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Document and Entity Information
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Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 13, 2014
Jun. 28, 2013
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2013    
Document Fiscal Year Focus 2013    
Document Fiscal Period Focus FY    
Entity Registrant Name CENTURY CASINOS INC /CO/    
Entity Central Index Key 0000911147    
Current Fiscal Year End Date --12-31    
Entity Filer Category Smaller Reporting Company    
Entity Common Stock, Shares Outstanding   24,381,057  
Entity Public Float     $ 72,752,078
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
ASSETS    
Cash and cash equivalents $ 27,348 $ 24,747
Receivables, net 1,205 700
Prepaid expenses 2,298 608
Inventories 498 311
Other current assets 115 86
Current portion of note receivable 195 0
Deferred income taxes 231 83
Restricted cash 470 0
Total Current Assets 32,360 26,535
Property and equipment, net 132,639 99,526
Goodwill 13,279 4,941
Equity investment 0 3,346
Deferred income taxes 3,634 2,145
Casino licenses 5,236 0
Trademark 2,129 104
Notes receivable 305 0
Security deposits 800 0
Deferred financing costs 242 478
Restricted cash 0 261
Total Assets 190,624 137,336
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current portion of long-term debt 4,195 372
Accounts payable and accrued liabilities 8,279 6,379
Accrued payroll 4,257 2,806
Taxes payable and other 4,803 3,413
Contingent liability (note 3) 5,104 0
Deferred income taxes 163 101
Total current liabilities 26,801 13,071
Long-term debt, less current portion 29,864 3,192
Taxes payable 601 237
Deferred income taxes 3,908 2,680
Total Liabilities 61,174 19,180
Commitments and Contingencies (Note 13)      
Shareholders' Equity:    
Preferred stock; $0.01 par value; 20,000,000 shares authorized; no shares issued or outstanding 0 0
Common stock; $0.01 par value; 50,000,000 shares authorized; 24,377,761 and 24,243,926 shares issued; 24,377,761 and 24,128,114 shares outstanding 244 243
Additional paid-in capital 75,138 75,388
Retained earnings 44,419 38,238
Accumulated other comprehensive earnings 2,008 4,569
Treasury stock - 0 and 115,812 shares at cost 0 (282)
Total Century Casinos shareholders' equity 121,809 118,156
Non-controlling interest 7,641 0
Total Equity 129,450 118,156
Total Liabilities and Shareholders' Equity $ 190,624 $ 137,336

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 24,377,761 24,243,926
Common stock, shares outstanding 24,377,761 24,128,114
Treasury stock, shares 0 115,812

Consolidated Statements of Earnings
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Consolidated Statements of Earnings (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Operating revenue:    
Gaming $ 95,472 $ 62,871
Hotel, bowling, food and beverage 13,073 13,190
Other 3,683 4,206
Gross revenue 112,228 80,267
Less: Promotional allowances (7,640) (8,439)
Net operating revenue 104,588 71,828
Operating costs and expenses:    
Gaming 50,319 30,208
Hotel, bowling, food and beverage 9,498 10,061
General and administrative 32,554 21,452
Depreciation 6,599 4,757
Total operating costs and expenses 98,970 66,478
(Loss) earnings from equity investment (135) 426
Earnings from operations 5,483 5,776
Non-operating income (expense):    
Gain on business combination 2,478 0
Interest income 73 37
Interest expense (983) (670)
Gains (losses) on foreign currency transactions and other 318 (24)
Non-operating income (expense), net 1,886 (657)
Earnings before income taxes 7,369 5,119
Income tax provision 1,294 1,028
Net earnings 6,075 4,091
Less: Net earnings attributable to noncontrolling interest 106 0
Net earnings attributable to Century Casinos, Inc. shareholders $ 6,181 $ 4,091
Earnings per share:    
Basic $ 0.26 $ 0.17
Diluted $ 0.26 $ 0.17
Weighted average shares outstanding - basic 24,052 24,004
Weighted average shares outstanding - diluted 24,213 24,105

Consolidated Statements of Comprehensive Earnings (Loss)
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Consolidated Statements of Comprehensive Earnings (Loss) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Consolidated Statements Of Comprehensive Earnings (Loss)    
Net earnings $ 6,075 $ 4,091
Other comprehensive (loss) income, net of tax:    
Foreign currency translation adjustments (2,561) 1,278
Other comprehensive (loss) income, net of tax (2,561) 1,278
Comprehensive earnings 3,514 5,369
Plus: Comprehensive loss attributable to non-controlling interests 106 0
Less: Foreign currency translation adjustments attributable to non-controlling interests (279) 0
Comprehensive earnings attributable to Century Casinos shareholders $ 3,341 $ 5,369

Consolidated Statements Of Shareholders' Equity
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Consolidated Statements Of Shareholders' Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Total Century Casions Shareholders' Equity [Member]
Noncontrolling Interest [Member]
Total
BALANCE at Dec. 31, 2011 $ 240 $ 75,144 $ 3,291 $ 34,147 $ (282) $ 112,540 $ 0 $ 112,540
Shares, BALANCE at Dec. 31, 2011 23,877,362              
Net earnings 0 0 0 4,091 0 4,091 0 4,091
Foreign currency translation adjustments 0 0 1,278 0 0 1,278 0 1,278
Amortization of stock based compensation 0 (4) 0 0 0 (4) 0 (4)
Exercise of stock options 3 248 0 0 0 251 0 251
Exercise of stock options, Shares 250,752              
BALANCE at Dec. 31, 2012 243 75,388 4,569 38,238 (282) 118,156 0 118,156
Shares, BALANCE AT at Dec. 31, 2012 24,128,114             24,128,114
Net earnings 0 0 0 6,181 0 6,181 (106) 6,075
Foreign currency translation adjustments 0 0 (2,561) 0 0 (2,561) 279 (2,282)
Amortization of stock based compensation 0 33 0 0 0 33 0 33
Fair value of noncontrolling interest 0 0 0 0 0 0 7,468 7,468
Exercise of stock options 1 (283) 0 0 282 0 0 0
Exercise of stock options, Shares 249,647             849,210 [1]
BALANCE at Dec. 31, 2013 $ 244 $ 75,138 $ 2,008 $ 44,419 $ 0 $ 121,809 $ 7,641 $ 129,450
Shares, BALANCE AT at Dec. 31, 2013 24,377,761             24,377,761
[1] 849,210 options were exercised and 249,647 shares were issued through net share settlement.

