Company Quick10K Filing
Quick10K
Century Casinos
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$7.67 29 $226
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-11-06 Earnings, Regulation FD, Exhibits
8-K 2018-08-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-06-11 Shareholder Vote
8-K 2018-04-27 Regulation FD, Exhibits
8-K 2018-02-26 Officers
8-K 2018-02-06
MAR Marriott
MGM MGM Resorts
WYNN Wynn Resorts
IHG Intercontinental Hotels Group
H Hyatt Hotels
CZR Caesars Entertainment
ERI Eldorado Resorts
PLYA Playa Hotels & Resorts
CVEO Civeo
SKIS Peak Resorts
CNTY 2018-09-30
Part I – Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 cnty-20180930xex31_1.htm
EX-31.2 cnty-20180930xex31_2.htm
EX-31.3 cnty-20180930xex31_3.htm
EX-32.1 cnty-20180930xex32_1.htm
EX-32.2 cnty-20180930xex32_2.htm
EX-32.3 cnty-20180930xex32_3.htm

Century Casinos Earnings 2018-09-30

CNTY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cnty-20180930x10q.htm 10-Q 20180930 10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 2018



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 number          0-22900



CENTURY CASINOS, INC.

(Exact name of registrant as specified in its charter) 





 

DELAWARE

84-1271317

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 



455 E. Pikes Peak Ave., Suite 210, Colorado Springs, Colorado 80903

(Address of principal executive offices, including zip code)



(719) 527-8300

(Registrant’s telephone number, including area code)

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.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer  

 

Smaller reporting company



 

Emerging growth company



 

 

If an emerging growth company, indicate by check mark 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

29,439,179  shares of common stock, $0.01 par value per share, were outstanding as of October 31, 2018.

 

1


 

 

INDEX



 

 

Part I

FINANCIAL INFORMATION

Page

Item 1.

Condensed Consolidated Financial Statements (Unaudited)



Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017



Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2018 and 2017



Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2018 and 2017



Condensed Consolidated Statements of Equity as of September 30, 2018 and 2017



Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 



Notes to Condensed Consolidated Financial Statements

10 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

57 

Item 4.

Controls and Procedures

57 

Part II

OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57 

Item 6.

Exhibits

58 

Signatures

59 



 

2


 

 

PART I – FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



 

 

 

 

 

 



 

September 30,

 

 

December 31,

Amounts in thousands, except for share and per share information

 

2018

 

 

2017

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 Cash and cash equivalents

 

$

46,818 

 

$

74,677 

 Receivables, net

 

 

7,029 

 

 

6,281 

 Prepaid expenses

 

 

1,859 

 

 

1,482 

 Inventories

 

 

803 

 

 

740 

 Restricted cash

 

 

 

 

1,023 

 Other current assets

 

 

247 

 

 

118 

Total Current Assets

 

 

56,756 

 

 

84,321 



 

 

 

 

 

 

Property and equipment, net

 

 

185,548 

 

 

152,778 

Goodwill

 

 

14,607 

 

 

15,162 

Deferred income taxes

 

 

467 

 

 

1,522 

Casino licenses

 

 

15,455 

 

 

15,065 

Trademarks

 

 

1,784 

 

 

1,859 

Cost investment

 

 

1,000 

 

 

1,000 

Equity investment

 

 

432 

 

 

Deposits and other

 

 

3,500 

 

 

3,169 

Total Assets

 

$

279,549 

 

$

274,876 



 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 Current portion of long-term debt

 

$

20,079 

 

$

5,697 

 Accounts payable

 

 

8,162 

 

 

4,765 

 Accrued liabilities

 

 

16,002 

 

 

10,434 

 Accrued payroll

 

 

6,866 

 

 

6,894 

 Taxes payable

 

 

4,861 

 

 

4,815 

Contingent liability (Note 7)

 

 

830 

 

 

1,833 

Total Current Liabilities

 

 

56,800 

 

 

34,438 



 

 

 

 

 

 

Long-term debt, net of current portion and deferred financing costs (Note 6)

 

 

33,206 

 

 

51,016 

Taxes payable and other

 

 

1,785 

 

 

2,104 

Total Liabilities

 

 

91,791 

 

 

87,558 

Commitments and Contingencies (Note 7)

 

 

 

 

 

 



See notes to unaudited condensed consolidated financial statements.



