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Document and Entity Information
v0.0.0.0
Document and Entity Information
3 Months Ended
Mar. 31, 2014
Apr. 17, 2014
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2014  
Document Fiscal Year Focus 2014  
Document Fiscal Period Focus Q1  
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

Condensed Consolidated Balance Sheets
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Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
ASSETS    
Cash and cash equivalents $ 26,436 $ 27,348
Receivables, net 1,157 1,205
Prepaid expenses 1,967 2,298
Inventories 509 498
Other current assets 97 115
Current portion of note receivable 195 195
Deferred income taxes 227 231
Restricted cash 868 470
Total Current Assets 31,456 32,360
Property and equipment, net 131,530 132,639
Goodwill 13,074 13,279
Deferred income taxes 3,733 3,634
Casino licenses 4,976 5,236
Trademark 2,123 2,129
Notes receivable 305 305
Deposits and other 481 800
Deferred financing costs 256 242
Total Assets 187,934 190,624
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current portion of long-term debt 5,642 4,195
Accounts payable 1,909 1,987
Accrued liabilities 6,417 6,292
Accrued payroll 4,104 4,257
Taxes payable 4,401 4,803
Contingent liability (Note 3) 5,084 5,104
Deferred income taxes 163 163
Total Current Liabilities 27,720 26,801
Long-term debt, less current portion 28,199 29,864
Taxes payable and other 614 601
Deferred income taxes 3,798 3,908
Total Liabilities 60,331 61,174
Commitments and Contingencies      
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; 24,381,057 and 24,377,761 shares issued and outstanding 244 244
Additional paid-in capital 75,162 75,138
Retained earnings 44,929 44,419
Accumulated other comprehensive earnings 301 2,008
Total Century Casinos shareholders' equity 120,636 121,809
Non-controlling interests 6,967 7,641
Total equity 127,603 129,450
Total Liabilities and Shareholders' Equity $ 187,934 $ 190,624

Condensed Consolidated Balance Sheets (Parenthetical)
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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2014
Dec. 31, 2013
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 24,381,057 24,377,761
Common stock, shares outstanding 24,381,057 24,377,761

Condensed Consolidated Statements of Earnings
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Condensed Consolidated Statements of Earnings (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Operating revenue:    
Gaming $ 26,116 $ 15,696
Hotel 400 388
Food and beverage 2,706 2,578
Other 1,695 1,233
Gross revenue 30,917 19,895
Less: Promotional allowances (1,807) (1,904)
Net operating revenue 29,110 17,991
Operating costs and expenses:    
Gaming 15,275 6,932
Hotel 149 182
Food and beverage 2,238 2,118
General and administrative 8,655 5,424
Depreciation and amortization 1,810 1,191
Total operating costs and expenses 28,127 15,847
(Loss) from equity investment 0 (96)
Earnings from operations 983 2,048
Non-operating income (expense):    
Interest income 13 6
Interest expense (685) (82)
Gain on foreign currency transactions and other 130 7
Non-operating (expense), net (542) (69)
Earnings before income taxes 441 1,979
Income tax provision 215 317
Net earnings 226 1,662
Less: Net losses attributable to non-controlling interests 284 0
Net earnings attributable to Century Casinos, Inc. shareholders $ 510 $ 1,662
Earnings per share:    
Basic $ 0.02 $ 0.07
Diluted $ 0.02 $ 0.07
Weighted average shares outstanding - basic 24,380 24,128
Weighted average shares outstanding - diluted 24,384 24,154

Condensed Consolidated Statements of Comprehensive (Loss) Earnings
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Condensed Consolidated Statements of Comprehensive (Loss) Earnings (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Condensed Consolidated Statements of Comprehensive (Loss) Earnings [Abstract]    
Net earnings $ 226 $ 1,662
Other comprehensive (loss) income, net of tax:    
Foreign currency translation adjustments (1,816) (1,213)
Other comprehensive (loss), net of tax (1,816) (1,213)
Comprehensive (loss) earnings (1,590) 449
Plus: Comprehensive loss attributable to non-controlling interests 284 0
Less: Foreign currency translation adjustments attributable to non-controlling interests 109 0
Comprehensive (loss) earnings attributable to Century Casinos shareholders $ (1,197) $ 449