Consolidated Statements of Cash Flows
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Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Cash Flows from Operating Activities:    
Net earnings $ 6,075 $ 4,091
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 6,599 4,757
Gain on business combination (2,478) 0
Loss on disposition of fixed assets 570 33
Amortization of stock-based compensation 33 (4)
Amortization of deferred financing costs 82 154
Deferred tax expense (348) (48)
Loss (earnings) from equity unconsolidated subsidiary 135 (426)
Changes in Operating Assets and Liabilities:    
Receivables 182 420
Prepaid expenses and other assets (1,346) (167)
Accounts payable and accrued liabilities (360) (303)
Inventories (72) (35)
Other operating assets (4) (15)
Other operating liabilities 113 0
Accrued payroll 150 426
Taxes payable (1,888) 317
Net cash provided by operating activities 7,443 9,200
Cash Flows from Investing Activities:    
Purchases of property and equipment (4,746) (3,784)
Acquisition of Casinos Poland, net of cash acquired (4,399) 0
Acquisition of United Horsemen Alberta, net of cash acquired upon consolidation 98 0
Proceeds advance to United Horseman Alberta prior to consolidation (1,390) 0
Payment of origination costs of United Hoursemen Alberta loan prior to consolidation (52) (113)
Restricted cash escrowed for loan to United Horsemen Alberta prior to consolidation 0 (261)
Proceeds from disposition of assets 72 8
Issuance of note receivable (500) 0
Net cash used in investing activities (10,917) (4,150)
Cash Flows from Financing Activities:    
Proceeds from borrowings 13,181 3,626
Payment of deferred financing costs 0 (301)
Principal repayments (6,863) (9,248)
Proceeds from exercise of options 0 251
Net cash provided by (used in) financing activities 6,318 (5,672)
Effect of Exchange Rate Changes on Cash (243) 177
Increase (decrease) in Cash and Cash Equivalents 2,601 (445)
Cash and Cash Equivalents at Beginning of Period 24,747 25,192
Cash and Cash Equivalents at End of Period 27,348 24,747
Supplemental Disclosure of Cash Flow Information:    
Interest paid 731 561
Income taxes paid 3,864 1,140
Non-cash investing activities:    
Capital expenditures funded by operating activities $ 1,343 $ 371

Description Of Business And Basis Of Presentation
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Description Of Business And Basis Of Presentation
12 Months Ended
Dec. 31, 2013
Description Of Business And Basis Of Presentation [Abstract]  
Description Of Business And Basis Of Presentation

1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Century Casinos, Inc. (“CCI” or the “Company”) is an international casino entertainment company. As of December 31, 2013, the Company owned casino operations in North America, managed cruise ship-based casinos on international and Alaskan waters, held a majority ownership interest in nine casinos throughout Poland, and had a management contract to manage the casino in the Radisson Aruba Resort, Casino & Spa.

 

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

-  

The Century Casino & Hotel in Edmonton, Alberta, Canada;

-  

The Century Casino Calgary, Alberta, Canada;

-

The Century Casino & Hotel in Central City, Colorado; and

-

The Century Casino & Hotel in Cripple Creek, Colorado.

 

The Company operates 12 ship-based casinos onboard four cruise lines: Oceania Cruises, TUI Cruises, Windstar Cruises and Regent Seven Seas Cruises. In addition, in February 2014 the Company announced that it signed an exclusive agreement with Nova Star Cruises Ltd. to operate a ship-based casino on board the Nova Star. Nova Star Cruises will operate a round trip cruise ferry service connecting Portland, Maine and Yarmouth, Nova Scotia. The ferry service is scheduled to start May 15, 2014. 

 

In March 2007, the Company’s subsidiary Century Casinos Europe GmbH (“CCE”) acquired 33.3% of the outstanding shares issued by Casinos Poland Ltd (“CPL” or “Casinos Poland”) and the Company accounted for the investment under the equity method. In April 2013, CCE acquired from LOT Polish Airlines an additional 33.3% ownership interest in CPL. As of the date of acquisition; the Company began consolidating its 66.6% ownership of CPL as a majority-owned subsidiary for which it has a controlling financial interest. Polish Airports Company (“Polish Airports”) owns the remaining 33.3% of CPL. The Company accounts  for and reports the 33.3% Polish Airports ownership interest as a non-controlling financial interest. See Note 3 for additional information related to CPL.

 

In December 2010, the Company entered into a long-term management agreement to direct the operation of the casino at the Radisson Aruba Resort, Casino & Spa. The Company receives a management fee consisting of a fixed fee, plus a percentage of the casino’s earnings before interest, taxes, depreciation and amortization.  The Company was not required to invest any amounts under the management agreement.

 

On November 30, 2012, the Company’s subsidiary CCE signed credit and management agreements with United Horsemen of Alberta Inc. ("UHA") in connection with the development and operation of a Racing Entertainment Center (“REC”) in Balzac, north metropolitan area of Calgary, Alberta, Canada, which the Company will operate as Century Downs Racetrack and Casino. On November 29, 2013, CCE and UHA amended the management agreement and credit agreements. Under the amended agreements, CCE owns 15% of UHA, controls the UHA board of directors and manages the development of the REC project. The Company began consolidating UHA as a minority owned subsidiary for which it has a controlling financial interest on November 29, 2013.  Unaffiliated shareholders own the remaining 85% of UHA and the Company accounts  for and reports  the 85% UHA ownership interest as a non-controlling financial interest. See Note 3 for additional information related to UHA.

 


Significant Accounting Policies
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Significant Accounting Policies
12 Months Ended
Dec. 31, 2013
Significant Accounting Policies [Abstract]  
Significant Accounting Policies

 

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of CCI and its majority owned subsidiaries. As of November 29, 2013, the Company began consolidating UHA as a minority owned subsidiary for which it has a controlling financial interest. All intercompany transactions and balances have been eliminated.

 

Use of Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

 

Recently Issued Accounting Pronouncement – In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  The objective of ASU 2013-11 is to provide guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  The Company is currently assessing the impact the standard will have on its financial statements.

 

Cash and Cash Equivalents – All highly liquid investments with an original maturity of three months or less are considered cash equivalents.

 

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. Although the amount of credit exposure to any one institution may exceed federally insured amounts, the Company limits its cash investments to high quality financial institutions in order to minimize its credit risk.

 

Inventories  Inventories, which consist primarily of food, beverage, retail merchandise and operating supplies, are stated at the lower of cost or market. Cost is determined by the first-in, first out method.

 

Property and Equipment - Property and equipment are stated at cost. Depreciation of assets in service is determined using the straight-line method over the estimated useful lives of the assets. Leased property and equipment under capital leases are amortized over the lives of the respective leases or over the service lives of the assets, whichever is shorter. Estimated service lives used are as follows:

 

Buildings and improvements

739 years

Gaming equipment

37 years

Furniture and non-gaming equipment

3-7 years

 

The Company evaluates long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication of impairment, determined by the excess of the carrying value in relation to anticipated undiscounted future cash flows, the carrying amount of the asset is written down to its estimated fair value by a charge to operations. No long-lived asset impairment charges were recorded for the years ended December 31, 2013 or 2012.

 

 

Goodwill—Goodwill represents the excess purchase price over the fair value of the net identifiable assets acquired related to third party business combinations.  See Note 5.

 

Intangible Assets—Identifiable intangible assets include trademarks and casino licenses.  The Company’s trademarks and UHA casino license are indefinite-lived intangible assets and therefore are not amortized.  The Company’s casino licenses related to CPL are finite-lived intangible assets and are amortized over their respective useful lives.  See Note 5.

