Document and Entity Information
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Document and Entity Information
9 Months Ended
Sep. 30, 2014
Nov. 07, 2014
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2014  
Document Fiscal Year Focus 2014  
Document Fiscal Period Focus Q3  
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
Sep. 30, 2014
Dec. 31, 2013
ASSETS    
Cash and cash equivalents $ 27,303 $ 27,348
Receivables, net 912 1,205
Prepaid expenses 2,883 2,298
Inventories 545 498
Current portion of note receivable 0 195
Deferred income taxes 197 231
Restricted cash 446 470
Other current assets 84 115
Total Current Assets 32,370 32,360
Property and equipment, net 132,797 132,639
Goodwill 12,277 13,279
Deferred income taxes 3,847 3,634
Casino licenses 4,327 5,236
Trademark 1,949 2,129
Notes receivable 0 305
Deposits and other 675 800
Deferred financing costs 255 242
Total Assets 188,497 190,624
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current portion of long-term debt 6,490 4,195
Accounts payable 3,413 2,460
Accrued liabilities 5,590 5,819
Accrued payroll 4,233 4,257
Taxes payable 2,807 4,803
Contingent liability (note 3) 4,656 5,104
Deferred income taxes 155 163
Total Current Liabilities 27,344 26,801
Long-term debt, less current portion 32,126 29,864
Taxes payable and other 590 601
Deferred income taxes 3,595 3,908
Total Liabilities 63,655 61,174
Commitments and Contingencies      
Shareholders' Equity:    
Preferred stock; $0.01 par value; 20,000,000 shares authorized; no shares issued or outstanding      
Common stock; $0.01 par value; 50,000,000 shares authorized; 24,381,057 and 24,377,761 shares issued and outstanding 244 244
Additional paid-in capital 75,197 75,138
Retained earnings 45,881 44,419
Accumulated other comprehensive earnings (1,352) 2,008
Total Century Casinos shareholders' equity 119,970 121,809
Non-controlling interests 4,872 7,641
Total equity 124,842 129,450
Total Liabilities and Shareholders' Equity $ 188,497 $ 190,624

Condensed Consolidated Balance Sheets (Parenthetical)
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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 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 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Operating revenue:        
Gaming $ 26,377 $ 26,758 $ 81,676 $ 68,603
Hotel 441 414 1,236 1,166
Food and beverage 2,680 2,619 8,124 7,817
Other 1,035 1,031 3,891 3,373
Gross revenue 30,533 30,822 94,927 80,959
Less: Promotional allowances (2,410) (1,996) (6,137) (5,795)
Net operating revenue 28,123 28,826 88,790 75,164
Operating costs and expenses:        
Gaming 13,780 13,959 45,130 34,401
Hotel 156 172 445 538
Food and beverage 2,370 2,416 6,925 6,875
General and administrative 9,052 9,224 28,450 23,052
Depreciation and amortization 2,050 1,685 5,820 4,671
Total operating costs and expenses 27,408 27,456 86,770 69,537
(Loss) from equity investment 0 0 0 (128)
Earnings from operations 715 1,370 2,020 5,499
Non-operating income (expense):        
Gain on business combination 0 0 0 2,074
Interest income 11 7 72 18
Interest expense (707) (206) (2,090) (550)
Gain on foreign currency transactions and other 200 66 375 234
Non-operating (expense) income, net (496) (133) (1,643) 1,776
Earnings before income taxes 219 1,237 377 7,275
Income tax provision 138 132 786 685
Net earnings (loss) 81 1,105 (409) 6,590
Net loss (earnings) attributable to non-controlling interests 715 (32) 1,871 (198)
Net earnings attributable to Century Casinos, Inc. shareholders $ 796 $ 1,073 $ 1,462 $ 6,392
Earnings per share:        
Basic $ 0.03 $ 0.04 $ 0.06 $ 0.26
Diluted $ 0.03 $ 0.04 $ 0.06 $ 0.26
Weighted average shares outstanding - basic 24,381 24,249 24,380 24,334
Weighted average shares outstanding - diluted 24,417 24,413 24,419 24,464

