufficient cash flow or if our cash needs exceed our borrowing 
capacity under the Amended Credit Facility, we could be required to adopt one 
or more alternatives, such as reducing, delaying or eliminating planned capital 
expenditures, selling assets, restructuring debt or obtaining additional equity 
capital.



OFF BALANCE SHEET ARRANGEMENTS



John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of 
the Company, and Ben Farahi are the three largest stockholders of 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.

In response to customer demand for more convenient surface parking at the 
Atlantis, and after detailed analysis, on August 28, 2015, the Company, through 
its subsidiary Golden Road, entered into a 20-year lease (the “Parking Lot 
Lease”) with BLI with respect to a portion of the Shopping Center. This lease 
gives the Atlantis the right to use a parcel, approximately 4.15 acres, 
comprised of a commercial building and surrounding land adjacent to the 
Atlantis (the “Leased Property”). The primary purpose of the Parking Lot Lease 
is to provide additional, convenient, Atlantis surface parking. We demolished 
the commercial building on the Leased Property 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 
November 17, 2015. The minimum annual rent is subject to a cost of living 
adjustment increase on each five-year anniversary. In addition, we are 
responsible for payment of property taxes, utilities and maintenance expenses 
related to the Leased Property. We have an option to renew the Parking Lot 
Lease for an additional 10-year term. If we elect not to exercise the renewal 
option, we will be obligated to pay BLI $1.6 million. During each of the 
three-month periods ended September 30, 2017 and 2016, we paid approximately 
$174 thousand in parking lot rent payments. During each of the nine-month 
periods ended September 30, 2017 and 2016, we paid approximately $522 thousand 
in parking lot rent payments.

A driveway (the “Driveway Project”) that is being shared between the Atlantis 
and the Shopping Center was completed and opened on September 30, 2004. The 
Shopping Center is controlled by BLI. As part of the Driveway Project, in 
January 2004, we leased (the “Driveway Lease”) approximately 37,400 square-foot 
corner section of the Shopping Center, for a minimum lease term of 15 years at 
an annual rent of $300 thousand, subject to a cost of living increase on each 
five year anniversary of the Driveway Lease. As of September 30, 2017, the 
annual rent is $377 thousand. In August 2015, we exercised our option to extend 
the lease for three individual five-year terms in addition to the 15-year 
initial term. At the end of the extension periods, we have the option to 
purchase the leased section of the Shopping Center. The leased space is being 
used by us for pedestrian and vehicle access to the Atlantis, and we may use a 
portion of the parking spaces at the Shopping Center. The total cost of the 
project was $2.0 million. We were responsible for two thirds of the total cost, 
or $1.35 million. The cost of the new driveway is being depreciated over the 
15-year expected economic useful life of the asset; some components of the new 
driveway are being depreciated over a shorter period of time. During each of 
the three-month periods ended September 30, 2017 and 2016, we paid 
approximately $94 thousand in driveway rent payments. During each of the 
nine-month periods ended September 30, 2017 and 2016, we paid approximately 
$282 thousand in driveway rent payments.



OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS



Negative economic developments in Northern Nevada, the Denver metropolitan 
area, or in our feeder markets, could adversely impact discretionary incomes of 
our target customers, which, in turn could adversely impact our business. Our 
target customers might curtail discretionary spending for leisure activities 
and businesses may reduce spending for conventions and meetings, both of which 
would adversely impact our business. Management continues to monitor economic 
trends and intends, as appropriate, to adopt operating strategies to attempt to 
mitigate the effects of such adverse conditions. We can make no assurances that 
such strategies will be effective should negative economic developments in our 
markets occur.



The expansion of Native American casinos in California has had an impact on 
casino revenues in Nevada, in general, and many analysts have continued to 
predict the impact will be more significant on the Reno-Lake Tahoe market. If 
other Reno-area casinos continue to suffer business losses due to increased 
pressure from California Native American casinos, such casinos may intensify 
their marketing efforts to northern Nevada residents as well, greatly 
increasing competitive activities for our local customers.



Higher fuel costs may deter California, Denver area, and other drive-in 
customers from coming to the Atlantis or the Monarch Casino Black Hawk.



We also believe that unrestricted land-based casino gaming in or near any major 
metropolitan area in the Atlantis’ key feeder market areas, such as San 
Francisco or Sacramento, or in other areas near Denver, Colorado, the Black 
Hawk key feeder markets, could have a material adverse effect on our business.



