Edgar Filing: CENTURY CASINOS INC /CO/

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ___________

Commission file number 0-22900

CENTURY CASINOS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	84-1271317
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2860 South Circle Drive, Suite 350, Colorado Springs, Colorado 80906

(Address of principal executive offices, including zip code)

(719) 527-8300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

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

23,877,362 shares of common stock, $0.01 par value per share, were outstanding as of August 1, 2011.

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CENTURY CASINOS, INC.

FORM 10-Q INDEX

		Page
PART I	FINANCIAL INFORMATION	Number

Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010	3
	Condensed Consolidated Statements of Earnings (Loss) for the Three and Six Months ended June 30, 2011 and 2010	4
	Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Six Months ended June 30, 2011 and 2010	5
	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2011 and 2010	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	29
	SIGNATURES	29

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PART I – FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
Amounts in thousands, except for share and per share information	2011			2010
	(unaudited)				**
ASSETS
Current Assets:
Cash and cash equivalents	$	19,757		$	21,461
Receivables, net		712			1,088
Prepaid expenses		713			413
Inventories		315			305
Other current assets		1			3
Deferred income taxes		483			197
Total Current Assets		21,981			23,467

Property and equipment, net		103,669			103,956
Goodwill		5,098			4,942
Equity investment		3,337			2,806
Deferred income taxes		1,127			1,219
Other assets		346			336
Total Assets	$	135,558		$	136,726

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	2,279		$	4,203
Accounts payable and accrued liabilities		5,364			5,151
Accrued payroll		1,890			2,329
Taxes payable		1,170			2,277
Deferred income taxes		100			97
Total Current Liabilities		10,803			14,057

Long-term debt, less current portion		8,480			9,305
Deferred income taxes		2,188			1,866
Total Liabilities		21,471			25,228

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; 23,993,174 and 23,977,061 shares issued, respectively; 23,877,362 and 23,861,249 shares outstanding, respectively		240			240
Additional paid-in capital		75,137			74,930
Accumulated other comprehensive earnings		6,356			4,982
Retained earnings		32,636			31,628
		114,369			111,780
Treasury stock – 115,812 shares at cost		(282	)		(282	)
Total Shareholders’ Equity		114,087			111,498
Total Liabilities and Shareholders’ Equity	$	135,558		$	136,726

** Derived from the Company's audited consolidated balance sheet at December 31, 2010.
See notes to condensed consolidated financial statements.

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CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited)

	For the three months						For the six months
	ended June 30,						ended June 30,
Amounts in thousands, except for share and per share information	2011			2010			2011			2010
Operating revenue:
Gaming	$	15,928		$	13,239		$	30,753		$	25,821
Hotel, bowling, food and beverage		3,141			2,756			6,384			5,521
Other		1,004			770			1,939			1,349
Gross revenue		20,073			16,765			39,076			32,691
Less: Promotional allowances		(2,071	)		(1,825	)		(3,959	)		(3,614	)
Net operating revenue		18,002			14,940			35,117			29,077
Operating costs and expenses:
Gaming		7,341			5,854			14,272			11,287
Hotel, bowling, food and beverage		2,553			2,228			5,064			4,338
General and administrative		5,848			5,150			11,216			10,093
Depreciation		1,665			1,524			3,306			3,013
Total operating costs and expenses		17,407			14,756			33,858			28,731
Earnings from equity investment		382			160			474			348
Earnings from operations		977			344			1,733			694
Non-operating income (expense):
Interest income		5			14			7			22
Interest expense		(197	)		(281	)		(443	)		(572	)
Gains (losses) on foreign currency transactions & other		114			(244	)		189			(1	)
Non-operating income (expense), net		(78	)		(511	)		(247	)		(551	)
Earnings (loss) before income taxes		899			(167	)		1,486			143
Income tax provision		255			92			478			272
Net earnings (loss)	$	644		$	(259	)	$	1,008		$	(129	)

Earnings per share:
Basic	$	0.03		$	(0.01	)	$	0.04		$	(0.01	)
Diluted	$	0.03		$	(0.01	)	$	0.04		$	(0.01	)

See notes to condensed consolidated financial statements.

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CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(Unaudited)

	For the three months					For the six months
	ended June 30,					ended June 30,

Amounts in thousands	2011		2010			2011		2010

Net earnings (loss)	$	644	$	(259	)	$	1,008	$	(129	)
Foreign currency translation adjustments		80		(1,550	)		1,374		(920	)
Comprehensive earnings (loss)	$	724	$	(1,809	)	$	2,382	$	(1,049	)

See notes to condensed consolidated financial statements.