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 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Condensed Consolidated Statements of Comprehensive (Loss) Earnings [Abstract]        
Net earnings (loss) $ 81 $ 1,105 $ (409) $ 6,590
Other comprehensive income (loss), net of tax:        
Foreign currency translation adjustments (3,649) 2,025 (3,977) (1,425)
Other comprehensive (loss) earnings, net of tax (3,649) 2,025 (3,977) (1,425)
Comprehensive (loss) earnings (3,568) 3,130 (4,386) 5,165
Comprehensive loss (earnings) attributable to non-controlling interests 715 (32) 1,871 (198)
Foreign currency translation adjustments attributable to non-controlling interests 534 (362) 617 (87)
Comprehensive (loss) earnings attributable to Century Casinos shareholders $ (2,319) $ 2,736 $ (1,898) $ 4,880

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 (loss) 0 0 0 6,392 0 6,392 198 6,590
Foreign currency translation adjustment 0 0 (1,512) 0 0 (1,512) 87 (1,425)
Stock-based compensation expense 0 8 0 0 0 8 0 8
Fair value of non-controlling interest 0 0 0 0 0 0 5,214 5,214
Exercise of stock options 1 (280) 0 0 282 3 0 3
Exercise of stock options, shares 249,647              
BALANCE at Sep. 30, 2013 244 75,116 3,057 44,630 0 123,047 5,499 128,546
Shares, BALANCE at Sep. 30, 2013 24,377,761              
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 (loss) 0 0 0 1,462 0 1,462 (1,871) (409)
Foreign currency translation adjustment 0 0 (3,360) 0 0 (3,360) (617) (3,977)
Stock-based compensation expense 0 56 0 0 0 56 0 56
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 Sep. 30, 2014 $ 244 $ 75,197 $ (1,352) $ 45,881 $ 0 $ 119,970 $ 4,872 $ 124,842
Shares, BALANCE at Sep. 30, 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
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Cash Flows from Operating Activities:    
Net (loss) earnings $ (409) $ 6,590
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:    
Depreciation and amortization 5,820 4,671
Gain on business combination 0 (2,074)
Casino license impairment 198 0
Loss on disposition and impairment of fixed assets 590 266
Stock-basaed compensation expense 56 8
Amortization of deferred financing costs 58 62
Deferred tax expense (499) (498)
Earnings in unconsolidated subsidiary 0 128
Changes in Operating Assets and Liabilities:    
Receivables 379 488
Prepaid expenses and other assets (709) 54
Increase (decrease) in accounts payable (1,314) (766)
Accrued liabilities (23) (427)
Inventories (87) (38)
Other operating assets 0 (128)
Other operating liabilities 17 (223)
Accrued payroll 129 (237)
Taxes payable (2,046) (1,398)
Net cash provided by operating activities 2,160 6,478
Cash Flows used in Investing Activities:    
Purchases of property and equipment (8,672) (2,144)
Acquisition of Casinos Poland, net of cash acquired 0 (4,580)
Proceeds from disposition of assets 1 53
Note receivable proceeds (issuance) 500 (500)
Net cash used in investing activities (8,171) (7,171)
Cash Flows provided by Financing Activities:    
Proceeds from borrowings 9,002 9,322
Principal repayments (2,289) (2,806)
Distribution to non-controlling interest (281) 0
Exercise of stock options 3 3
Net cash provided by financing activities 6,435 6,519
Effect of Exchange Rate Changes on Cash (469) (126)
(Decrease) Increase in Cash and Cash Equivalents (45) 5,700
Cash and Cash Equivalents at Beginning of Period 27,348 24,747
Cash and Cash Equivalents at End of Period 27,303 30,447
Supplemental Disclosure of Cash Flow Information:    
Interest paid 383 494
Income taxes paid 2,225 1,662
Non-cash investing activities:    
Purchase of property, plant and equipment on account $ 2,305 $ 162

Description Of Business And Basis Of Presentation
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Description Of Business And Basis Of Presentation
9 Months Ended
Sep. 30, 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 September 30, 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, had a management contract to manage the casino in the Radisson Aruba Resort, Casino & Spa and was developing a Racing Entertainment Center (“REC”) in Canada.