-  Continued -

 

3


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)





 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

 

December 31,

Amounts in thousands, except for share and per share information

 

2018

 

 

2017

Equity:

 

 

 

 

 

 

Preferred stock; $0.01 par value; 20,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

Common stock; $0.01 par value; 50,000,000 shares authorized; 29,434,018 and 29,359,820 shares issued and outstanding

 

 

294 

 

 

294 

Additional paid-in capital

 

 

113,955 

 

 

113,068 

Retained earnings

 

 

75,549 

 

 

72,662 

Accumulated other comprehensive loss

 

 

(9,232)

 

 

(6,127)

Total Century Casinos, Inc. shareholders' equity

 

 

180,566 

 

 

179,897 

Non-controlling interests

 

 

7,192 

 

 

7,421 

Total Equity

 

 

187,758 

 

 

187,318 

Total Liabilities and Equity

 

$

279,549 

 

$

274,876 



See notes to unaudited condensed consolidated financial statements.

 

4


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

   

 

For the three months

 

For the nine months

   

 

ended September 30,

 

ended September 30,

Amounts in thousands, except for per share information

 

2018

 

2017

 

2018

 

2017

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

$

35,983 

 

$

36,914 

 

$

102,595 

 

$

102,814 

Hotel

 

 

575 

 

 

560 

 

 

1,534 

 

 

1,491 

Food and beverage

 

 

4,290 

 

 

3,868 

 

 

11,630 

 

 

10,622 

Other

 

 

2,716 

 

 

2,449 

 

 

8,075 

 

 

7,604 

Operating revenue

 

 

43,564 

 

 

43,791 

 

 

123,834 

 

 

122,531 

Less: Promotional allowances (1)

 

 

 

 

(2,743)

 

 

 

 

(7,756)

Net operating revenue

 

 

43,564 

 

 

41,048 

 

 

123,834 

 

 

114,775 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

 

18,490 

 

 

17,094 

 

 

52,666 

 

 

48,796 

Hotel

 

 

197 

 

 

171 

 

 

551 

 

 

468 

Food and beverage

 

 

4,148 

 

 

3,388 

 

 

11,708 

 

 

9,452 

General and administrative

 

 

15,174 

 

 

13,392 

 

 

44,781 

 

 

36,819 

Depreciation and amortization

 

 

2,323 

 

 

2,226 

 

 

6,645 

 

 

6,330 

Total operating costs and expenses

 

 

40,332 

 

 

36,271 

 

 

116,351 

 

 

101,865 

Income from equity investment

 

 

 

 

 

 

 

 

Earnings from operations

 

 

3,234 

 

 

4,777 

 

 

7,484 

 

 

12,910 

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

74 

 

 

21 

 

 

107 

 

 

69 

Interest expense

 

 

(904)

 

 

(829)

 

 

(3,023)

 

 

(2,667)

Gain on foreign currency transactions, cost recovery income and other

 

 

182 

 

 

70 

 

 

431 

 

 

555 

Non-operating (expense) income, net

 

 

(648)

 

 

(738)

 

 

(2,485)

 

 

(2,043)

Earnings before income taxes

 

 

2,586 

 

 

4,039 

 

 

4,999 

 

 

10,867 

Income tax (expense) benefit

 

 

(791)

 

 

3,913 

 

 

(1,784)

 

 

2,054 

Net earnings

 

 

1,795 

 

 

7,952 

 

 

3,215 

 

 

12,921 

Net earnings attributable to non-controlling interests

 

 

(155)

 

 

(322)

 

 

(328)

 

 

(1,329)

Net earnings attributable to Century Casinos, Inc. shareholders

 

$

1,640 

 

$

7,630 

 

$

2,887 

 

$

11,592 



 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Century Casinos, Inc. shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06 

 

$

0.31 

 

$

0.10 

 

$

0.47 

Diluted

 

$

0.05 

 

$

0.31 

 

$

0.10 

 

$

0.47 

Weighted average shares outstanding - basic

 

 

29,425 

 

 

24,470 

 

 

29,388 

 

 

24,464 

Weighted average shares outstanding - diluted

 

 

29,987 

 

 

24,891 

 

 

29,986 

 

 

24,905 



 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.



(1)

See Note 2 for a discussion of the impact of the adoption of ASU 2014-09 on the presentation of promotional allowances.

 

5


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

   

 

For the three months

 

For the nine months



 

ended September 30,

 

ended September 30,

   

 

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands

 

2018

 

2017

 

2018

 

2017

   

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

1,795 

 

$

7,952 

 

$

3,215 

 

$

12,921 



 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

1,810 

 

 

2,740 

 

 

(3,535)

 

 

7,299 

Other comprehensive income (loss)

 

 

1,810 

 

 

2,740 

 

 

(3,535)

 

 

7,299 

Comprehensive income (loss)

 

$

3,605 

 

$

10,692 

 

$

(320)

 

$

20,220 



 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to non-controlling interests

 

 

(155)

 

 

(322)

 

 

(328)

 

 

(1,329)

Foreign currency translation adjustments

 

 

(216)

 

 

(238)

 

 

430 

 

 

(1,185)

Comprehensive income (loss) attributable to Century Casinos, Inc. shareholders

 

$

3,234 

 

$

10,132 

 

$

(218)

 

$

17,706 



 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.