Condensed Consolidated Statements Of Shareholders' Equity
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Condensed 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 Casinos Shareholders' Equity [Member]
Noncontrolling Interest [Member]
Total
BALANCE at Dec. 31, 2012 $ 243 $ 75,388 $ 4,569 $ 38,238 $ (282) $ 118,156 $ 0 $ 118,156
Shares, BALANCE at Dec. 31, 2012 24,128,114              
Net earnings 0 0 0 1,662 0 1,662 0 1,662
Foreign currency translation adjustments 0 0 (1,213) 0 0 (1,213) 0 (1,213)
Amortization of stock based compensation 0 2 0 0 0 2 0 2
Exercise of stock options 0 0 0 0 0 0 0 0
Exercise of stock options, shares 0              
BALANCE at Mar. 31, 2013 243 75,390 3,356 39,900 (282) 118,607 0 118,607
Shares, BALANCE at Mar. 31, 2013 24,128,114              
BALANCE at Dec. 31, 2013 244 75,138 2,008 44,419 0 121,809 7,641 129,450
Shares, BALANCE at Dec. 31, 2013 24,377,761             24,377,761
Net earnings 0 0 0 510 0 510 (284) 226
Foreign currency translation adjustments 0 0 (1,707) 0 0 (1,707) (109) (1,816)
Amortization of stock based compensation 0 21 0 0 0 21 0 21
Distribution to non-controlling interest 0 0 0 0 0 0 (281) (281)
Exercise of stock options 0 3 0 0 0 3 0 3
Exercise of stock options, shares 3,296              
BALANCE at Mar. 31, 2014 $ 244 $ 75,162 $ 301 $ 44,929 $ 0 $ 120,636 $ 6,967 $ 127,603
Shares, BALANCE at Mar. 31, 2014 24,381,057             24,381,057

Condensed Consolidated Statements of Cash Flows
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Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash Flows from Operating Activities:    
Net earnings $ 226 $ 1,662
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 1,810 1,191
Loss on disposition of fixed assets 59 1
Amortization of stock-based compensation 21 2
Amortization of deferred financing costs 19 21
Deferred tax expense (205) (88)
Earnings from equity investment 0 96
Changes in Operating Assets and Liabilities, net of assets/liabilities acquired in business combination:    
Receivables 35 (195)
Prepaid expenses and other assets 141 28
Accounts payable and accrued liabilities (1,297) 204
Inventories (25) 9
Other operating assets 0 3
Other operating liabilities 12 0
Accrued payroll (110) (518)
Taxes payable (378) (1,229)
Net cash provided by operating activities 308 1,187
Cash Flows from Investing Activities:    
Purchases of property and equipment (1,501) (336)
Proceeds from disposition of assets 0 12
Issuance of note receivable 0 (500)
Net cash used in investing activities (1,501) (824)
Cash Flows from Financing Activities:    
Proceeds from borrowings 1,444 7,249
Principal repayments (620) (60)
Distribution to non-controlling interest (281) 0
Net cash provided by financing activities 543 7,189
Effect of Exchange Rate Changes on Cash (262) (193)
(Decrease) Increase in Cash and Cash Equivalents (912) 7,359
Cash and Cash Equivalents at Beginning of Period 27,348 24,747
Cash and Cash Equivalents at End of Period 26,436 32,106
Supplemental Disclosure of Cash Flow Information:    
Interest paid 101 62
Income taxes paid 534 745
Non-cash investing activities:    
Purchase of property, plant and equipment on account $ 1,377 $ 306

Description Of Business And Basis Of Presentation
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Description Of Business And Basis Of Presentation
3 Months Ended
Mar. 31, 2014
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 March 31, 2014, 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 Ltd. 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 May 2014, Windstar Cruises launched the Star Pride, the first of three newly acquired all suite cruise ships. We operate the ship-based casino aboard this 212 passenger ship. Windstar Cruises is planning to begin operations on the other two vessels during the second quarter of 2015, and we expect to operate the planned ship-based casinos aboard each ship. In addition, in June 2014, TUI Cruises plans to launch the Mein Schiff 3. We will operate the ship-based casino aboard this 2,506 passenger ship.