 

As of September 30, 2014 the Company owned, operated and managed 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.

 

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.

 

The Company operates 16 ship-based casinos onboard the ships of the following five cruise lines: Oceania Cruises, TUI Cruises, Windstar Cruises, Regent Seven Seas Cruises and Nova Star Cruises Ltd.  

In May 2014, Windstar Cruises launched the Star Pride, the first of three newly acquired all suite cruise ships. The Company operates the ship-based casino onboard 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 ship-based casinos onboard each ship.

 

In February 2014, the Company signed an exclusive agreement with Nova Star Cruises Ltd. to operate a ship-based casino onboard the Nova Star, a round trip cruise ferry service connecting Portland, Maine and Yarmouth, Nova Scotia. The ferry began operations on May 15, 2014 and operates on a seasonal basis from May to November. In September 2014, Nova Star Cruises Ltd. announced that it was shortening its 2014 sailing season with the final round trip ending on October 14, 2014.

 

In June 2014, TUI Cruises launched the Mein Schiff 3 and the Company currently operates the ship-based casino onboard this ship.

 

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. dba Century Downs Racetrack and Casino ("CDR") in connection with the development and operation of a 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 CDR amended the credit agreement. Under the amended credit agreement, CCE owns 15% of CDR, controls the CDR 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 CDR into an additional 60% ownership interest in CDR. The Company began consolidating CDR as a minority owned subsidiary for which it has a controlling financial interest on November 29, 2013. Unaffiliated shareholders own the remaining 85% of CDR, and the Company accounts for and reports the 85% CDR ownership interest as a non-controlling financial interest. See Note 3 for additional information related to CDR.

 

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 September 30, 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:

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

September 30,

Ending Rates

 

2014

 

2013

 

2013

Canadian dollar (CAD)

 

1.1208 

 

1.0636 

 

1.0285 

Euros (€)

 

0.7919 

 

0.7258 

 

0.7389 

Polish zloty (PLN)

 

3.3140 

 

3.0182 

 

3.1214 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

 

For the nine months

 

 

 

 

ended September 30,

 

 

 

ended September 30,

 

 

Average Rates

 

2014

 

2013

 

% Change

 

2014

 

2013

 

% Change

Canadian dollar (CAD)

 

1.0890 

 

1.0389 

 

(4.8%)

 

1.0940 

 

1.0237 

 

(6.9%)

Euros (€)

 

0.7552 

 

0.7549 

 

0.0% 

 

0.7381 

 

0.7594 

 

2.8% 

Polish zloty (PLN)

 

3.1544 

 

3.2054 

 

1.6% 

 

3.0820 

 

3.1884 

 

3.3% 

Source: Pacific Exchange Rate Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Recently Issued Accounting Pronouncement
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Recently Issued Accounting Pronouncement
9 Months Ended
Sep. 30, 2014
Recently Issued Accounting Pronouncement [Abstract]  
Recently Issued Accounting Pronouncement

 

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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 (“ASU 2013-11”).  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. 

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014‑09”).  The objective of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard for US GAAP and International Financial Reporting Standards.  ASU 2014‑09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.  Early adoption of ASU 2014-09 is not permitted. The Company is currently evaluating the impact of adopting ASU 2014‑09, but does not expect the standard to have a significant effect on its consolidated financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (“ASU 2014-15”). The objective of ASU 2014-15 is to provide guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for fiscal years ending after December 15, 2016, and annual and interim periods thereafter. The Company assessed the new standard as of September 30, 2014. Management does not expect this standard to have a material impact on the Company’s consolidated financial statements.