 

 

6


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands, except share information

Common Shares

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Retained

Earnings

 

 

Total Century Casinos Shareholders' Equity

 

 

Noncontrolling Interests

 

 

Total Equity

BALANCE AT January 1, 2017

24,451,582 

 

$

245 

 

$

78,174 

 

$

(12,609)

 

$

66,386 

 

$

132,196 

 

$

6,388 

 

$

138,584 

Cumulative effect of accounting
change

 

 

 

 

(17)

 

 

 

 

17 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

11,592 

 

 

11,592 

 

 

1,329 

 

 

12,921 

Foreign currency translation adjustment

 

 

 

 

 

 

6,114 

 

 

 

 

6,114 

 

 

1,185 

 

 

7,299 

Amortization of stock-based compensation

 

 

 

 

419 

 

 

 

 

 

 

419 

 

 

 

 

419 

Distribution to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

(1,457)

 

 

(1,457)

Exercise of stock options

20,738 

 

 

 

 

32 

 

 

 

 

 

 

32 

 

 

 

 

32 

BALANCE AT September 30, 2017

24,472,320 

 

$

245 

 

$

78,608 

 

$

(6,495)

 

$

77,995 

 

$

150,353 

 

$

7,445 

 

$

157,798 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT January 1, 2018

29,359,820 

 

$

294 

 

$

113,068 

 

$

(6,127)

 

$

72,662 

 

$

179,897 

 

$

7,421 

 

$

187,318 

Net earnings

 

 

 

 

 

 

 

 

2,887 

 

 

2,887 

 

 

328 

 

 

3,215 

Foreign currency translation adjustment

 

 

 

 

 

 

(3,105)

 

 

 

 

(3,105)

 

 

(430)

 

 

(3,535)

Amortization of stock-based compensation

 

 

 

 

613 

 

 

 

 

 

 

613 

 

 

 

 

613 

Distribution to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

(572)

 

 

(572)

Fair value of non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

445 

 

 

445 

Incremental direct costs of common stock issuance

 

 

 

 

(59)

 

 

 

 

 

 

(59)

 

 

 

 

(59)

Exercise of stock options

74,198 

 

 

 

 

333 

 

 

 

 

 

 

333 

 

 

 

 

333 

BALANCE AT September 30, 2018

29,434,018 

 

$

294 

 

$

113,955 

 

$

(9,232)

 

$

75,549 

 

$

180,566 

 

$

7,192 

 

$

187,758 

See notes to unaudited condensed consolidated financial statements.



 

7


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



 

 

 

 

 

 

   

 

For the nine months



 

ended September 30,

Amounts in thousands

 

2018

 

2017



 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

Net earnings

 

$

3,215 

 

$

12,921 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

6,645 

 

 

6,330 

Loss on disposition of fixed assets

 

 

1,229 

 

 

466 

Adjustment of contingent liability (Note 7)

 

 

99 

 

 

Unrealized gain on interest rate swaps

 

 

(51)

 

 

(366)

Amortization of stock-based compensation expense

 

 

613 

 

 

419 

Amortization of deferred financing costs

 

 

92 

 

 

118 

Deferred taxes

 

 

1,629 

 

 

(5,273)

Income from unconsolidated subsidiary

 

 

(1)

 

 

Changes in Operating Assets and Liabilities, Net of Acquisition:

 

 

 

 

 

 

Receivables, net

 

 

70 

 

 

156 

Prepaid expenses and other assets

 

 

(1,929)

 

 

(1,013)

Accounts payable

 

 

295 

 

 

306 

Accrued liabilities

 

 

3,919 

 

 

1,455 

Inventories

 

 

(86)

 

 

Other operating liabilities

 

 

1,348 

 

 

100 

Accrued payroll

 

 

162 

 

 

296 

Taxes payable

 

 

(1,647)

 

 

883 

Contingent liability payment

 

 

(999)

 

 

(824)

Net cash provided by operating activities

 

 

14,603 

 

 

15,980 



 

 

 

 

 

 

Cash Flows used in Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(40,001)

 

 

(5,168)

Acquisition of Century Casino St. Albert (net of cash acquired)

 

 

 

 

(1,494)

Acquisition of Saw Close Casino, Ltd. licenses (Note 4)

 

 

 

 

(126)

Acquisition of Golden Hospitality Ltd., net of $0.2 million cash acquired (Note 3)

 

 

(337)

 

 

Investment in Minh Chau Ltd. (Note 3)

 

 

(445)

 

 

Proceeds from disposition of assets

 

 

 

 

Net cash used in investing activities

 

 

(40,777)

 

 

(6,787)

 Continued –

See notes to unaudited condensed consolidated financial statements.