 

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.

 

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, manages the development of the REC project and has the right to convert CAD 11 million that the Company plans to loan to UHA into an additional 60% ownership interest in UHA. 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.

 

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 and Rule 8-03 of Regulation S-X. 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 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, 2013. The results of operations for the period ended March 31, 2014 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”) 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:

 

 

 

 

 

 

 

March 31,

December 31,

March 31,

Ending Rates

2014

2013

2013

Canadian dollar (CAD)

1.1053 
1.0636 
1.0156 

Euros (€)

0.7259 
0.7258 
0.7787 

Polish zloty (PLN)

3.0266 
3.0182 
3.2541 

 

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

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

Average Rates

2014

2013

% Change

Canadian dollar (CAD)

1.1026 
1.0084 
(9.3%)

Euros (€)

0.7299 
0.7574 
3.6% 

Polish zloty (PLN)

3.0533 
3.1443 
2.9% 

Source: Pacific Exchange Rate Service

 

 

 

 

 

 

 


Recently Issued Accounting Pronouncement
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Recently Issued Accounting Pronouncement
3 Months Ended
Mar. 31, 2014
Recently Issued Accounting Pronouncement [Abstract]  
Recently Issued Accounting Pronouncement

2. 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 has assessed and implemented the new standard as of January 1, 2014. The adoption of the standard had no impact on the Company’s financial statements. 


Acquisition
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Acquisition
3 Months Ended
Mar. 31, 2014
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 404 slot machines and 71 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 and $12.4 million in net operating revenue and less than $0.1 million in net earnings from January 1, 2014 through March 31, 2014. 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 in CPL 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.

 

 

 

 

 

Total

Amounts in thousands (USD)

 

Investment fair value - April 8, 2013

$
5,214 

Investment book value - 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).   

 

The following table provides information regarding the purchase consideration paid for the Company’s acquisition of an additional 33.3% interest in CPL:

 

Purchase Consideration – cash outflow

 

 

 

 

Outflow of cash to acquire subsidiary, net of cash acquired

 

Cash consideration

$
6,780 

Less: balances acquired

(2,381)

Outflow 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 were recorded as general and administrative expenses as of December 31, 2013.

 

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. There is no specific Polish law or regulation regarding 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 this 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 of this decision 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 March 31, 2014 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 on January 1, 2013. 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 during the period for which the pro forma information is presented, or of future results.

 

 

 

 

 

 

 

 

For the three months

ended March 31,2013

Net operating revenue

 

$
30,159 

Net earnings

 

$
1,539 

Basic and diluted earnings per share

 

$
0.06 

 

 

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 the 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. Loan A has an interest rate of BMO prime plus 600 basis points and a term of five years, and CAD 11 million of the 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. 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 in UHA as collateral for the loan.  

 

Under the amended management and credit agreements, CCE acquired 15% of UHA, controls the UHA board of directors, manages the development and operation of the REC project and has the right to convert CAD 11 million of Loan A into an additional 60% ownership interest in UHA. 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 licensing by the Alberta Gaming and Liquor Commission (“AGLC”), 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 it has a controlling financial interest. Unaffiliated shareholders own the remaining 85% of UHA. The Company accounts for and reports the remaining 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 and $0.3 million in net operating revenue and less than $0.1 million in net losses from January 1, 2014 through March 31, 2014.

 

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.

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. Goodwill of $0.2 million 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 the non-controlling interest of the non-affiliated shareholders 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 $0.3 million in connection with the UHA acquisition. These costs include legal, accounting, and valuation fees and were recorded as general and administrative expenses as of March 31, 2014.

 

Land

Prior to the Company’s acquisition, UHA purchased various plots of land on which the REC project will be constructed. UHA sold a portion of this land consisting of 71.99 acres to 1685258 Alberta Ltd (“Rosebridge”) and leased 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 March 31, 2014, the outstanding balance on the financing obligation was $17.6 million and the implicit interest rate was 10.0%.

 

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 in April 2013 and UHA issued a promissory note to pay 1369454 Alberta Ltd. 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 in December 2013 to pay outstanding Canadian federal tax owed by UHA. 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 during the periods presented are immaterial.