Acquisitions
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Acquisitions
9 Months Ended
Sep. 30, 2014
Acquisitions [Abstract]  
Acquisition

3.ACQUISITIONS

 

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 471 slot machines and 73 gaming tables. The Company paid for the purchase through borrowings under its credit agreement (“BMO Credit Agreement”) with the Bank of Montreal (“BMO”) (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 $37.1 million in net operating revenue and $0.6 million in net losses from January 1, 2014 through September 30, 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 final fair values of assets and liabilities as of April 8, 2013, the date of acquisition. The measurement period to make any adjustments to the fair value of the assets and liabilities recognized as a result of the acquisition ended a year after the date of acquisition on April 8, 2014.

 

 

 

 

 

 

 

 

 

 

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 for the year ended 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, January 1, 2009 to December 31, 2009 and 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 Administrative Court and expects a decision in 2015.

 

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 periods from December 1, 2007 to December 31, 2008 and from January 1, 2009 to December 31, 2009. CPL paid PLN 3.5 million ($1.2 million) to the Polish IRS for taxes and interest owed on December 31, 2013. CPL filed an appeal of this decision in January 2014 to the Voivodship Administrative Court. In September 2014, the Voivodship Administrative Court denied CPL’s appeal.  CPL plans to appeal the decision to the Supreme Administrative Court.

 

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 September 30, 2014 is estimated at PLN 14.8 million ($4.7 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 nine months

 

 

 

ended September 30, 2013

Net operating revenue

 

$

80,595 

Net earnings

 

$

6,245 

Basic and diluted earnings per share

 

$

0.25 

 

 

 

 

 

Century Downs Racetrack and Casino

On November 30, 2012, the Company’s subsidiary CCE signed credit and management agreements with CDR 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 an amended credit agreement with CDR in connection with the development of the REC project. Under the amended credit agreement, CCE agreed to loan to CDR 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 additional ownership position in CDR 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 CDR 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 CDR’s stock by the majority of the CDR 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 the BMO Credit Agreement (Note 6).   

 

Under the amended credit agreement with CDR, CCE acquired 15% of CDR, controls the CDR 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 CDR. Once the REC is developed and operational and for as long as CCE has not converted the CDR loan into a majority ownership position in CDR, CCE will receive 60% of CDR’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 CDR as a minority owned subsidiary for which it has a controlling financial interest. Unaffiliated shareholders own the remaining 85% of CDR. The Company accounts for and reports the remaining 85% CDR ownership interest as a non-controlling financial interest. CDR 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 $0.5 million in net operating revenue and less than $0.1 million in net losses from January 1, 2014 through September 30, 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, CDR’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 CDR 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 CDR at its fair value of $2.3 million as of November 29, 2013.

 

Acquisition-related costs

The Company incurred acquisition costs of approximately $0.4 million in connection with the CDR acquisition. These costs include legal, accounting, and valuation fees and were recorded as general and administrative expenses as of September 30, 2014.

 

Land

Prior to the Company’s acquisition, CDR purchased various plots of land on which the REC project will be constructed. CDR 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 September 30, 2014, the outstanding balance on the financing obligation was $17.4 million and the implicit interest rate was 10.0%.

 

Contingent Liability

In February 2013, 1369454 Alberta Ltd filed a lawsuit against CDR for previously owed money not paid by CDR.  The case was settled in April 2013, and CDR issued a promissory note to pay 1369454 Alberta Ltd. CAD 0.2 million  ($0.2 million based on the exchange rate in effect on September 30, 2014).  

 

Financing

Prior to November 29, 2013, the Company loaned $1.4 million to CDR for deferred financing costs related to legal fees incurred for the CDR 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 $0.2 million to CDR in December 2013 to pay outstanding Canadian federal tax owed by CDR. The unsecured note is due and payable on December 31, 2014 and has a 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 operating activities of CDR during the comparable 2013 periods presented are immaterial.