8


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)



 

 

 

 

 

 

   

 

For the nine months



 

ended September 30,

Amounts in thousands

 

2018

 

2017



 

 

 

 

 

 

Cash Flows used in Financing Activities:

 

 

 

 

 

 

Proceeds from borrowings

 

 

2,707 

 

 

2,680 

Principal payments

 

 

(4,326)

 

 

(4,312)

Payment of deferred financing costs

 

 

(92)

 

 

Distribution to non-controlling interest

 

 

(642)

 

 

(2,043)

Proceeds from exercise of stock options

 

 

333 

 

 

32 

Net cash used in financing activities

 

 

(2,020)

 

 

(3,643)



Effect of Exchange Rate Changes on Cash

 

$

(711)

 

$

1,445 



 

 

 

 

 

 

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

 

$

(28,905)

 

$

6,995 



 

 

 

 

 

 

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

 

$

76,444 

 

$

39,020 

Cash, Cash Equivalents and Restricted Cash at End of Period

 

$

47,539 

 

$

46,015 



 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Interest paid

 

$

3,336 

 

$

4,286 

Income taxes paid

 

$

2,605 

 

$

1,935 



 

 

 

 

 

 

Non-Cash Investing Activities:

 

 

 

 

 

 

Purchase of property and equipment on account

 

$

8,395 

 

$

383 

Non-Cash Financing Activities:

 

 

 

 

 

 

Assets acquired under capital lease obligation

 

$

 

$

105 



See notes to unaudited condensed consolidated financial statements.



9


 

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION



Century Casinos, Inc. (“CCI” or the “Company”) is an international casino entertainment company. As of September 30, 2018, the Company owned casino operations in North America and England; was developing a racetrack and entertainment center (“REC”) in Edmonton, Canada; had eight casino licenses in Poland, and held a majority ownership interest in seven casinos that were currently operating in Poland; held a majority ownership interest in a REC in Calgary, Canada, and the pari-mutuel off-track betting network in southern Alberta, Canada; managed cruise ship-based casinos on international waters; managed a hotel, international entertainment and gaming club in Vietnam through a majority-owned subsidiary, and provided gaming services in Argentina.



The Company currently owns, operates and manages the following casinos through wholly-owned subsidiaries in North America and England:



·

The Century Casino & Hotel in Edmonton, Alberta, Canada (“Century Resorts Alberta” or “CRA”)

·

The Century Casino St. Albert in Edmonton, Alberta, Canada (“CSA”)

·

The Century Casino Calgary, Alberta, Canada (“CAL”)

·

The Century Casino & Hotel in Central City, Colorado (“CTL”)

·

The Century Casino & Hotel in Cripple Creek, Colorado (“CRC”); and

·

The Century Casino Bath (formerly Saw Close Casino) in Bath, England (“CCB”)



The Company currently has a controlling financial interest through its wholly-owned subsidiary Century Resorts Management GmbH (formerly Century Casinos Europe GmbH) (“CRM”) in the following majority-owned subsidiaries:



·

The Company owns 66.6% of Casinos Poland Ltd (“CPL” or “Casinos Poland”). As of September 30, 2018,  CPL owned licenses for eight casinos throughout Poland,  seven of which were operating.  CPL is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. Polish Airports Company (“Polish Airports”) owns the remaining 33.3% of CPL, which is reported as a non-controlling financial interest.



·

The Company owns 75% of United Horsemen of Alberta Inc. dba Century Downs Racetrack and Casino (“CDR” or “Century Downs”). CDR operates Century Downs Racetrack and Casino, a REC in Balzac, a north metropolitan area of Calgary, Alberta, Canada. CDR is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. The remaining 25% of CDR is owned by unaffiliated shareholders and is reported as a non-controlling financial interest.



·

The Company owns 75% of Century Bets! Inc. (“CBS” or “Century Bets”). CBS operates the pari-mutuel off-track betting network in Southern Alberta, Canada. CBS is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. Rocky Mountain Turf Club (“RMTC”) owns the remaining 25% of CBS, which is reported as a non-controlling financial interest.