We rely on information technology and other systems to maintain and transmit 
customer financial information, credit card settlements, credit card funds 
transmissions, mailing lists and reservations information. The systems and 
processes we have implemented to protect customers, employees and company 
information are subject to the ever-changing risk of compromised security. 
These risks include cyber and physical security breaches, system failure, 
computer viruses, and negligent or intentional misuse by customers, company 
employees, or employees of third party vendors. The steps we take to deter and 
mitigate these risks may not be successful and our insurance coverage for 
protecting against cybersecurity risks may not be sufficient. Any disruption, 
compromise or loss of data or systems that results from a cybersecurity attack 
or breach could materially adversely impact operations or regulatory compliance 
and could result in remedial expenses, fines, litigation, and loss of 
reputation, potentially impacting our financial results.


COMMITMENTS AND CONTINGENCIES


Total Contractual Cash Obligations

Because interest payments under our Amended Credit Facility are subject to 
factors that, in our judgment, vary materially, the amount of future interest 
payments is not presently determinable. These factors include: i) future 
short-term interest rates; ii) our future leverage ratio which varies with 
EBITDA and our borrowing levels; and iii) the rate at which we deploy capital 
and other spending which, in turn, impacts the level of future borrowings. The 
interest rate under the Amended Credit Facility is LIBOR plus a margin ranging 
from 1.00% to 2.50%, or a base rate (as defined in the Amended Credit Facility) 
plus an interest rate margin ranging from 0.00% to 1.50%, or the Prime Rate. 
The interest rate is adjusted quarterly based on our leverage ratio, which is 
calculated using operating results over the previous four quarters and 
borrowings at the end of the most recent quarter. Based on our leverage ratio, 
at September 30, 2017, pricing was LIBOR plus 1.00% and will be adjusted in 
subsequent quarters in accordance with our leverage ratio. At September 30, 
2017, the one-month LIBOR was 1.24%.


As described in above under “Capital Spending and Development”, we have begun 
commencement of the Monarch Black Hawk Expansion Plan, which started in the 
fourth quarter of 2013. While we have disclosed the estimated cost of that 
expansion, we have not yet entered into contracts for substantial portions of 
the work. For this reason, we have included in the table above only the amounts 
for which we have contractual commitments. At September 30, 2017, we estimate 
that the remaining cost to complete the Black Hawk Expansion Plan is between 
$218 million and $225 million.



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market risk is the risk of loss arising from adverse changes in market 
conditions and prices, such as interest rates, foreign currency exchange rates 
and commodity prices. We do not have any cash or cash equivalents as of 
September 30, 2017 that are subject to market risk. We do not enter into 
derivative financial instruments for trading or speculative purpose, nor have 
we experienced any losses to date on any derivative financial instruments due 
to counterparty credit risk.


In the normal course of business, we are exposed to risks associated with 
fluctuations in interest rates. As of September 30, 2017, we had $26.2 million 
of outstanding principal balance under our Amended Credit Facility that was 
subject to credit risk. A 1% increase in the interest rate on the balance 
outstanding under the Amended Credit Facility at September 30, 2017 would 
result in a change in our annual interest cost of approximately $0.3 million.



OTHER INFORMATION



LEGAL PROCEEDINGS



From time to time, we may be party to claims that arise in the normal course of 
business. Management believes that the amount of any reasonably possible or 
probable loss for known matters would not have a material adverse impact on our 
financial condition, cash flows or results of operations; however, the outcome 
of these actions is inherently difficult to predict.



RISK FACTORS



There have been no material changes to the risk factors we previously disclosed 
in Item 1A of our 2016 Form 10-K.



We encourage investors to review the risks and uncertainties relating to our 
business disclosed under the heading Risk Factors or otherwise in the 2016 Form 
10-K, as well as those contained in Part I - Forward-Looking Statements 
thereof, as revised or supplemented by our Quarterly Reports filed with the SEC 
since the filing of the 2016 Form 10-K.



If any of the risks discussed in the sections referenced above actually occur, 
our business, financial condition and results of operations could be materially 
and adversely affected. If this were to happen, the value of our common stock 
could decline significantly, and investors could lose all or part of their 
investment.



This report is qualified in its entirety by these risk factors.