 

Foreign Currency Translation

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”) and Polish zloty (“PLN”).  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:

 

 

 

 

 

Ending Rates

2013

2012

Canadian dollar (CAD)

1.0636 
0.9949 

Euros (€)

0.7258 
0.7584 

Polish zloty (PLN)

3.0182 
3.0996 

 

 

 

 

 

 

 

Average Rates

2013

2012

% Change

Canadian dollar (CAD)

1.0302 
0.9996 
(3.1%)

Euros (€)

0.7532 
0.7781 
3.2% 

Polish zloty (PLN)

3.1597 
3.2541 
2.9% 

Source: Pacific Exchange Rate Service

 

 

 

 

Comprehensive Earnings (Loss) – Comprehensive earnings (loss) includes the effect of fluctuations in foreign currency rates on the values of the Company’s foreign investments.

 

Revenue Recognition and Promotional Allowances – Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for chips in the customer’s possession. Hotel, bowling, food and beverage revenue is recognized when products are delivered or services are performed. Management fees are recognized as revenue when services are provided. Advance deposits on rooms and advance ticket sales are recorded as accrued liabilities until services are provided to the customer. The incremental amount of unpaid progressive jackpots is recorded as a liability and a reduction of casino revenue in the period during which the progressive jackpot increases. Revenue is recognized net of incentives related to gaming play and points earned in point-loyalty programs.

 

At the Company’s casinos in Edmonton and Calgary, the Alberta Gaming and Liquor Commission (“AGLC”) retains 85% of slot machine net win, of which 15% is allocated to licensed charities. For all table games, excluding poker and craps, the casino is required to allocate 50% of its net win to a charity designated by the AGLC. For poker and craps, 25% of the casino’s net win is allocated to the charity. The Century Casino & Hotel in Edmonton and the Century Casino Calgary record revenue net of the amounts retained by the AGLC and charities.

 

Hotel accommodations, bowling, food and beverage furnished without charge to customers are included in gross revenue at retail value and are deducted as promotional allowances to arrive at net operating revenue. The Company issues coupons to customers for the purpose of generating future revenue. The value of coupons redeemed is applied against the revenue generated on the day of the redemption. The estimated cost of providing promotional allowances is included in casino expenses.

 

 

Loyalty Programs - 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 Company records a liability based on the points earned multiplied by the redemption value, and records a corresponding reduction in casino revenue. Points can be redeemed for cash and/or various amenities at the casino, such as meals, hotel stays and gift shop items. The value of the points is offset against the revenue in the period in which the points were earned. The value of unused or unredeemed points is included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. The expiration of unused points results in a reduction of the liability. As of December 31, 2013 and 2012, the outstanding balance of this liability was $0.9 million and $1.0 million, respectively.

 

Stock-Based Compensation – Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of all option grants.

 

Advertising Expenses – Advertising costs are expensed when incurred by the Company. Advertising expenses were $1.4 million and $1.6 million in each of the years ended December 31, 2013 and 2012, respectively.

 

Income Taxes – The Company accounts for income taxes using the asset and liability method, which provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, at a rate expected to be in effect when the differences become deductible or payable. Recorded deferred tax assets are evaluated for impairment by reviewing internal estimates for future net income. Due to the uncertainty of future taxable income, deferred tax assets of $5.4 million resulting from net operating losses in the U.S., $0.8 million resulting from the Calgary casino purchase and $0.6 million from the Century Casinos Europe subsidiary have been fully reserved (see Note 10). The Company will assess the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. Further, the Company’s implementation of certain tax strategies could reduce the need for a valuation allowance in the future. 

 

Earnings Per Share – The calculation of basic earnings per share considers only weighted average outstanding common shares in the computation. The calculation of diluted earnings per share gives effect to all potentially dilutive securities. The calculation of diluted earnings per share is based upon the weighted average number of common shares outstanding during the period, plus, if dilutive, the assumed exercise of stock options using the treasury stock method. Weighted average shares outstanding for the year ended December 31, 2013 and 2012 were as follows:

 

 

 

 

 

 

 

For the year ended

 

December 31

Amounts in thousands

2013

2012

Weighted average common shares, basic

24,052 
24,004 

Dilutive effect of stock options

161 
101 

Weighted average common shares, diluted

24,213 
24,105 

 

The following stock options are anti-dilutive and have not been included in the weighted- average shares outstanding calculation:

 

 

 

 

 

 

For the year ended

 

December 31

Amounts in thousands

2013

2012

Stock options

68 
887 

 


Acquisition
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Acquisition
12 Months Ended
Dec. 31, 2013
Acquisition [Abstract]  
Acquisition

3. ACQUISITION

 

Casinos Poland

On April 8, 2013, the Company’s subsidiary CCE acquired from LOT Polish Airlines an additional 33.3% ownership interest in CPL for cash consideration of $6.8 million. The acquisition of CPL furthers the Company’s strategy to grow and develop mid-size casinos. CPL is the owner and operator of nine casinos throughout Poland with a total of 412 slot machines and 72 gaming tables.  The Company paid for the purchase through borrowings under its credit agreement with the Bank of Montreal (“BMO Credit Agreement”) (Note 6). There was no contingent consideration related to the transaction.

 

Prior to April 8, 2013, the Company owned 33.3% of CPL and accounted for the ownership interest as an equity investment. The Company currently owns a 66.6% interest in CPL and on April 8, 2013 began consolidating CPL as a majority-owned subsidiary for which the Company has a controlling financial interest. As a result, the Company changed its accounting for CPL from an equity method investment to a consolidated subsidiary. CPL contributed a total of $34.8 million in net operating revenue and less than $0.1 million in net earnings from the date of acquisition through December 31, 2013. Polish Airports owns the remaining 33.3% ownership interest in CPL and the Company accounts for and reports the Polish Airports ownership interest as a non-controlling financial interest. 

 

Upon consolidation, the fair value of the Company’s initial 33.3% equity investment was determined to be $5.2 million as of the acquisition date. The $5.2 million was greater than the carrying value of the equity investment, resulting in a gain of $2.1 million, net of foreign currency translation. The Company recorded the gain in “Gain on business combination” in the 2013 consolidated statement of earnings. The fair value was determined based on the controlling interest obtained through the additional 33.3% interest acquired and on the Company’s internal valuation of CPL using the following methods, which the Company believes provide the most appropriate indicators of fair value: 

·

relief from royalty method;

·

replacement cost method;

·

direct market value approach and direct and indirect cost approach; and

·

sales comparison approach, income approach and cost approach.

 

·

 

·

 

 

 

 

 

Amounts in thousands (in USD)

Total

Investment fair value - April 8, 2013

$
5,214 

Investment book value at April 8, 2013

(3,020)

Gain on business combination including foreign currency translation

2,194 

Less: foreign currency translation

(113)

Gain on business combination

$
2,081 

 

Details of the purchase in the table below are based on estimated fair values of assets and liabilities as of April 8, 2013, the date of acquisition. Allocation of the purchase consideration is preliminary and subject to adjustment as the Company obtains additional information during the measurement period (a period up to one year from the date of acquisition) that could change the fair value allocation as of the acquisition date.