The Company has the following concession, management and consulting service agreements:



·

As of September 30, 2018, the Company operated 13 ship-based casinos through concession agreements with four cruise ship owners. The concession agreement to operate the ship-based casino onboard the Mein Schiff 1 ended in April 2018 when the ship was transferred from the TUI Cruises fleet to another cruise line. The concession agreements to operate the ship-based casinos onboard the Wind Star and Marella Discovery will end in the fourth quarter of 2018.



In March 2015, in connection with an agreement with Norwegian Cruise Line Holdings (“Norwegian”) to terminate the Company’s concession agreements with Oceania Cruises (“Oceania”) and Regent Seven Seas Cruises (“Regent”), the Company entered into a two-year consulting agreement, which became effective on June 1, 2015, under which the Company provided limited consulting services for the ship-based casinos of Oceania and Regent in exchange for receiving a consulting fee of $2.0 million, which was payable $250,000 per quarter through May 2017.  

10


 

 

·

The Company, through its subsidiary CRM, has a 7.5% ownership interest in Mendoza Central Entretenimientos S.A., an Argentina company (“MCE”). The shares are reported on the condensed consolidated balance sheet using the cost method of accounting. MCE has an exclusive concession agreement with Instituto Provincial de Juegos y Casinos to lease slot machines and provide related services to Casino de Mendoza, a casino located in Mendoza, Argentina and owned by the Province of Mendoza. In addition, CRM and MCE have entered into a consulting services agreement pursuant to which CRM provides advice on casino matters and receives a service fee consisting of a fixed fee plus a percentage of MCE’s earnings before interest, taxes, depreciation and amortization (“EBITDA”). See Note 3 for additional information related to MCE.



·

On April 25, 2018, the Company’s subsidiary CRM entered into a Shareholder’s Agreement with Golden Hospitality Ltd. (“GHL”) and GHL’s shareholders, pursuant to which CRM purchased a 51% ownership interest in GHL. The Company consolidates GHL as a majority-owned subsidiary for which the Company has a controlling financial interest.  The remaining 49% of GHL is owned by unaffiliated shareholders and is reported by the Company as a non-controlling financial interest. For its ownership interest in GHL, the Company recognized assets of $0.5 million, including $0.2 million in cash, and assumed liabilities of $0.1 million as of the date of acquisition. GHL is included in the Corporate and Other reportable segment.



GHL entered into an agreement with Minh Chau Ltd. (“MCL”) and MCL’s owners, pursuant to which GHL purchased an initial 6.36% ownership interest in MCL and agreed to purchase an additional ownership interest of up to a total of 51% of MCL over a three-year period for approximately $3.6 million.  GHL has the option to purchase an additional 19% ownership interest in MCL for a total of 70% of MCL under certain conditions. MCL is the owner of a small hotel and international entertainment and gaming club in the Cao Bang province of Vietnam that is 300 feet from the Vietnamese – Chinese border station. The hotel offers 30 rooms, and the international entertainment and gaming club currently offers seven electronic table games for non-Vietnamese passport holders under a provincial investment certificate that allows for up to 26 electronic games. GHL and MCL also entered into a management agreement which provides that GHL will manage the operations at the hotel and international entertainment and gaming club in exchange for receiving a portion of MCL’s net profit. The Company accounts for GHL’s interest in MCL as an equity investment. The Company valued the management agreement with MCL at $0.1 million, which is recorded in deposits and other on its consolidated balance sheet as of the date of its acquisition of its ownership interest in GHL. See Note 3 for additional information related to GHL and MCL.



Additional Projects and Other Developments



The Company is building a horse racing facility in the Edmonton market area, which it is planning to operate as Century Mile Racetrack and Casino. Century Mile will be a one-mile horse racetrack and a multi-level REC. The project is located on Edmonton International Airport land close to the city of Leduc, south of Edmonton. The Company began construction on the Century Mile project in July 2017 and estimates that the casino will open in April 2019. On August 24, 2018, the Company’s borrowing capacity under its credit agreement with the Bank of Montreal (“BMO”) was increased by CAD 33.0 million ($25.5 million based on the exchange rate in effect on September 30, 2018) to provide additional funding for the Century Mile project.



In August 2017, the Company announced that, together with the owner of the Hamilton Princess Hotel & Beach Club in Hamilton, Bermuda, it had submitted a license application to the Bermudan government for a casino at the Hamilton Princess Hotel & Beach Club. The casino will feature approximately 200 slot machines, 17 live table games, one or more electronic table games and a high limit area and salon privé. In September 2017, the Bermuda Casino Gaming Commission granted a provisional casino gaming license, which is subject to certain conditions and approvals including the adoption of certain rules and regulations by the Parliament of Bermuda.  The Company’s subsidiary, CRM, entered into a long-term management agreement with the owner of the hotel to manage the operations of the casino and receive a management fee if a license is awarded. CRM will also provide a $5.0 million loan for the purchase of casino equipment if the license is awarded.