Goodwill And Intangible Assets
v0.0.0.0
Goodwill And Intangible Assets
9 Months Ended
Sep. 30, 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 September 30, 2014 include our Edmonton casino property, our CPL casino operations, and CDR’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 nine months ended September 30, 2014.

Changes in the carrying amount of goodwill related to the Company’s Edmonton property, CPL casino operations and CDR’s REC project development activities for the nine months ended September 30, 2014 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands

 

Edmonton

 

Casinos Poland

 

CDR

 

Total

Balance – January 1, 2014

 

$

4,622 

 

$

8,479 

 

$

178 

 

$

13,279 

Effect of foreign currency translation

 

 

(236)

 

 

(757)

 

 

(9)

 

 

(1,002)

Balance – September 30, 2014

 

$

4,386 

 

$

7,722 

 

$

169 

 

$

12,277 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

Changes in the carrying amount of trademarks for the nine months ended September 30, 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

 

 

 

 

(180)

 

 

(180)

Balance – September 30, 2014

 

$

108 

 

$

1,841 

 

$

1,949 

 

 

 

 

 

 

 

 

 

 

 

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 nine months ended September 30, 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. On June 30, 2014, the Casinos Poland management board decided to suspend operations at the Sosnowiec casino for a period of five months. During the preceding year, the board replaced staff, changed the exterior appearance of the casino, increased marketing efforts and modified the floor plan of the casino. However, the casino had not achieved profitability. Based on the decision to suspend operations, the Company evaluated the carrying amount of the Sosnowiec casino license and determined that it no longer had value. Therefore, the Company wrote down the Sosnowiec casino license to zero and charged $0.2 million to operating costs and expenses. Changes in the carrying amount of the Casinos Poland licenses for the nine months ended September 30, 2014 are as follows:

 

 

 

 

 

 

 

 

 

 

Amounts in thousands

 

 

 

Balance – January 1, 2014

 

$

2,245 

Sosnowiec license impairment

 

 

(198)

Amortization

 

 

(412)

Effect of foreign currency translation

 

 

(146)

Balance – September 30, 2014

 

$

1,489 

 

 

 

 

 

As of September 30, 2014, estimated amortization expense for the CPL casino licenses over the next five years is as follows:

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands

 

 

 

2014

 

$

117 

2015

 

 

468 

2016

 

 

435 

2017

 

 

346 

2018

 

 

107 

2019

 

 

16 

 

 

$

1,489 

 

 

 

 

 

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 3.4 years.

 

Century Downs Racetrack and Casino

CDR currently has one casino license pending final approval from the AGLC for the REC project. The AGLC has approved development of the REC project and a preliminary license. However, the AGLC will not issue a final license until the REC opens. As of November 29, 2013, the Company began reporting the CDR license as an intangible asset on the Company’s consolidated balance sheet. As of September 30, 2014, the carrying amount of the license was $2.8 million. No impairment charges related to the license have been recorded during 2013 or during the nine months ended September 30, 2014.

 

 

 

 

 

 

 

 

 

Amounts in thousands

 

CDR

Balance – January 1, 2014

 

$

2,991 

Effect of foreign currency translation

 

 

(153)

Balance – September 30, 2014

 

$

2,838 

 

 

 

 

 

 


Promotional Allowances
v0.0.0.0
Promotional Allowances
9 Months Ended
Sep. 30, 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 also 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 provided promotional allowances is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

For the nine months

 

 

ended September 30,

 

ended September 30,

 

 

2014

 

2013

 

2014

 

2013

Amounts in thousands

 

 

 

 

 

 

 

 

 

 

 

 

Hotel

 

$

25 

 

$

20 

 

$

66 

 

$

61 

Food and beverage

 

 

286 

 

 

301 

 

 

800 

 

 

822 

 

 

$

311 

 

$

321 

 

$

866 

 

$

883 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, free play 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 accrued liabilities on the Company’s consolidated balance sheets. The expiration of unused points results in a reduction of the liability. As of September 30, 2014 and December 31, 2013, the outstanding balance of this liability was $1.0 and $0.9 million, respectively.