Goodwill And Intangible Assets
v0.0.0.0
Goodwill And Intangible Assets
3 Months Ended
Mar. 31, 2014
Goodwill And Intangible Assets [Abstract]  
Goodwill And Intangible Assets

4.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 March 31, 2014 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 were recorded during 2013 or during the three months ended March 31, 2014.

Changes in the carrying amount of goodwill related to the Company’s Edmonton property, CPL and UHA for the three months ended March 31, 2014 are as follows:

 

 

 

 

 

 

Amounts in thousands

Edmonton

Casinos Poland

UHA

Total

Balance – January 1, 2014

$
4,622 
$
8,479 
$
178 
$
13,279 

Effect of foreign currency translation

(174)
(24)
(7)
(205)

Balance – March 31, 2014

$
4,448 
$
8,455 
$
171 
$
13,074 

 

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.

As of March 31, 2014, the carrying amounts of the trademarks were as follows:

 

 

 

 

 

Amounts in thousands

 

Century Casinos

$
108 

Casinos Poland

2,015 

Total

$
2,123 

 

Changes in the carrying amount of trademarks for the three months ended March 31, 2014 are as follows:

 

 

 

 

 

Amounts in thousands

Century Casinos

Casinos Poland

Total

Balance – January 1, 2014

$
108 
$
2,021 
$
2,129 

Effect of foreign currency translation

(6)
(6)

Balance – March 31, 2014

$
108 
$
2,015 
$
2,123 

 

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. No impairment charges related to trademarks were recorded during 2013 or during the three months ended March 31, 2014.

Casino Licenses

 

Casinos Poland

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 for the three months ended March 31, 2014 are as follows:

 

 

 

 

Amounts in thousands

 

Balance – January 1, 2014

$
2,245 

Amortization

(142)

Effect of foreign currency translation

(5)

Balance – March 31, 2014

$
2,098 

 

As of March 31, 2014, estimated amortization expense for the CPL casino licenses over the next five years is as follows:

 

 

 

 

 

Amounts in thousands

 

2014

424 

2015

565 

2016

529 

2017

432 

2018

131 

2019

17 

 

$
2,098 

 

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 3.7 years.

 

UHA

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 March 31, 2014, the carrying amount of the license was $2.9 million. No impairment charges related to the license have been recorded during 2013 or during the three months ended March 31, 2014.

 

 

 

 

 

UHA

Amounts in thousands

 

Balance – January 1, 2014

$
2,991 

Effect of foreign currency translation

(113)

Balance – March 31, 2014

$
2,878 

 


Promotional Allowances
v0.0.0.0
Promotional Allowances
3 Months Ended
Mar. 31, 2014
Promotional Allowances [Abstract]  
Promotional Allowances

5.PROMOTIONAL ALLOWANCES

 

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 as follows:

 

 

 

 

 

 

 

For the three months

 

ended March 31,

 

2014

 

2013

Amounts in thousands

 

 

 

Hotel

$
22 

 

$
19 

Food and beverage

256 

 

255 

 

$
278 

 

$
274 

 

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 March 31, 2014 and December 31, 2013, the outstanding balance of this liability was $0.9 million.


Long-Term Debt
v0.0.0.0
Long-Term Debt
3 Months Ended
Mar. 31, 2014
Long-Term Debt [Abstract]  
Long-Term Debt

6.  LONG-TERM DEBT

 

Long-term debt as of March 31, 2014 and December 31, 2013 consisted of the following:

 

 

 

 

 

 

March 31,

 

December 31,

Amounts in thousands

2014

 

2013

Credit agreement - Bank of Montreal

$
8,679 

 

$
9,277 

Credit agreement - Casinos Poland

4,507 

 

4,798 

Credit facility - Casinos Poland

2,812 

 

1,447 

Capital leases - Casinos Poland

205 

 

207 

Financing obligation - UHA land lease*

17,638 

 

18,330 

Total long-term debt

$
33,841 

 

$
34,059 

Less current portion

(5,642)

 

(4,195)

Long-term portion

$
28,199 

 

$
29,864 

 

*The financing obligation represents the land lease with UHA. Prior to the Company’s acquisition, UHA purchased various plots of land on which the REC project will be constructed. UHA sold a portion of the land consisting of 71.99 acres to Rosebridge and leased back 51.99 acres of the land. The Company began accounting for the lease using the financing method as of the date of the UHA 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. Under the land lease, UHA has four options to purchase the land. The first option date is July 1, 2023.