11


 

 

Preparation of Financial Statements



The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial reporting, the rules and regulations of the Securities and Exchange Commission which apply to interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated.



In the opinion of management, all adjustments considered necessary for the fair presentation of financial position, results of operations and cash flows of the Company have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for the quarter ended September 30, 2018 are not necessarily indicative of the operating results for the full year.



Presentation of Foreign Currency Amounts



The Company’s functional currency is the U.S. dollar (“USD” or “$”).  Foreign subsidiaries with a functional currency other than the U.S. dollar translate assets and liabilities at current exchange rates at the end of the reporting periods, while income and expense accounts are translated at average exchange rates for the respective periods.  The Company and its subsidiaries enter into various transactions made in currencies different from their functional currencies.  These transactions are typically denominated in the Canadian dollar (“CAD”), Euro (“EUR”), Polish zloty (“PLN”) and British pound (“GBP”).  Gains and losses resulting from changes in foreign currency exchange rates related to these transactions are included in income from operations as they occur. 



The exchange rates to the U.S. dollar used to translate balances at the end of the reported periods are as follows:







 

 

 

 



 

 

 

 



 

September 30,

 

December 31,

Ending Rates

 

2018

 

2017

Canadian dollar (CAD)

 

1.2945 

 

1.2545 

Euros (EUR)

 

0.8619 

 

0.8334 

Polish zloty (PLN)

 

3.6395 

 

3.4841 

British pound (GBP)

 

0.7671 

 

0.7396 



The average exchange rates to the U.S. dollar used to translate balances during each reported period are as follows:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the three months

 

 

 

For the nine months

 

 



 

ended September 30,

 

 

 

ended September 30,

 

 

Average Rates

 

2018

 

2017

 

% Change

 

2018

 

2017

 

% Change

Canadian dollar (CAD)

 

1.3068 

 

1.2531 

 

(4.3%)

 

1.2874 

 

1.3072 

 

1.5% 

Euros (EUR)

 

0.8601 

 

0.8512 

 

(1.1%)

 

0.8377 

 

0.8997 

 

6.9% 

Polish zloty (PLN)

 

3.6981 

 

3.6219 

 

(2.1%)

 

3.5581 

 

3.8379 

 

7.3% 

British pound (GBP)

 

0.7676 

 

0.7641 

 

(0.5%)

 

0.7405 

 

0.7845 

 

5.6% 

Source: Pacific Exchange Rate Service

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



12


 

 

2. SIGNIFICANT ACCOUNTING POLICIES



Recently Issued Accounting Pronouncements - In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”). The objective of ASU 2016-02 is to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous US GAAP. ASU 2016-02 requires lessees to account for leases as finance leases or operating leases. Both finance and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and, for operating leases, the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. The standard must be adopted by recognizing and measuring leases at the beginning of the earliest period being presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2018-11”), which provides that entities may elect not to recast the comparative periods presented upon transition. The Company has elected to use the transition package of practical expedients permitted within the new standard, which among other things, allows the carryforward of historical lease classification. The Company expects the standard to have a material impact on its consolidated balance sheet upon recognition of the right-of-use asset and lease liability due to the significance of the Company’s operating lease portfolio. 



In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify the subsequent measurement of goodwill by entities performing their annual goodwill impairment tests by comparing the fair value of a reporting unit, including income tax effects from any tax-deductible goodwill, with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds fair value. ASU 2017-04 is effective for fiscal years beginning after December 31, 2021, and interim periods within those fiscal years. Early adoption of ASU 2017-04 is permitted on goodwill impairment tests performed after January 1, 2017. ASU 2017-04 should be applied on a prospective basis. The Company is currently evaluating the impact of adopting ASU 2017-04; however, the standard is not expected to have a material impact on its consolidated financial statements.



In February 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (“ASU 2018-02”).  The objective of ASU 2018-02 is to provide guidance on the impacts of the Tax Cuts and Jobs Act (“Tax Act”). The guidance permits the reclassification of certain income tax effects of the Tax Act from other comprehensive income to retained earnings (stranded tax effects). The guidance also requires certain new disclosures. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. Entities may adopt the guidance using one of two transition methods: retrospective to each period or periods in which the income tax effects of the Tax Act related to the items remaining in other comprehensive income are recognized, or at the beginning of the period of adoption. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.



In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) (“ASU 2018-05”). The objective of ASU 2018-05 is to amend guidance on the Tax Act provided in Staff Accounting Bulletin No. 118. The guidance is effective immediately upon issuance. The Company reviewed the guidance and determined that it applied the guidance effectively in its Annual Report on Form 10-K for the year ended December 31, 2017.