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CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	For the six months
	ended June 30,
Amounts in thousands	2011			2010

Cash Flows from Operating Activities:

Net earnings (loss)	$	1,008		$	(129	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation		3,306			3,013
Loss on disposition of fixed assets		53			7
Amortization of stock-based compensation		192			288
Amortization of deferred financing costs		45			18
Deferred tax expense		119			325
Earnings from equity investment		(474	)		(348	)

Changes in operating assets and liabilities:
Receivables	$	384		$	97
Prepaid expenses and other assets		(288	)		75
Accounts payable and accrued liabilities		(114	)		(417	)
Inventories		(2	)		(4	)
Other operating assets		(50	)		(45	)
Accrued payroll		(479	)		200
Taxes payable		(1,093	)		(1,406	)
Net cash provided by operating activities		2,607			1,674

Cash Flows from Investing Activities:
Purchases of property and equipment	$	(1,683	)	$	(4,001	)
Proceeds from disposition of Century Casino Millennium		0			200
Acquisition of Century Casino Calgary, net of $1,193 cash acquired		0			(9,301	)
Proceeds from disposition of assets		16			45
Net cash used in investing activities		(1,667	)		(13,057	)

Cash Flows from Financing Activities:
Principal repayments	$	(3,103	)	$	(861	)
Repurchase of common stock		0			(141	)
Proceeds from equity investment dividend		163			0
Proceeds from exercise of options		15			0
Net cash used in financing activities		(2,925	)		(1,002	)

- Continued -

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CENTURY CASINOS, INC. AND SUBSIDIARIES

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

Effect of Exchange Rate Changes on Cash		281			(104	)

(Decrease) in Cash and Cash Equivalents		(1,704	)		(12,489	)

Cash and Cash Equivalents at Beginning of Period		21,461			36,992
Cash and Cash Equivalents at End of Period	$	19,757		$	24,503
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	429		$	557
Income taxes paid	$	149		$	187

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Please refer to Note 2 of the Company's condensed consolidated financial statements for details of the Company’s acquisition of the Century Casino Calgary in Alberta, Canada in 2010.

See notes to condensed consolidated financial statements.

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CENTURY CASINOS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Century Casinos, Inc. (“CCI” or the “Company”) is an international casino entertainment company. As of June 30, 2011, the Company owned casino operations in North America; managed cruise ship-based casinos on international waters; and owned the management agreement to manage the casino in the Radisson Aruba Resort, Casino & Spa. The Company also owns a 33.3% ownership interest in Casinos Poland Ltd (“CPL”), the owner and operator of seven casinos in Poland. The Company continues to pursue other projects in various stages of development. See Note 2 for a discussion of the Company’s acquisition of the Century Casino in Calgary, Alberta, Canada in January 2010.

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 and the instructions to Form 10-Q and Rule 10-01 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, 2010. The results of operations for the period ended June 30, 2011 are not necessarily indicative of the operating results for the full year.

Presentation of Foreign Currency Amounts

Transactions that are denominated in a foreign currency are translated and recorded at the exchange rate in effect on the date of the transaction. Commitments that are denominated in a foreign currency and all balance sheet accounts other than shareholders’ equity are translated and presented based on the U.S. exchange rate at the end of the reported periods. Current period transactions affecting the profit and loss of operations conducted in foreign currencies are valued at the average U.S. exchange rate for the period in which they are incurred.

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

	June 30,		December 31,
Ending Rates	2011		2010
Canadian dollar (CAD)		0.9643		0.9946
Euros (€)		0.6885		0.7468
Polish zloty (PLN)		2.7517		2.9641
Source: Pacific Exchange Rate Service

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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 six months
	ended June 30,				ended June 30,
Average Rates	2011		2010		2011		2010
Canadian dollar (CAD)		0.9678		1.0279		0.9769		1.0345
Euros (€)		0.6947		0.7859		0.7130		0.7548
Polish zloty (PLN)		2.7495		3.1575		2.8180		3.022
Source: Pacific Exchange Rate Service

2.	ACQUISITIONS

Century Casino in Calgary

On January 13, 2010, the Company, through Century Casinos Europe (“CCE”), acquired 100% of the issued and outstanding shares of Frank Sisson's Silver Dollar Ltd. (“FSSD”) and 100% of the issued and outstanding shares of EGC Properties Ltd. (“EGC”). FSSD and EGC collectively owned and operated the Silver Dollar Casino and related land in Calgary, Alberta, Canada. In November 2010, we rebranded the casino under the name Century Casino in Calgary.

The total consideration for the transaction was $11.5 million, which consisted of a $10.7 million purchase price plus a net working capital adjustment of $0.8 million. CCE paid $1.0 million on the acquisition on November 6, 2009. On January 13, 2010, CCE paid the remaining $10.5 million. The purchase price was paid from cash on hand. There was no contingent consideration for the transaction.