Long-Term Debt
v0.0.0.0
Long-Term Debt
9 Months Ended
Sep. 30, 2014
Long-Term Debt [Abstract]  
Long-Term Debt

 

6. LONG-TERM DEBT

 

Long-term debt as of September 30, 2014 and December 31, 2013 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

Amounts in thousands

 

2014

 

2013

Credit agreement - Bank of Montreal

 

$

13,825 

 

$

9,277 

Credit agreement - Casinos Poland

 

 

4,043 

 

 

4,798 

Credit facility - Casinos Poland

 

 

3,215 

 

 

1,447 

Capital leases - Casinos Poland

 

 

138 

 

 

207 

Financing obligation - CDR land lease*

 

 

17,395 

 

 

18,330 

Total long-term debt

 

$

38,616 

 

$

34,059 

Less current portion

 

 

(6,490)

 

 

(4,195)

Long-term portion

 

$

32,126 

 

$

29,864 

 

 

 

 

 

 

 

 

*The financing obligation represents the land lease with CDR. Prior to the Company’s acquisition, CDR purchased various plots of land on which the REC project will be constructed. CDR 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 CDR 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, CDR has four options to purchase the land. The first option date is July 1, 2023.

 

As of September 30, 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

 

$

389 

 

$

3,599 

2015

 

 

1,556 

 

 

1,809 

2016

 

 

1,556 

 

 

1,716 

2017

 

 

1,556 

 

 

272 

2018

 

 

1,556 

 

 

Thereafter

 

 

7,212 

 

 

Total

 

$

13,825 

 

$

7,396 

 

 

 

 

 

 

 

 

Due to the nature of the CDR land lease financing obligation, there are no principal payments due until the Company exercises its option to purchase the land. Lease payments are applied to interest only, and any change in the outstanding balance of the financing obligation relates to foreign currency translation.

The consolidated weighted average interest rate on all Company debt was 7.7% for the nine months ended September 30, 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 5.60% 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 5.60% on the CPL loan agreements due to the CDR financing obligation, on which the Company pays an implicit interest rate of 10.0%.  

 

Credit Agreement – Bank of Montreal

In May 2012, the Company, through its Canadian subsidiaries, entered into the CAD 28.0 million credit agreement with the Bank of Montreal. On August 15, 2014, the Company, through its Canadian subsidiaries, entered into an amended and restated BMO Credit Agreement that increased the principal amount of the loan to CAD 39.1 million. As of September 30, 2014, the Company had borrowed CAD 17.5 million, of which the outstanding balance was CAD 15.5 million ($13.8 million based on the exchange rate in effect on September 30, 2014) and the Company had approximately CAD 21.6 million ($19.3 million based on the exchange rate in effect on September 30, 2014) available under the BMO Credit Agreement. The outstanding borrowings cannot be re-borrowed once they are repaid. The Company has used borrowings under the BMO Credit Agreement primarily to repay the Company’s mortgage loan related to the Edmonton property, pay for the additional 33.3% investment in CPL (Note 3) and pay for development costs related to the REC project (Note 3). The Company can also use the loan proceeds to pursue the development or acquisition of new gaming opportunities and for general corporate purposes. Borrowings bear interest at fixed rates or at BMO’s floating rate plus a margin.  Any funds not drawn down under the BMO Credit Agreement are subject to standby fees ranging from 0.50% to 0.75% payable quarterly in arrears. The BMO Credit Agreement has a term of five years through August 2019 and is guaranteed by the Company. The shares of the Company’s subsidiaries in Edmonton and Calgary and the Company’s 15% interest in CDR 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 September 30, 2014.

 

Amortization expenses relating to deferred financing charges were $0.1 million for the period ended September 30, 2014 and 2013. These costs are included in interest expense in the consolidated statements of earnings.

 

Casinos Poland

As of September 30, 2014, CPL had debt totaling $7.4 million. The debt includes two credit agreements, one credit facility and 12 capital lease agreements.