In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”). The objective of ASU 2018-13 is to modify disclosure requirements on fair value measurements. The guidance is effective for fiscal years beginning after December 31, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be adopted using the prospective method for certain disclosures within the guidance and retrospectively upon the effective date. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.



13


 

 

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). The objective of ASU 2018-15 is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with those incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 31, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied either retrospectively or prospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.



Changes Related to Adoption of ASU 2016-18



In November 2016, the FASB issued ASU 2016-18, Restricted Cash (“ASU 2016-18”). The objective of ASU 2016-18 is to require the statement of cash flows to include restricted cash in explaining the change during the period in the total of cash and cash equivalents. The Company adopted ASU 2016-18 in its consolidated financial statements for the year ended December 31, 2017. The standard impacts the presentation of the Company’s condensed consolidated statement of cash flows in its condensed consolidated financial statements for the nine months ended September 30, 2018 and September 30, 2017, and the Company has added the following additional disclosures in this Note 2 about its restricted cash balances to its discussion of cash and cash equivalents.



Cash and Cash Equivalents

A reconciliation of cash, cash equivalents and restricted cash as stated in the Company’s statement of cash flows is presented in the following table:





 

 

 

 

 

 



 

September 30,

 

September 30,

Amounts in thousands

 

2018

 

2017

Cash and cash equivalents

 

$

46,818 

 

$

44,254 

Restricted cash

 

 

 

 

1,013 

Restricted cash included in deposits and other

 

 

721 

 

 

748 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

47,539 

 

$

46,015 



For the nine months ended September 30, 2018, restricted cash included $0.6 million in deposits and other related to a cash guarantee for the Company’s CCB loan agreement and $0.1 million in deposits and other related to payments of prizes and giveaways for Casinos Poland.



The prior period amounts within the Company’s condensed consolidated statement of cash flows have been revised to reflect the new presentation of restricted cash after the adoption of ASU 2016-18. The information below presents the impact of this presentation change on the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2017.





 

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Cash Flows

Amounts in thousands

 

As Previously Reported

 

Changes Related to Adoption of ASU 2016-18

 

Revised

For the nine months ended September 30, 2017

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

$

(2,512)

 

$

1,499 

 

$

(1,013)



 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash

 

 

1,366 

 

 

79 

 

 

1,445 



 

 

 

 

 

 

 

 

 

Increase in Cash, Cash Equivalents and Restricted Cash

 

 

5,417 

 

 

1,578 

 

 

6,995 



 

 

 

 

 

 

 

 

 

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

 

 

38,837 

 

 

183 

 

 

39,020 

Cash, Cash Equivalents and Restricted Cash at End of Period

 

$

44,254 

 

$

1,761 

 

$

46,015 



14


 

 

Changes Related to Adoption of ASU 2014-19



In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The objective of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard under US GAAP and International Financial Reporting Standards. The Company adopted ASU 2014-09 in its condensed consolidated financial statements for 2018 using the modified retrospective approach. The Company applied ASU 2014-09 to contracts that were not completed as of January 1, 2018. The Company determined that all contractual performance obligations were completed as of December 31, 2017 and that no adjustment to retained earnings was required. The Company determined there was no impact to its condensed consolidated balance sheet, condensed consolidated statement of comprehensive (loss) income or condensed consolidated statement of cash flows. The standard impacts the presentation of the Company’s condensed consolidated statement of earnings in its condensed consolidated financial statements for the three and nine months ended September 30, 2018, and the Company has added the following additional disclosures in this Note 2 related to the impact of ASU 2014-09.



The most significant impacts of adoption of the new accounting standard were as follows:

·

Promotional Allowances: The Company recognizes revenue for goods and services provided to customers for free, as an inducement to gamble, as gaming revenue with an offset to gaming revenue based on the stand-alone selling price rather than an offset to promotional allowances. This change primarily resulted in a reclassification between revenue line items. 

·

Loyalty Accounting:  Complimentary points earned through game play at the Company’s casinos are identified as separate performance obligations and recorded as a reduction in gaming revenue when earned at the retail value of the benefits owed to the customer (less estimated breakage) and an increase to the loyalty program liability representing outstanding performance obligations. Such amounts are recognized as revenue in the line item of the corresponding good or service provided when the performance obligation is fulfilled.

·

Estimated Cost of Promotional Allowances: The Company no longer reclassifies the estimated direct cost of providing promotional allowances from other expense line items to the gaming expense line item. This change resulted in a reclassification between expense line items that reduced gaming expense and increased hotel and food and beverage expenses by $0.3 million and $0.9 million for the three and nine months ended September 30, 2018, respectively. 