The Company incurred acquisition costs of approximately $0.3 million. The majority of these costs, which include legal, accounting and valuation fees, were recorded as general and administrative expenses during the fourth quarter of 2009.

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The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values on January 13, 2010, the date of acquisition:

Amounts in thousands
Acquisition Date	January 13, 2010
Cash	$	1,193
Accounts receivable		202
Prepaid expenses		207
Inventory		56
Property and equipment		10,977
Deferred tax asset, net		690
Total assets acquired		13,325
Accounts payable and accrued liabilities		429
Accrued payroll		222
Total liabilities assumed		651
Net assets		12,674
Excess of net assets over purchase consideration (bargain purchase)		1,180
Purchase consideration		11,494

Cash acquired		(1,193	)
Cash deposit made in 2009		(1,000	)
Net cash paid in 2010	$	9,301

During the year ended December 31, 2010, the Company recognized a $1.2 million gain on the bargain purchase associated with the Century Casino in Calgary acquisition. The bargain purchase was the result of the fair market value of the assets acquired exceeding the purchase price. Pro forma results of operations for 2010 have not been presented, as the impact on consolidated financial results would not have been material.

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3. EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

Following is the summarized financial information of CPL as of June 30, 2011 and December 31, 2010 and the three and six months ended June 30, 2011 and 2010:

Amounts in thousands (in USD):	June 30,		December 31,
	2011		2010
Balance Sheet:
Current assets	$	5,352	$	4,197
Noncurrent assets	$	12,923	$	10,927
Current liabilities	$	7,184	$	5,503
Noncurrent liabilities	$	3,923	$	3,842

	For the three months				For the six months
	ended June 30,				ended June 30,
	2011		2010		2011		2010
Operating Results
Net operating revenue	$	13,663	$	10,973	$	25,199	$	24,727
Net earnings	$	1,147	$	480	$	1,422	$	1,044

The Company’s maximum exposure to losses in CPL at June 30, 2011 was $3.3 million, the value of its equity investment in CPL.

Changes in the carrying amount of the investment in CPL during the six months ended June 30, 2011 are as follows:

Amounts in thousands (in USD)	Total
Balance – December 31, 2010	$	2,806
Equity Earnings		474
Effect of foreign currency translation		220
Dividend		(163	)
Balance – June 30, 2011	$	3,337

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4. GOODWILL

Changes in the carrying amount of goodwill for the six months ended June 30, 2011 are as follows:

Amounts in thousands
Balance – December 31, 2010	$	4,942
Effect of foreign currency translation	$	156
Balance – June 30, 2011	$	5,098

5. PROMOTIONAL ALLOWANCES

Hotel accommodations and food and beverage furnished without charge to customers are included in gross revenue at a value which approximates retail and are then deducted as complimentary services to arrive at net operating revenue.

The Company issues coupons for the purpose of generating future revenue. The cost of the coupons redeemed is applied against the revenue generated on the day of the redemption. In addition, 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. Points can be redeemed for cash and/or various amenities at the casino, such as meals, hotel stays and gift shop items. The cost of the points is offset against the revenue in the period in which the revenue generated the points. 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.

Promotional allowances presented in the condensed consolidated statement of earnings include the following:

	For the three months				For the six months
	ended June 30,				ended June 30,
	2011		2010		2011		2010
Amounts in thousands
Hotel, Bowling, Food & Beverage	$	909	$	764	$	1,741	$	1,495
Free Plays or Coupons		502		539		947		1,108
Player Points		660		522		1,271		1,011
Total Promotional Allowances	$	2,071	$	1,825	$	3,959	$	3,614

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6. INCOME TAXES

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

As of June 30, 2011, the Company has established a valuation allowance for its U.S. deferred tax assets of $5.5 million and a valuation allowance for its foreign deferred tax assets of $0.9 million. The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. The ultimate realization of deferred income tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax expense after considering the following factors:

·	The level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets would be deductible,

·	Accumulation of net income before tax utilizing a look-back period of three years, and

·	Tax planning strategies.