 

 

Acquisition Date

April 8, 2013

 

 

Amounts in thousands

 

Purchase consideration:

 

Cash paid

$
6,780 

Acquisition-date fair value of the previously held equity interest

5,214 

Total purchase consideration, including fair value of previously held equity interest

$
11,994 

 

 

The assets and liabilities recognized as a result of the acquisition are as follows:

 

 

 

 

Cash

$
2,381 

Accounts receivable

545 

Deferred tax assets - current

325 

Prepaid expenses

354 

Inventory

139 

Other current assets

Property and equipment

17,905 

Licenses

2,533 

Trademark

1,924 

Deferred tax assets, non-current

1,034 

Other long-term assets

477 

Current portion of long-term debt

(4,267)

Accounts payable and accrued liabilities

(1,743)

Contingent liability

(5,776)

Accrued payroll

(1,640)

Taxes payable

(2,112)

Long-term debt, less current portion

(1,687)

Deferred income taxes, non-current

(1,257)

Net identifiable assets acquired

9,138 

 

 

Less: Non-controlling interest

(5,214)

Add: Goodwill

8,070 

Net assets acquired

$
11,994 

 

The Company accounted for the transaction as a step acquisition, and accordingly, CPL's assets of $27.6 million (including $2.4 million in cash) and liabilities of $18.5 million were included in the Company's consolidated balance sheet at April 8, 2013. The goodwill is attributable to the expected synergies and economies of scale of incorporating CPL with the Company.  The acquisition also combines the specialties of the Company’s management expertise in the gaming industry with the brand awareness of Casinos Poland. Goodwill is not a tax deductible item for the Company. 

 

Non-controlling interest

The Company recognized the Polish Airports’ non-controlling interest in CPL at its fair value as of the acquisition date. The Company estimated the fair value of the non-controlling interest by determining the value of a controlling interest in the entity. Having control over a company gives additional rights to the holder of the controlling interest as opposed to the holder of the non-controlling interest. The Company applied a 22.5% discount for lack of control to determine the value of the non-controlling interest. The discount for lack of control was estimated based on an analysis of the transactions in the casinos and gaming industry in the past five years. The resulting value of the non-controlling interest was PLN 16.5 million ( $5.2 million).

 

 

Purchase Consideration – cash outflow

 

 

 

 

Outflow of cash to acquire subsidiary, net of cash acquired

 

Cash consideration

$
6,780 

Less: balances acquired

(2,381)

Net of cash - investing activities

$
4,399 

 

Acquisition-related costs

The Company incurred acquisition costs of approximately $0.1 million in connection with the CPL acquisition. These costs include legal, accounting and valuation fees and have been recorded as general and administrative expenses.

 

Contingent liability

 

In March 2011, the Polish Internal Revenue Service (“Polish IRS”) conducted a tax audit of CPL to review the calculation and payment of personal income tax by CPL employees. Under Polish law, there is no specific regulation of how casinos should treat tips given by customers to casino employees.

 

Based on the March 2011 audit, the Polish IRS concluded that CPL should calculate, collect and remit to the Polish IRS personal income tax on tips received by CPL employees from casino customers for the periods  from December 1, 2007 to December 31, 2008 and from January 1, 2011 to January 31, 2011.

 

After proceedings between CPL and the Polish IRS, the Director of the Tax Chamber in Warsaw upheld the decision of the Polish IRS on November 30, 2012 for review of the period from January 1, 2011 to January 31, 2011. CPL paid PLN 0.1 million (less than $0.1 million) to the Polish IRS for taxes and interest owed resulting from the decision. CPL appealed the decision to the Regional Administrative Court in Warsaw in December 2012. In September 2013, the Regional Administrative Court in Warsaw denied CPL’s appeal. CPL appealed the decision to the Supreme Administration Court and expects a decision in 2014.

 

After further proceedings and appeals between CPL and the Polish IRS, the Director of the Tax Chamber in Warsaw also upheld the decision of the Polish IRS on December 30, 2013 for review of the period from December 1, 2007 to December 31, 2008. CPL paid PLN 3.5 million ($1.2 million) to the Polish IRS for taxes and interest owed on December 31, 2013 and the Company reduced the contingent liability for the payment. CPL filed an appeal in January 2014 and expects a decision in 2014.

 

Management has evaluated the likelihood that the litigation will be unfavorable for CPL using a probability weighted cash flow analysis and recorded a liability at estimated fair value in purchase accounting. As a result, the balance of the potential liability for all open periods as of December 31, 2013 is estimated at PLN 14.8 million ($4.9 million).

 

Pro Forma Results

The following table provides unaudited pro forma information of the Company as if the acquisition of CPL had occurred at the beginning of the earliest period presented. This pro forma information is not necessarily indicative of the combined results of operations that actually would have been realized had the acquisition been consummated prior to the periods for which the pro forma information is presented, or of future results.

 

 

 

 

 

 

 

 

 

Unaudited

For the year ended December 31,

 

Unaudited

For the year ended December 31,

 

 

2013

 

2012

Net operating revenue

 

$
117,955 

 

$
115,843 

Net earnings

 

$
6,037 

 

$
4,620 

Basic and diluted earnings per share

 

$
0.25 

 

$
0.19 

 

Century Downs Racetrack and Casino

On November 30, 2012, the Company’s subsidiary CCE signed credit and management agreements with UHA in connection with the development of a REC project in Balzac, north metropolitan area of Calgary, Alberta, Canada, which the Company will operate as Century Downs Racetrack and Casino.  

 

On November 29, 2013, CCE finalized amended credit and management agreements with UHA in connection with the development of the REC project. Under the amended credit agreement, CCE agreed to loan to UHA a total of CAD 24 million in two separate loans, Loan A and Loan B. Loan A would be for CAD 13 million and Loan B would be for CAD 11 million. Both loans are for the exclusive use of developing and operating the REC project. CCE intends to fund both loans with additional borrowings under our BMO Credit Agreement. The Company has a commitment letter with BMO for an additional CAD 11 million credit facility under the BMO Credit Agreement and has pledged its 15% ownership interest (see below) as collateral for the loan.   Loan A has an interest rate of BMO prime plus 600 basis points and a term of five years, and the CAD 11 million loan is convertible at CCE’s option into an ownership position in UHA of up to 60%. Loan B has an interest rate equivalent to the rate charged under the BMO Credit Agreement plus an administrative fee and a term of five years. CCE will not advance funds from Loan B to UHA until CCE has advanced all monies from Loan A. Both loans are secured by a leasehold mortgage on the REC property and a pledge of UHA’s stock by the majority of the UHA shareholders.