Revenue



The Company derives revenue from:

(1)

contracts with customers,

(2)

financial instruments,

(3)

cost recovery payments, and

(4)

dividends from its cost investment.



A breakout of the Company’s derived revenue is presented in the table below.







 

 

 

 

 

 

 

 

 

 

 

 



 

For the three months

 

For the nine months



 

ended September 30,

 

ended September 30,

Amounts in thousands

 

2018

 

2017

 

2018

 

2017

Revenue from contracts with customers

 

$

43,564 

 

$

41,048 

 

$

123,834 

 

$

114,775 

Interest income

 

 

74 

 

 

21 

 

 

107 

 

 

69 

Cost recovery income

 

 

 

 

 

 

 

 

Dividend revenue

 

 

 

 

 

 

 

 

Total revenue

 

$

43,638 

 

$

41,069 

 

$

123,941 

 

$

114,844 



15


 

 

The Company’s performance obligations related to contracts with customers consist of the following:



Gaming

The majority of the Company’s revenue is derived from gaming transactions involving wagers wherein, upon settlement, the Company either retains the customer’s wager, or returns the wager to the customer. Gaming revenue is reported as the net difference between wins and losses. Gaming revenue is reduced by the incremental amount of unpaid progressive jackpots in the period during which the jackpot increases and the dollar value of points earned through tracked play. In Canada, gaming revenue is also reduced by amounts retained by the Alberta Gaming and Liquor Commission (“AGLC”) and Horse Racing Alberta (“HRA”). Performance obligations are satisfied upon completion of the wager with liabilities recognized for points earned through play. The Company does not extend lines of credit to customers.



Hotel accommodations and food and beverage furnished without charge, coupons and downloadable credits provided to customers to entice play are considered marketing incentives to induce play and are presented as a reduction to gaming revenue at the retail value on the date of redemption. Members of the Company’s casinos’ player clubs earn points based on, among other things, their volume of play at the Company’s casinos. Players can accumulate points over time that they may redeem at their discretion under the terms of the program. The value of the points is offset against the revenue in the period in which the points were earned. The Company records a liability based on the redemption value of the points earned with an estimate for breakage, and records a corresponding reduction in gaming revenue. The value of unused or unredeemed points is included in accrued liabilities on the Company’s consolidated balance sheets.



Hotel, Bowling, Food and Beverage and Other Sales

Goods and services provided include hotel room rentals, food and beverage sales, bowling lane rentals and retail sales. Revenue is recognized over time as specified in the contract, however, the majority of the contracts are satisfied on the same day and revenue is recognized on the date of the sale. Revenue that is collected before the date of sale is recorded as deferred revenue. In the normal course of business, the Company does not accept product returns. The Company has elected the practical expedient permitted under ASU 2014-09 and excludes taxes assessed by a governmental authority and collected by the Company from the transaction price.



Pari-Mutuel

Pari-mutuel revenue involves wagers on horse racing. The Company facilitates wagers on horse racing through live racing at the Company’s racetrack, off-track betting parlors at the Company’s casinos, and the operation of the Southern Alberta off-track betting network. The Company has determined that it is the principal in the performance obligations through which amounts are wagered on horse races run at the Company’s racetrack. For these performance obligations, the Company records revenue as the commission retained on wagers with revenue recognized on the date of the wager. The Company has determined that it is acting as the agent for all wagers placed through the Company’s off-track betting parlors and the off-track betting network. For these performance obligations, the Company records pari-mutuel revenue as the commission retained on wagers less the expense for host fees to the host racetrack with revenue recognized on the date of the wager. Expenses related to licenses and HRA levies are expensed in the same month as revenue is recognized. The Company takes future bets for the Kentucky Derby only and recognizes wagers on the Kentucky Derby as deferred revenue. 



Management and Consulting Fees

Revenue from the Company’s consulting services agreement with MCE and the management agreement with MCL are recorded monthly as services are provided. Payments are typically due within 30 days of the month to which the services relate. The agreed upon price in the contract does not contain variable consideration. The Company did not incur any costs to obtain its current agreements with MCE or MCL.



16


 

 

The Company operates gaming establishments as well as related lodging, restaurant, horse racing (including off-track betting) and entertainment facilities around the world. The Company generates revenue at its properties by providing the following types of products and services: gaming, hotel, food and beverage, and pari-mutuel and other. Disaggregation of the Company’s revenue from contracts with customers by type of revenue and geographical location is presented in the tables below.







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the three months ended September 30, 2018

Amounts in thousands