 

As of March 31, 2014, scheduled maturities related to Bank of Montreal and Casinos Poland long-term debt are as follows:

 

 

 

 

 

 

 

 

 

Amounts in thousands

Bank of Montreal

 

Casinos Poland

2014

$
747 

 

$
4,226 

2015

995 

 

1,683 

2016

995 

 

1,614 

2017

995 

 

2018

995 

 

Thereafter

3,952 

 

Total

$
8,679 

 

$
7,524 

 

The consolidated weighted average interest rate on all Company debt was 8.2% for the three months ended March 31, 2014. 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 5.47% on its borrowings under the CPL loan agreements. The weighted average interest rate on all Company debt is higher than the 3.75% interest rate of the BMO Credit Agreement and the weighted average interest of 5.47% on the CPL loan agreements due to the UHA financing obligation, on which the Company pays an implicit interest rate of 10.0%.  

 

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 through May 2017 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 March 31, 2014. As of March 31, 2014, the amount outstanding was $8.7 million and the Company had approximately CAD 17.0 million (approximately $15.0 million based on the exchange rate in effect on March 31, 2014) 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 less than $0.1 million for the period ended March 31, 2014 and 2013. 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 debt totaling $7.5 million as of March 31, 2014. The debt includes two bank loans, one bank line of credit and 12 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 March 31, 2014, 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 March 31, 2014. 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 March 31, 2014, the amount outstanding was $0.5 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 March 31, 2014.

 

The bank line of credit is a short-term facility used to finance current operations. The line of credit is with BPH Bank, is a short-term revolving credit facility with an interest rate of WIBOR plus 1.85%. The credit agreement terminates on February 13, 2016. As of March 31, 2014, the amount outstanding was $2.8 million and CPL has approximately $0.8 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 March 31, 2014.

 

CPL’s remaining debt consists of 12 capital lease agreements. The lease agreements are for various vehicles that are replaced on an ongoing basis. As of March 31, 2014, the amount outstanding was $0.2 million.

 

In addition, under Polish gaming law, CPL is required to maintain PLN 4.8 million in the form of deposits or bank guarantees for payment of casino jackpots and gaming tax obligations.  On February 14, 2014, BRE Bank issued a guarantee of PLN 3.5 million ( $1.2 million based on the exchange rate in effect as of March 31, 2014) to CPL for this purpose.  The term of the guarantee by BRE Bank is three years.  As of March 31, 2014, CPL maintained $0.4 million in deposits for this purpose.

 

 

 

UHA

Prior to the Company’s acquisition, UHA purchased various plots of land on which the REC project will be constructed. UHA sold a portion of this land consisting of 71.99 acres to Rosebridge and leased 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 March 31, 2014, the outstanding balance on the financing obligation was $17.6 million and the implicit interest rate was 10.0%.  


Income Taxes
v0.0.0.0
Income Taxes
3 Months Ended
Mar. 31, 2014
Income Taxes [Abstract]  
Income Taxes

7.INCOME TAXES

 

The Company’s pre-tax income (loss), income tax (benefit) and effective tax rate by jurisdiction are summarized in the table below:

 

 

 

 

 

 

 

 

 

For the three months

For the three months

Amounts in thousands

ended March 31, 2014

ended March 31, 2013

   

Pre-tax income (loss)

Income tax (benefit)

Effective tax rate

Pre-tax income (loss)

Income tax

Effective tax rate

Canada

$
971 
$
233 
24.0% 
$
1,520 
$
280 
18.4% 

United States

(567)
0.0% 
181 
0.0% 

Mauritius*

40 
2.5% 
136 
2.9% 

Austria

(9)
0.0% 
278 
0.0% 

Poland

(19)
(316.7%)
(136)
33 
(24.3%)

Total

$
441 
$
215 
48.8% 
$
1,979 
$
317 
16.0% 

 

 

 

 

 

 

 

*Ship-based casinos

 

 

 

 

 

 

 

During the three months ended March 31, 2014, the Company recognized income tax expense of $0.2 million on pre-tax income of $0.4 million, representing an effective income tax benefit rate of 48.8% compared to an income tax expense of $0.3 million on pre-tax income of $2.0 million, representing an effective income tax rate of 16% for the same period in 2013.