 

Under the amended management and credit agreements, CCE acquired 15% of UHA, controls the UHA board of directors and will manage the development and operation of the REC project. Once the REC is developed and operational and for as long as CCE has not converted the UHA loans into a majority ownership position in UHA, CCE will receive 60% of UHA’s net profit before tax as a management fee. However, as a condition of AGLC licensing, the Company anticipates converting the loan to a majority ownership interest on or before the REC is operational.

 

As of November 29, 2013, the Company began consolidating UHA as a minority owned subsidiary for which we have a controlling financial interest. Unaffiliated shareholders own the remaining 85% of UHA. The Company accounts for and reports the 85% UHA ownership interest as a non-controlling financial interest. UHA contributed a total of less than $0.1 million in net operating revenue and less than $0.1 million in net losses from the date of acquisition through December 31, 2013.

 

The REC project will be the only horse race track in the Calgary area and will consist of a 5.5 furlongs (0.7 miles) racetrack, a gaming floor with 550 proposed slot machines, a bar, a lounge, restaurant facilities, an off-track-betting area and an entertainment area. The AGLC has approved development of the project and a preliminary license. The AGLC will not issue a final license until the REC opens. Horse Racing Alberta, the governing authority for horseracing in Alberta, has approved the REC project and approved a license. Construction commenced in March 2014 and the Company anticipates that UHA will complete the REC by the end of 2014. 

 

The Company accounted for the transaction as a business combination, and accordingly, UHA’s assets of $22.9 million (including $0.1 million in cash) and liabilities of $20.5 million were included in the Company's consolidated balance sheet at November 29, 2013. The goodwill is attributable to the expected business expansion opportunity for the Company. The acquisition leverages the Company’s management specialties and expertise in the gaming industry to the horse racing industry, and the REC project, once completed, will be one of the Company’s largest scale properties. Goodwill is not a tax deductible item for the Company. 

 

Upon consolidation, the fair value of the Company’s 15% ownership interest was determined to be $0.4 million as of the acquisition date. Since the Company did not give any cash consideration for the 15% ownership interest, it recorded the $0.4 million as a gain in “Gain on business combination” in the 2013 consolidated statement of earnings. The fair value was determined based on the controlling interest obtained and on the Company’s valuation of UHA using the following methods, which the Company believes provide the most appropriate indicators of fair value: 

 

·

multi-period excess earnings method;

·

cost method;

·

capitalized cash flow method;

·

discounted cash flow method; and

·

direct market value approach.

 

 

Details of the purchase in the table below are based on estimated fair values of assets and liabilities as of November 29, 2013. Allocation of the purchase consideration is preliminary and subject to adjustment as the Company obtains additional information during the measurement period (a period up to one year).

 

 

 

 

Acquisition Date

November 29, 2013

 

 

Amounts in thousands

 

Purchase consideration:

 

Cash paid

$

Acquisition date fair value for 15% equity interest for the Company's guarantee of additional REC project financing

$
397 

Total purchase consideration

$
397 

 

 

 

 

Cash

$
98 

Restricted cash

472 

Accounts receivable

126 

Prepaid expenses

12 

Casino license

3,001 

Property and equipment

19,234 

Accounts payable and accrued liabilities

(471)

Taxes payable

(19)

Contingent liability

(189)

Long-term debt, less current portion

(19,792)

Net identifiable assets acquired

2,472 

 

 

Less: Non-controlling interest

(2,253)

Add: Goodwill

178 

Net assets acquired

$
397 

 

Non-controlling interest

The Company recognized non-affiliated shareholders non-controlling interest in UHA at its fair value of $2.3 million as of November 29, 2013.

 

Acquisition-related costs

The Company incurred acquisition costs of approximately $0.2 million in connection with the UHA acquisition. These costs include legal, accounting, and valuation fees and have been recorded as general and administrative expenses.

 

 

Land

Prior to the Company’s acquisition, UHA purchased various plots of land on which to build the REC project. UHA sold a portion of this land consisting of 71.99 acres to 1685258 Alberta Ltd (“Rosebridge”).  UHA then entered into an agreement with Rosebridge to lease back 51.99 acres of the land. The Company began accounting for the lease using the financing method as of the date of acquisition. Under the financing method, the Company accounts for the land subject to lease as an asset and the lease payments as interest on the financing obligation.

 

Contingent Liability

Subsequent to the Company’s acquisition, 1369454 Alberta Ltd, a Canadian company, and the County of Rockyview filed a lawsuit against UHA for previously owed money not paid by UHA.  The case was settled and UHA issued a promissory note to pay 1369454 Alberta and the County of Rockyview $0.2 million subject to cost recoveries.

 

Financing

Prior to November 29, 2013, the Company loaned to UHA $1.4 million for deferred financing costs related to legal fees incurred for the UHA loan and various expenditures relating to the development of the REC. As of the date of consolidation, the Company began eliminating the loan as an intercompany transaction.

 

Restricted Cash

The Company’s subsidiary CCE loaned UHA $0.2 million to pay outstanding Canadian Federal tax owed by UHA in December 2013. The unsecured note is due and payable on December 31, 2014 and has a nominal 4% interest rate. The note will be repaid once $0.5 million of restricted cash is released from escrow held with Rosebridge in connection with the land lease.

 

Pro Forma Results

Pro forma information is not included because the limited activities of UHA since January 1, 2012 are immaterial.

 


Property And Equipment
v0.0.0.0
Property And Equipment
12 Months Ended
Dec. 31, 2013
Property and Equipment [Abstract]  
Property and Equipment

4.PROPERTY AND EQUIPMENT

 

Property and equipment at December 31, 2013 and 2012 consist of the following:

 

 

 

 

 

 

December 31,

Amounts in thousands

2013

 

2012

Land

$
50,465 

 

$
30,639 

Buildings and improvements

$
89,429 

 

$
80,308 

Gaming equipment

$
22,244 

 

$
16,746 

Furniture and non-gaming equipment

$
19,243 

 

$
16,922 

Capital leases

$
286 

 

$

Capital projects in process

$
1,704 

 

$
778 

 

$
183,371 

 

$
145,393 

Less accumulated depreciation

($50,732)

 

($45,867)

 

 

 

 

Property and equipment, net

$
132,639 

 

$
99,526 

 

Depreciation expense was $6.2 million for the year ended December 31, 2013 and $4.8 million for the year ended December 31, 2012.


Goodwill And Intangible Assets
v0.0.0.0
Goodwill And Intangible Assets
12 Months Ended
Dec. 31, 2013
Goodwill And Intangible Assets [Abstract]  
Goodwill And Intangible Assets

5.GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

We test goodwill for impairment as of October 1 each year, or more frequently as circumstances indicate it is necessary.  Testing compares the estimated fair values of our reporting units to the reporting units’ carrying values.  Our reporting units with goodwill balances as of December 31, 2013 include our Edmonton casino property, our CPL casino operations, and UHA’s REC project development activities.  We consider a variety of factors when estimating the fair value of our reporting units, including estimates about the future operating results of each reporting unit, multiples of earnings, various market analyses, and recent sales of comparable businesses, if such information is available to us.  The Company makes a variety of estimates and judgments about the relevance and comparability of these factors to the reporting units in estimating their fair values.   If the carrying value of a reporting unit exceeds its estimated fair value, the fair value of each reporting unit is allocated to the reporting unit’s assets and liabilities to determine the implied fair value of the reporting unit’s goodwill and whether impairment is necessary.  No impairment charges related to goodwill have been recorded during 2013 and 2012.

Changes in the carrying amount of goodwill related to the Company’s Edmonton property, CPL and UHA for the period ended December 31, 2013 are as follows:

 

 

 

 

 

 

 

 

Amounts in thousands

Edmonton

Casinos Poland

UHA

Total

Balance – January 1, 2013

$
4,941 
$
$
$
4,941 

Purchase of Casinos Poland (Note 3)

8,070 
8,070 

Purchase of UHA (Note 3)

178 
178 

Effect of foreign currency translation

(319)
409 
90 

Balance – December 31, 2013

$
4,622 
$
8,479 
$
178 
$
13,279 

 

Intangible Assets

 

Trademarks

The Company currently owns two trademarks, the Century Casinos trademark and the Casinos Poland trademark. As of April 8, 2013, the Company began reporting the Casinos Poland trademark as an intangible asset on the Company’s consolidated balance sheets. No impairment charges related to trademarks have been recorded during 2013 and 2012.

As of December 31, 2013, the carrying amounts of the trademarks were as follows:

 

 

 

 

Amounts in thousands

 

Century Casinos

$
108 

Casinos Poland

2,021 

Total

$
2,129 

 

 

 

 

 

 

 

Amounts in thousands

Century Casinos, Inc.

Casinos Poland

Total

Balance – January 1, 2013

$
104 
$
$
104 

Additions

Purchase of Casinos Poland (Note 3)

1,924 
1,924 

Effect of foreign currency translation

97 
97 

Balance – December 31, 2013

$
108 
$
2,021 
$
2,129 

 

The Company has determined both trademarks have indefinite useful lives and therefore the Company does not amortize trademarks.   Rather, the Company tests its trademarks for impairment annually or more frequently as circumstances indicate it is necessary. The Company tests trademarks for impairment using the relief-from-royalty method. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company would recognize an impairment charge equal to the difference.

 

Casino Licenses

Casinos Poland currently has nine casino licenses each with an original term of six years. As of April 8, 2013, the Company began reporting the Polish casino licenses as finite-lived intangible assets on the Company’s consolidated balance sheets. Changes in the carrying amount of the Casinos Poland licenses from the date of acquisition to December 31, 2013 are as follows:

 

 

 

 

Casinos Poland

Amounts in thousands

 

Balance – April 8, 2013

$
2,533 

Amortization

(395)

Effect of foreign currency translation

107 

Balance – December 31, 2013

$
2,245 

 

As of December 31, 2013, estimated amortization expense for the CPL casino licenses over the next five years is as follows:

 

 

 

 

Amounts in thousands

 

2014

569 

2015

569 

2016

531 

2017

433 

2018

127 

Thereafter

16 

 

$
2,245 

 

Such estimates do not reflect the impact of future foreign exchange rate changes or the renewal of the licenses. The weighted average period before the next renewal is 4.0 years.  

 

 

UHA currently has one casino license pending final approval from the AGLC for the REC project. As of November 29, 2013, the Company began reporting the UHA license as an intangible asset on the Company’s consolidated balance sheet. As of December 31, 2013, the carrying amount of the license was $3.0 million. No impairment charges related to the license have been recorded during 2013.

 

 

 

 

UHA

Amounts in thousands

 

Balance – November 29, 2013

$
3,001 

Effect of foreign currency translation

10 

Balance – December 31, 2013

$
2,991 

 

 


Long-Term Debt
v0.0.0.0
Long-Term Debt
12 Months Ended
Dec. 31, 2013
Long-Term Debt [Abstract]  
Long-Term Debt

6.LONG-TERM DEBT

 

Long-term debt at December 31, 2013 and 2012 consisted of the following:

 

 

 

 

 

 

 

 

December 31,

 

December 31,

Amounts in thousands

2013

 

2012

Credit agreement - Bank of Montreal

$
9,277 

 

$
3,564 

Credit agreement - Casinos Poland

4,798 

 

Credit facilities - Casinos Poland

1,447 

 

Capital leases - Casinos Poland

207 

 

Financing obligation - UHA land lease

18,330 

 

Total long-term debt

$
34,059 

 

3,564 

Less current portion

(4,195)

 

(372)

Long-term portion

$
29,864 

 

$
3,192 

 

As of December 31, 2013, scheduled maturities related to long-term debt are as follows:

 

 

 

 

Amounts in thousands

 

2014

$
4,195 

2015

$
2,714 

2016

$
2,645 

2017

$
1,034 

2018

$
1,034 

Thereafter

$
22,437 

Total

$
34,059 

 

 

The consolidated weighted average interest rate on all Company debt was 7.0% for the year ended December 31, 2013. The Company pays a floating interest rate on its borrowings under the BMO Credit Agreement and the current interest rate is approximately 3.75%. The Company pays a weighted average interest rate of 6.49% on its borrowings under the CPL loan agreements. The weighted average interest rate on all Company debt is higher than the 4.0% interest rate of the BMO Credit Agreement and the weighted average interest of 6.49% on the CPL loan agreements because the Company began paying an implicit interest rate of 10.0% on debt related to the UHA financing obligation.  

 

Credit Agreement – Bank of Montreal

On May 23, 2012, the Company, through its Canadian subsidiaries, entered into the CAD 28.0 million credit agreement with the Bank of Montreal. On May 23, 2012, the Company borrowed CAD 3.7 million from the BMO Credit Agreement to repay the Company’s mortgage loan related to the Edmonton property. The Company can also use the proceeds to pursue the development or acquisition of new gaming opportunities and for general corporate purposes. The BMO Credit Agreement has a term of five years and is guaranteed by the Company. On February 21, 2013, the Company borrowed an additional CAD 7.3 million to pay for the additional 33.3% investment in CPL (Note 3). The shares of the Company’s subsidiaries in Edmonton and Calgary are pledged as collateral for the BMO Credit Agreement. The BMO Credit Agreement contains a number of financial covenants applicable to the Canadian subsidiaries, in addition to covenants restricting their incurrence of additional debt. The Company was in compliance with all covenants of the BMO Credit Agreement as of December 31, 2013 and through the date of filing. As of December 31, 2013, the amount outstanding was $9.3 million and the Company had approximately CAD 17.0 million (approximately $16.0 million based on the exchange rate in effect on December 31, 2013)  available under the BMO Credit Agreement. The CAD 11.0 million the Company has borrowed cannot be re-borrowed once it is repaid.

 

Amortization expenses relating to deferred financing charges were $0.1 million for the period ended December 31, 2013 and $0.2 million for the period ended December 31, 2012. These costs are included in interest expense in the consolidated statements of earnings. 