 

The first credit agreement is with mBank (formerly known as BRE Bank). Under this credit agreement, CPL entered into the 3 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 September 30, 2014, the amount outstanding on the term loan was $3.1 million. CPL has no further borrowing availability under the loan, and the loan matures in November 2016. The mBank credit agreement contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt by CPL. CPL was in compliance with all covenants of this mBank agreement as of September 30, 2014.

 

The second credit agreement is also with mBank. Under this credit agreement, CPL entered into the 3  year term loan on September 15, 2014 at an interest rate of WIBOR plus 1.70%. Proceeds from the loan were used to repay balances outstanding under a prior credit agreement that matured in September 2014 and to finance current operations. As of September 30, 2014, the amount outstanding on the term loan was $0.9 million. CPL has no further borrowing availability under the loan, and the loan matures in September 2017. The mBank credit agreement contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt. CPL was in compliance with all covenants of this mBank agreement as of September 30, 2014.

 

The credit facility is a short-term line of credit with BPH Bank used to finance current operations. The bank line of credit bears an interest rate of WIBOR plus 1.85%. The credit facility terminates on February 13, 2016. As of September 30, 2014, the amount outstanding was $3.2 million and CPL has approximately $0.1 million available under the facility. The BPH Bank facility contains a number of financial covenants applicable to CPL, in addition to covenants restricting incurrence of additional debt by CPL. CPL was in compliance with all covenants of the BPH Bank line of credit as of September 30, 2014.

 

CPL’s remaining debt consists of 12 capital lease agreements for various vehicles. As of September 30, 2014, the amount outstanding was $0.1 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.  mBank issued guarantees to CPL for this purpose totaling PLN 4.8 million ($1.5 million based on the exchange rate in effect as of September 30, 2014). The mBank guarantees terminate on October 31, 2019.  As of September 30, 2014, CPL maintained $0.4 million in deposits for this purpose.

 

Century Downs Racetrack and Casino

Prior to the Company’s acquisition, CDR purchased various plots of land on which the REC project will be constructed. CDR 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 September 30, 2014, the outstanding balance on the financing obligation was $17.4 million and the implicit interest rate was 10.0%.  


Income Taxes
v0.0.0.0
Income Taxes
9 Months Ended
Sep. 30, 2014
Income Taxes [Abstract]  
Income Taxes

7.INCOME TAXES

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months

 

For the nine months

Amounts in thousands

 

ended September 30, 2014

 

ended September 30, 2013

   

 

Pre-tax income (loss)

 

Income tax expense (benefit)

 

Effective tax rate

 

Pre-tax income

 

Income tax expense (benefit)

 

Effective tax rate

Canada

 

$

2,434 

 

$

943 

 

 

38.7% 

 

$

3,771 

 

$

831 

 

 

22.0% 

United States

 

 

(1,157)

 

 

56 

 

 

(4.8%)

 

 

592 

 

 

 

 

0.0% 

Mauritius*

 

 

140 

 

 

12 

 

 

8.6% 

 

 

271 

 

 

 

 

3.0% 

Austria

 

 

81 

 

 

 

 

1.2% 

 

 

301 

 

 

(1)

 

 

(0.3%)

Poland

 

 

(1,121)

 

 

(226)

 

 

20.2% 

 

 

2,340 

 

 

(153)

 

 

(6.5%)

Total

 

$

377 

 

$

786 

 

 

208.5% 

 

$

7,275 

 

$

685 

 

 

9.4% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Ship-based casinos

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2014, the Company recognized income tax expense of $0.8 million on pre-tax income of $0.4 million, representing an effective income tax benefit rate of 208.5% compared to an income tax expense of $0.7 million on pre-tax income of $7.3 million, representing an effective income tax rate of 9.4% 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 lower pre-tax income in Austria and Poland for the third 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
9 Months Ended
Sep. 30, 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 and nine months ended September 30, 2014 and 2013 were as follows: