GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2012

NOTE 3. GOODWILL AND INTANGIBLE ASSETS

Goodwill of $25.1 million at December 31, 2012 represents the excess of total acquisition costs over the fair market value of net assets acquired and liabilities assumed in a business combination. To assist in the Company’s determination of the purchase price allocation for the Riviera Black Hawk Casino, the Company engaged a third-party valuation firm regarding the assets acquired and liabilities assumed in its acquisition (see NOTE 11).

Intangible assets consist of the following at December 31, (in thousands except years):

	Estimated Average Life
	(years)	2012
Customer list	8.3	$	10,490
Trade name	0.1	1,590
Total Intangible assets		12,080
Less accumulated amortization:
Trade name		(1,047		)
Customer list		(828		)
Total accumulated amortization		(1,875		)
Intangible assets, net	8.4	$	10,205

Amortization expense of $1.9 million was recognized for the twelve months ended December 31, 2012. The Company did not record any amortization expense of intangible assets in the prior years. Estimated amortization expense for the years ending December 31, 2013 through 2017 and thereafter is as follows:

(numbers in thousands)

2013	$	1,673
2014	1,166
2015	1,166
2016	1,166
2017	1,166
Thereafter	3,868
Total	$	10,205

In connection with business combination accounting, the Company recognized $1.6 million in a trade name related to the Riviera name, which is being amortized on a straight-line basis over the twelve months following the date Monarch acquired Black Hawk, April 26, 2012, as the Company plans to change the Riviera name. Customer lists were valued at $10.5 million, representing the value associated with the future potential customer revenue production and are being amortized on a straight-line basis over nine years.

Intangible assets were valued using the income approach. The Multi-Period Excess Earning Method (“MPEEM”) was used to value the customer list by capitalizing the future cash flows attributable to the customers based upon their expected future mortality dispersion function. The expected revenue from the existing client was estimated by applying a 24.0% attrition rate. To calculate excess earnings attributable to the customer list, the required return on other contributory assets such as tangible assets and identified intangible assets were deducted to estimate income associated with the customer list. The future excess earnings were discounted to the present value by a risk-adjusted discount rate of 12.0%, in order to determine the fair value of the customer list.

The Relief-from-Royalty Method was used to determine the fair value of the trade name. Considering comparable companies and the Company’s operation, a 1.0% royalty rate was applied in order to calculate the expected revenue attributable to the trade name. The future cash flows were discounted to the present value by a risk-adjusted discount rate of 11.0% in order to determine the fair value of the trade name.

All of the goodwill and intangible assets relate to our Black Hawk reporting segment. Upon completion of the preliminary purchase price allocation for the Company’s acquisition of Black Hawk, the Company decreased goodwill by $1.4 million related primarily to modification to the value of certain deferred tax assets. No other changes were noted to the carrying amount of goodwill during 2012. The allocation of the purchase price of Black Hawk is described in NOTE 11 and our reportable segments are described in NOTE 12.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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