 

The increase in the effective tax rate compared to the same period in 2013 is primarily the result of a pre-tax loss in the United States and Austria for the first quarter of 2014. Since the Company maintains a full valuation allowance on all of its U.S. and Austrian deferred tax assets, income tax expense is recorded relative to the jurisdictions that recognize book earnings.  In addition, the movement of exchange rates for intercompany loans denominated in U.S. dollars further impacts the Company’s effective income tax rate. Therefore, the Company’s overall effective income tax rate can be significantly impacted by foreign currency gains or losses.

 


Earnings Per Share
v0.0.0.0
Earnings Per Share
3 Months Ended
Mar. 31, 2014
Earnings Per Share [Abstract]  
Earnings Per Share

8.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 three months ended March 31, 2014 and 2013 were as follows:

 

 

 

 

 

 

For the three months

 

ended March 31,

Amounts in thousands

2014

2013

Weighted average common shares, basic

24,380 
24,128 

Dilutive effect of stock options

26 

Weighted average common shares, diluted

24,384 
24,154 

 

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

 

 

 

 

 

For the three months

 

ended March 31,

Amounts in thousands

2014

2013

Stock options

68 
38 

 

 

 


Fair Value Measurements
v0.0.0.0
Fair Value Measurements
3 Months Ended
Mar. 31, 2014
Fair Value Measurements [Abstract]  
Fair Value Measurements

9. FAIR VALUE MEASUREMENTS

 

The Company follows fair value measurement authoritative accounting guidance for all assets and liabilities measured at fair value. That authoritative accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs:

 

·

Level 1 – quoted prices in active markets for identical assets or liabilities

·

Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable

·

Level 3 – significant inputs to the valuation model are unobservable

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. 

 

Recurring Fair Value Measurements

We had no assets or liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013

 

Nonrecurring Fair Value Measurements

We have applied the provisions of the fair value measurement standard to our nonrecurring, non-financial assets and liabilities measured at fair value.  These assets and liabilities consist of those acquired by the Company in connection with our increased ownership in CPL and UHA. These assets are not measured at fair value on an ongoing basis, but are subject to fair value measurement only in certain circumstances.  The following table presents information about our non-financial assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2013, aggregated by the level in the fair value hierarchy within which those assets fall. There were no assets or liabilities measured at fair value at March 31, 2014.

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Contingent liability

$
$
$
5,104 

Noncontrolling interests

$
$
$
7,641 

Property and equipment, net

$
$
$
37,325 

Casino licenses

$
$
$
5,236 

Trademark

$
$
$
2,021 

 

The Company used the following methods to estimate the fair values of the assets and liabilities in the table above:

 

Contingent liability – Level 3 fair value measurements include the measurement of the contingent liability recorded for CPL. The company measures the fair value of the contingent liability using a probability weighted cash flow analysis. Because of the significance of the unobservable inputs in the fair value measurements of the liability, such measurements have been classified as Level 3.

 

Noncontrolling interests - Noncontrolling interests are measured primarily by a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures.

 

Property and equipment, net The Company measured the fair value of property and equipment by using the direct market value approach and the direct and indirect cost approach. Because of the significance of the unobservable inputs in the fair value measurements of the liability, such measurements have been classified as Level 3.

 

Casino licenses– The Company measured casino licenses acquired from CPL by using a replacement cost method. Because of the significance of the unobservable inputs in the fair value measurements of the liability, such measurements have been classified as Level 3.

 

Trademark – The Company measured the Casinos Poland trademark acquired from CPL by using the relief from royalty method. Because of the significance of the unobservable inputs in the fair value measurements of the liability, such measurements have been classified as Level 3.

 

Long-Term Debt – The carrying value of the Company’s BMO Credit Agreement approximates fair value as of March 31, 2014 and December 31, 2013 because it bears interest at the lenders’ variable rate.  The carrying value of the CPL debt approximates fair value as of March 31, 2014 and December 31, 2013 because a substantial portion of the debt is short-term with a primarily variable interest rate and CPL recently negotiated the debt with the lender. The carrying value of the UHA debt approximates fair value as of March 31, 2014 and December 31, 2013 because the debt bears an implicit rate based on the fair value of the land.

 

Other Estimated Fair Value Measurements – The estimated fair value of our other assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory, accrued payroll and accounts payable, have been determined to approximate carrying value based on the short-term nature of those financial instruments.    


Segment Information
v0.0.0.0
Segment Information
3 Months Ended
Mar. 31, 2014
Segment Information [Abstract]  
Segment Information

10.SEGMENT INFORMATION

 

The Company’s chief operating decision maker is a management function comprised of two individuals.  These two individuals are our Co-CEOs. The Company’s casino properties provide gaming, hotel accommodations, dining facilities and other amenities to the Company’s customers. Management views each property as an operating segment based on its business activities, financial information and operating results, which are used by our chief operating decision maker function to assess performance and allocate resources within the Company. The Company’s operating segments have been aggregated into one reporting segment based on the similarities among economic characteristics, the nature of the products and services provided, types of customers, the methods used to distribute our products and services, and the regulatory environments in which they operate and their management and reporting structure. All significant intercompany transactions have been eliminated. 

 

The Company's principal operating activities occur in four geographic areas: the United States, Canada, Europe and in international waters. The following summary provides information regarding the Company’s principal geographic areas:

 

 

 

 

 

 

 

 

 

Long Lived Assets

 

At March 31,

 

At December 31,

Amounts in thousands

2014

 

2013

   

 

 

 

United States

$
55,567 

 

$
55,809 

   

 

 

 

International:

 

 

 

   Canada

$
65,472 

 

$
67,858 

Europe

34,410 

 

33,793 

   International waters

1,029 

 

804 

  Aruba

 

Total international

100,911 

 

102,455 

Total

$
156,478 

 

$
158,264 

 

 

 

 

 

 

   

Net Operating Revenue

 

For the three months ended March 31,

Amounts in thousands

2014

 

2013

United States

$
6,462 

 

$
7,339 

   

 

 

 

International:

 

 

 

   Canada

$
8,563 

 

$
8,810 

   Europe

12,413 

 

   International waters

1,571 

 

1,749 

   Aruba

101 

 

93 

Total international

22,648 

 

10,652 

Total

$
29,110 

 

$
17,991 

 

 

 

 

 

 

 

 


Description Of Business And Basis Of Presentation (Tables)
v0.0.0.0
Description Of Business And Basis Of Presentation (Tables)
3 Months Ended
Mar. 31, 2014
Description Of Business And Basis Of Presentation [Abstract]  
Exchange Rates

 

 

 

 

 

March 31,

December 31,

March 31,

Ending Rates

2014

2013

2013

Canadian dollar (CAD)

1.1053 
1.0636 
1.0156 

Euros (€)

0.7259 
0.7258 
0.7787 

Polish zloty (PLN)

3.0266 
3.0182 
3.2541 

 

Average Exchange Rates

 

 

 

 

 

For the three months

 

 

ended March 31,

 

Average Rates

2014

2013

% Change

Canadian dollar (CAD)

1.1026 
1.0084 
(9.3%)

Euros (€)

0.7299 
0.7574 
3.6% 

Polish zloty (PLN)

3.0533 
3.1443 
2.9% 

Source: Pacific Exchange Rate Service

 

 

 

 


Acquisition (Tables)
v0.0.0.0
Acquisition (Tables)
3 Months Ended 9 Months Ended
Mar. 31, 2014
Sep. 30, 2013
Casinos Poland Ltd [Member]
   
Business Acquisition [Line Items]    
Gain On Business Combination  

 

 

 

Total

Amounts in thousands (USD)

 

Investment fair value - April 8, 2013

$
5,214 

Investment book value - 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 

 

Assets And Liabilities Recognized As A Result Of The Acquisition

 

 

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 

 

 
Purchase Consideration - Cash Outflow

 

 

Outflow of cash to acquire subsidiary, net of cash acquired

 

Cash consideration

$
6,780 

Less: balances acquired

(2,381)

Outflow of cash - investing activities

$
4,399 

 

 
Pro Forma Results  

 

 

 

 

 

 

 

 

For the three months

ended March 31,2013

Net operating revenue

 

$
30,159 

Net earnings

 

$
1,539 

Basic and diluted earnings per share

 

$
0.06 

 

United Horsemen Of Alberta Inc. [Member]
   
Business Acquisition [Line Items]    
Assets And Liabilities Recognized As A Result Of The Acquisition

 

 

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 

 

 
Casinos Poland Ltd [Member]
   
Business Acquisition [Line Items]    
Purchase Consideration - Cash Outflow

 

 

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 

 

 

Goodwill And Intangible Assets (Tables)
v0.0.0.0
Goodwill And Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2014
Changes In The Carrying Amount Of Goodwill

 

 

 

 

 

Amounts in thousands

Edmonton

Casinos Poland

UHA

Total

Balance – January 1, 2014

$
4,622 
$
8,479 
$
178 
$
13,279 

Effect of foreign currency translation

(174)
(24)
(7)
(205)

Balance – March 31, 2014

$
4,448 
$
8,455 
$
171 
$
13,074 

 

Trademarks

As of March 31, 2014, the carrying amounts of the trademarks were as follows:

 

 

 

 

 

Amounts in thousands

 

Century Casinos

$
108 

Casinos Poland

2,015 

Total

$
2,123 

 

Changes in the carrying amount of trademarks for the three months ended March 31, 2014 are as follows:

 

 

 

 

 

Amounts in thousands

Century Casinos

Casinos Poland

Total

Balance – January 1, 2014

$
108 
$
2,021 
$
2,129 

Effect of foreign currency translation

(6)
(6)

Balance – March 31, 2014

$
108 
$
2,015 
$
2,123 

 

Intangible Asset

 

 

Amounts in thousands

 

Balance – January 1, 2014

$
2,245 

Amortization

(142)

Effect of foreign currency translation

(5)

Balance – March 31, 2014

$
2,098 

 

Estimated Amortization Expense

 

 

Amounts in thousands

 

2014

424 

2015

565 

2016

529 

2017

432 

2018

131 

2019

17 

 

$
2,098 

 

United Horsemen Of Alberta Inc. [Member]
 
Intangible Asset

 

 

 

UHA

Amounts in thousands

 

Balance – January 1, 2014

$
2,991 

Effect of foreign currency translation

(113)

Balance – March 31, 2014

$
2,878 

 


Promotional Allowances (Tables)
v0.0.0.0
Promotional Allowances (Tables)
3 Months Ended
Mar. 31, 2014
Promotional Allowances [Abstract]  
Schedule Of Promotional Allowances

 

 

 

 

 

For the three months

 

ended March 31,

 

2014

 

2013

Amounts in thousands

 

 

 

Hotel

$
22 

 

$
19 

Food and beverage

256 

 

255 

 

$
278 

 

$
274 

 


Long-Term Debt (Tables)
v0.0.0.0
Long-Term Debt (Tables)
3 Months Ended
Mar. 31, 2014
Long-Term Debt [Abstract]  
Schedule of Long-term Debt

 

 

 

 

 

March 31,

 

December 31,

Amounts in thousands

2014

 

2013

Credit agreement - Bank of Montreal

$
8,679 

 

$
9,277 

Credit agreement - Casinos Poland

4,507 

 

4,798 

Credit facility - Casinos Poland

2,812 

 

1,447 

Capital leases - Casinos Poland

205 

 

207 

Financing obligation - UHA land lease*

17,638 

 

18,330 

Total long-term debt

$
33,841 

 

$
34,059 

Less current portion

(5,642)

 

(4,195)

Long-term portion

$
28,199 

 

$
29,864 

 

Schedule of Maturities of Long-term Debt

 

 

 

 

Amounts in thousands

Bank of Montreal

 

Casinos Poland

2014

$
747 

 

$
4,226 

2015

995 

 

1,683 

2016

995