 

The Company has a committed term sheet from BMO for additional financing of the REC project. The Company’s 15% ownership interest in UHA is pledged as collateral for the loan. 

 

Casinos Poland

Through the CPL acquisition, the Company assumed additional debt that totaled $6.5 million as of December 31, 2013. The debt includes two bank loans, two bank lines of credit and eleven capital lease agreements.  

 

The first bank loan is with BRE Bank. CPL entered into the 2.5 year term loan in November 2013 at an interest rate of Warsaw Interbank Offered Rate (“WIBOR”) plus 1.75%. Proceeds from the loan were used to repay the balance of the Bank Pocztowy loan related to the CPL properties, invest in slot equipment and relocate the Company’s Poznan, Poland casino. As of December 31, 2013, the amount outstanding was $4.0 million, and CPL had no further borrowing availability under the loan. The loan matures in November 2016. The BRE Bank loan agreement contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt. CPL complied with all covenants of the BRE Bank agreement as of December 31, 2013 and through the date of filing. The second bank loan is also with BRE Bank. CPL entered into the 2-year term loan at an interest rate of WIBOR plus 2.5%. Proceeds from the loan were used to finance current operations. As of December 31, 2013, the amount outstanding was $0.8 million, and CPL had no further borrowing availability under the loan. The BRE Bank loan matures in September 2014. The BRE Bank loan agreement contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt. CPL complied with all covenants of the BRE Bank agreement as of December 31, 2013 and through the date of filing.

 

 

The two bank lines of credit are short-term facilities. CPL used both lines of credit to finance current operations. The first line of credit is with BRE Bank, which is a short-term revolving credit facility renewed on a yearly basis. The last renewal was effective in February 2013 at an interest rate of WIBOR plus 2.0%. As of December 31, 2013, the amount outstanding was $0.1 million and CPL had no availability under the agreement. The BRE Bank facility contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt. CPL complied with all covenants of the BRE Bank line of credit as of December 31, 2013 and through the date of filing. The second line of credit is with BPH Bank, which also is a short-term revolving credit facility with an interest rate of WIBOR plus 1.95%. As of December 31, 2013, the amount outstanding was $1.4 million and CPL has approximately $0.2 million available under the agreement. The BPH Bank facility contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt. CPL complied with all covenants of the BPH Bank line of credit as of December 31, 2013 and through the date of filing.

 

CPL’s remaining debt consists of eleven capital lease agreements. The lease agreements are for various vehicles that are replaced on an ongoing basis. As of December 31, 2013, the amount outstanding was $0.2 million.

 

UHA

Prior to the Company’s acquisition, UHA purchased various plots of land on which to build the REC project. UHA sold a portion of this land consisting of 71.99 acres to Rosebridge.  UHA then entered into an agreement with Rosebridge to lease back 51.99 acres of the land. The Company began accounting for the lease using the financing method as of the date of acquisition. Under the financing method, the Company accounts for the land subject to lease as an asset and the lease payments as interest on the financing obligation. As of December 31, 2013, the outstanding balance on the financing obligation was $18.3 million and the implicit interest rate was 10%.  

 


Other Balance Sheet Captions
v0.0.0.0
Other Balance Sheet Captions
12 Months Ended
Dec. 31, 2013
Other Balance Sheet Captions [Abstract]  
Other Balance Sheet Captions

7.OTHER BALANCE SHEET CAPTIONS

 

Accounts payable and accrued liabilities are composed of the following as of December 31, 2013 and 2012:

 

 

 

 

 

 

 

December 31,

Amounts in thousands

2013

 

2012

Accounts payable

$
2,460 

 

$
1,305 

Accrued commissions (AGLC)

$
726 

 

$
1,946 

Progressive slot & table liability

$
1,173 

 

$
935 

Player point liability

$
874 

 

$
1,017 

Other accrued liabilities

$
3,046 

 

$
1,176 

Total

$
8,279 

 

$
6,379 

 

Accrued commissions (AGLC) include the portion of slot machine net sales and table games win owed to the AGLC as of December 31, 2013 and December 31, 2012.

 

Taxes payable are composed of the following as of December 31, 2013 and 2012:

 

 

 

 

 

 

 

 

December 31,

Amounts in thousands

2013

 

2012

Accrued property taxes

$
1,036 

 

$
1,052 

Gaming taxes payable

$
3,150 

 

$
1,031 

Other taxes payable

$
617 

 

$
1,330 

Total

$
4,803 

 

$
3,413 

 


Shareholder's Equity
v0.0.0.0
Shareholder's Equity
12 Months Ended
Dec. 31, 2013
Shareholder's Equity [Abstract]  
Shareholder's Equity

8.SHAREHOLDERS’ EQUITY

 

In March 2000, the Company’s board of directors approved a discretionary program to repurchase the Company’s outstanding common stock. In November 2009, the Company’s board of directors increased the amount available to be repurchased to $15.0 million. The Company did not repurchase any shares of its common stock during 2013 and 2012. The total remaining authorization under the repurchase program was $14.7 million as of December 31, 2013. The repurchase program has no set expiration or termination date.

 

The Company has not declared or paid any dividends. Declaration and payment of dividends, if any, in the future will be at the discretion of the board of directors. At the present time, the Company intends to use any earnings that may be generated to finance the growth of its business.

 

The Company does not have any minimum capital requirements related to its status as a U.S. corporation in the state of Delaware.


Stock-Based Compensation
v0.0.0.0
Stock-Based Compensation
12 Months Ended
Dec. 31, 2013
Stock-Based Compensation [Abstract]  
Stock-Based Compensation

9.STOCK-BASED COMPENSATION

 

The board of directors of the Company adopted an Employees’ Equity Incentive Plan (the “EEIP”) in April 1994. The EEIP expired in April 2004. All outstanding options from the EEIP have been issued and the Company no longer administers the plan. Stockholders of the Company approved a new equity incentive plan (the “2005 Plan”) at the 2005 annual meeting of stockholders. The 2005 Plan provides for the grant of awards to eligible individuals in the form of stock, restricted stock, stock options, performance units or other stock-based awards, all as defined in the 2005 Plan. The 2005 Plan provides for the issuance of up to 2,000,000 shares of common stock to eligible individuals through the various forms of permitted awards. The 2005 Plan limits the number of options that the Company can award to an eligible individual to 200,000 per year. The Company may not issue stock options at an option price lower than fair market value at the date of grant. All stock options must have an exercise period not to exceed ten years. Through December 31, 2013, the Company has granted, under the 2005 Plan, shares of incentive stock option awards (for which the option price was not less than the fair market value at the date of grant) and non-qualified options. Options granted to date have six-month, one-year, or four-year vesting periods. Through December 31, 2013,  the Company has issued all outstanding options at market value as of the date of the grant. Any committee as delegated by the board of directors has the power and discretion to, among other things, prescribe the terms and conditions for the exercise of, or modification of, any outstanding awards in the event of merger, acquisition or any other form of acquisition other than a reorganization of the Company under the United States Bankruptcy Code or liquidation of the Company. The 2005 Plan also allows limited transferability of any stock options to legal entities that are 100% owned or controlled by the optionee or to the optionee’s family trust.

 

Stock Options

 

The Company did not issue options to employees in 2013 or 2012. As of December 31, 2013, there were 70,638 options outstanding to employees of the Company under the 2005 Plan.

 

Activity in the Company’s stock-based compensation plans for employee stock options was as follows:

 

 

 

 

 

 

 

 

 

Option Shares

Weighted -Average Exercise Price

Weighted -Average Remaining Contractual Term

Options Exercisable

Weighted-Average Exercise Price

Outstanding at January 1, 2013

919,848 
$
2.94 

 

895,348 
$
2.96 

Granted

0.00 

 

 

 

Exercised*

(849,210)
2.93 

 

 

 

Cancelled or forfeited

0.00 

 

 

 

Outstanding at December 31, 2013

70,638 
$
3.03 
$
5.40 
56,638 
$
3.21 

*849,210 options were exercised and 249,647 shares were issued through net share settlement.

 

The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2013:

 

 

 

 

 

 

 

 

Dollar amounts in thousands

 

 

 

 

 

Exercise Price:

Options Outstanding

Options Exercisable

Intrinsic Value of Options Outstanding

Intrinsic Value of Options Exercisable

Weighted-Average Life of Options Outstanding (1)

Weighted-Average Life of Options Exercisable  (1)

$0.91

11,526 
11,526 
$
50 
$
50 
4.9 
4.9 

$0.93

11,612 
11,612 
$
50 
$
50 
4.9 
4.9 

$2.30

35,000 
21,000 
$
102 
$
61 
6.4 
6.4 

$9.00

12,500 
12,500 
$
$
3.5 
3.5 

 

70,638 
56,638 
$
202 
$
161 
5.15 
5.15 

(1) In years

 

 

 

 

 

 

 

The aggregate intrinsic value represents the difference between the Company’s closing stock price of $5.21 per share as of December 31, 2013 and the exercise price multiplied by the number of options outstanding or exercisable as of that date.

 

 

There were 30,000 options issued to independent directors of the Company during 2013. As of December 31, 2013,  there were 55,000 options outstanding to independent directors of the Company with a weighted-average exercise price of $6.93. During 2013, independent directors did not exercise any options. The weighted-average fair value of options granted are estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

 

Weighted-average risk-free interest rate

1.31%

Weighted-average expected life

5.4 yrs

Weighted-average expected volatility

63.6%

Weighted-average expect dividends

$0

 

 

For the years ended December 31, 2013 and 2012, the Company recorded less than $0.1 million for stock-based compensation expense. This amount is included in general and administrative expenses.

 

At December 31, 2013, there was $0.1 million of total unrecognized compensation expense related to unvested stock options remaining to be recognized through 2014.

 

Cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) are classified as financing cash flows on the Company’s consolidated statement of cash flows. No excess tax benefits were recorded for the years ended December 31, 2013 and 2012.


Income Taxes
v0.0.0.0
Income Taxes
12 Months Ended
Dec. 31, 2013
Income Taxes [Abstract]  
Income Taxes

10.INCOME TAXES 

 

The Company’s provision (benefit) for income taxes is summarized as follows:

 

 

 

 

 

 

 

Amounts in thousands

 

For the twelve months

ended December 31,

 

 

2013

 

2012

U.S. Federal - Current

 

$
25 

 

$
67 

U.S. Federal - Deferred

 

 

Provision for U.S. federal income taxes

 

25 

 

67 

 

 

 

 

 

Foreign - Current

 

$
1,616 

 

$
1,009 

Foreign - Deferred

 

(348)

 

(48)

Provision for foreign income taxes

 

1,268 

 

961 

Total provision for income taxes

 

$
1,294 

 

$
1,028 

 

 

The Company’s effective income tax rate differs from the statutory federal income tax rate as follows:

 

 

 

 

 

Amounts in thousands

2013

2012

U.S. Federal income tax statutory rate

34.0% 
34.0% 

Foreign income taxes

(18.5%)
(10.0%)

Equity in Polish investment

(5.4%)
0.2% 

State income tax (net of federal benefit)

(0.3%)
0.8% 

 

 

 

Valuation allowance

5.7% 
(2.6%)

Permanent and other items

2.1% 
(2.3%)

Total provision for income taxes

17.6% 
20.1% 

The effective tax rates of the Company’s foreign properties are impacted by the movement of exchange rates primarily due to loans, which are denominated in U.S. dollars. Therefore, foreign currency gains or losses recorded in each property’s local currency do not impact the Company’s earnings reported in U.S. dollars.

The Company records deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted statutory tax rate in effect for the year these differences are expected to be taxable or reversed. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for impairment on a quarterly basis by reviewing the Company’s internal estimates for future taxable income.

 

The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. We have a valuation allowance of $5.4 million on our U.S. deferred tax assets as of December 31, 2013 due to the uncertainty of future taxable income. We have a $0.8 million valuation allowance on our Calgary property deferred tax assets as of December 31, 2013 due to the uncertainty of future taxable income. We also have a $0.6 million valuation allowance on CCE’s deferred tax assets as of December 31, 2013 due to the uncertainty of future taxable income. The ultimate realization of deferred income tax assets depends on generation of future taxable income in the jurisdictions where the assets are located during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax. 

 

 

The Company’s deferred income taxes at December 31, 2013 and 2012 are summarized as follows:

 

 

 

 

 

Amounts in thousands

2013

2012

Deferred tax assets (liabilities) - U.S. Federal and state:

 

 

 

 

 

Deferred tax assets - current:

 

 

Accrued liabilities and other

$
169 
$
181 

Deferred tax (liabilities) - current:

 

 

Prepaid expenses

(67)
(101)

Valuation allowance

(167)
(177)

Net deferred tax (liabilities) - current

(65)
(97)

 

 

 

Deferred tax assets - non-current:

 

 

Amortization of goodwill for tax

473 
526 

Amortization of startup costs

317 
359 

Property and equipment

971 
1,089 

NOL carry forward

2,894 
2,584 

Accrued liabilities and other

675 
371 

Total deferred tax assets - non-current

5,330 
4,929 

Valuation allowance

(5,265)
(4,832)

Net deferred tax assets - non-current

65 
97 

Total deferred tax assets - U.S. federal and state

$
$

 

 

 

Deferred tax assets (liabilities) - foreign

 

 

 

 

 

Deferred tax assets - current:

 

 

NOL carryforward

$
$

Other

229 
79 

Deferred tax (liabilities) - current:

 

 

Other

(96)

Net deferred tax assets - current

133 
79 

 

 

 

Deferred tax assets - non-current:

 

 

Property and equipment

1,771 
621 

  NOL carryforward

2,483 
2,504