The income tax provisions are based on estimated full-year earnings for financial reporting purposes adjusted for permanent differences. The Company’s provision for income taxes from operations consists of the following:

	For the six months ended
	June 30,
Amounts in thousands	2011		2010
U.S. Federal - Current	$	52	$	31
U.S. Federal - Deferred		-		-
Provision for U.S. federal income taxes		52		31

Foreign - Current	$	307	$	29
Foreign - Deferred		119		212
Provision for foreign income taxes		426		241
Total provision for income taxes	$	478	$	272

The Company’s income tax expense by jurisdiction is summarized in the table below:

	For the six months								For the six months
Amounts in thousands	ended June 30, 2011								ended June 30, 2010
	Pre-tax income					Effective			Pre-tax income					Effective
	(loss)			Income tax		tax rate			(loss)			Income tax		tax rate
Canada	$	1,258		$	403		32.0	%	$	967		$	234		24.2	%
United States		(1,056	)		52		(4.9	%)		(708	)		31		(4.4	%)
Mauritius		1,133			22		1.9	%		205			6		2.9	%
Austria		(222	)		1		(0.5	%)		(654	)		1		(0.2	%)
Poland*		373			-		-			333			-		-
Total	$	1,486		$	478		32.1	%	$	143		$	272		190.2	%
*Poland includes earnings from the equity investment in CPL.

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7. EARNINGS PER SHARE

Basic earnings (loss) per share considers only weighted average outstanding common shares in the computation. Diluted earnings (loss) per share give effect to all potentially dilutive securities. Diluted earnings (loss) 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 and the assumed conversion of other convertible securities (using the “if converted” method) at the beginning of the year, or for the period outstanding during the year for current year issuances. Weighted average shares outstanding for the three and six months ended June 30, 2011 and 2010 were as follows:

	For the three months				For the six months
	ended June 30,				ended June 30,
	2011		2010		2011		2010
Weighted average common shares, basic		23,717,165		23,815,936		23,714,215		23,815,936
Dilutive effect of stock options		308,930		0		301,732		0
Weighted average common shares, diluted		24,026,095		23,815,936		24,015,947		23,815,936

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

	For the three months				For the six months
	ended June 30,				ended June 30,
	2011		2010		2011		2010
Unvested restricted stock		160,000		280,000		160,000		280,000
Stock options		886,710		1,278,594		886,710		1,278,594

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8. SEGMENT INFORMATION

The following summary provides information concerning the Company’s principal geographic areas:

	Long Lived Assets
	June 30,		December 31,
Amounts in thousands	2011		2010
United States	$	56,885	$	57,904
International:
Canada	$	51,467	$	50,474
Europe		3,617		3,102
International waters & other		1,608		1,779
Total international		56,692		55,355
Total	$	113,577	$	113,259



	Net Operating Revenue				Net Operating Revenue
	For the three months				For the six months
	ended June 30,				ended June 30,
Amounts in thousands		2011		2010		2011		2010
United States	$	7,731	$	6,826	$	14,969	$	13,263
International:
Canada	$	8,652	$	7,596	$	16,994	$	14,698
International waters & other		1,619		518		3,154		1,116
Total international		10,271		8,114		20,148		15,814
Total	$	18,002	$	14,940	$	35,117	$	29,077

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements, Business Environment and Risk Factors

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Century Casinos, Inc. (the “Company”) may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements as to industry trends and future expectations of the Company and other matters that do not relate strictly to historical facts and are based on certain assumptions by management. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled “Risk Factors” under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2010. We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

References in this item to “we,” “our,” or “us” are to the Company and its subsidiaries on a consolidated basis unless the context otherwise requires.

Amounts presented in this Item 2 are rounded. As such, rounding differences could occur in period over period changes and percentages reported throughout this Item 2.

OVERVIEW

Since our inception in 1992, we have been primarily engaged in developing and operating gaming establishments and related lodging, restaurant and entertainment facilities. Our primary source of revenue is from the net proceeds of our gaming machines and tables, with ancillary revenue generated from the hotel, restaurant, bowling and entertainment facilities that are a part of the casinos.

We currently own, operate and manage the following casinos through wholly-owned subsidiaries:

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

-	The Century Casino & Hotel in Cripple Creek, Colorado; and
-	The Century Casino & Hotel in Central City, Colorado.

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We also manage ship-based casinos on international waters aboard several cruise ships. The following table summarizes the cruise lines for which we have entered into agreements and the associated ships on which we currently operate ship-based casinos.

Cruise Line	Ship
Oceania Cruises	Regatta
Oceania Cruises	Nautica
Oceania Cruises	Insignia
Oceania Cruises	Marina
TUI Cruises	Mein Schiff 1
TUI Cruises	Mein Schiff 2 *
Windstar Cruises	Wind Surf
Windstar Cruises	Wind Star
Windstar Cruises	Wind Spirit
Regent Seven Seas Cruises	Seven Seas Voyager
Regent Seven Seas Cruises	Seven Seas Mariner
Regent Seven Seas Cruises	Seven Seas Navigator

* The Mein Schiff 2 began operations on May 15, 2011.

We hold a 33.3% ownership interest in and actively participate in the management of CPL, the owner and operator of seven full casinos in Poland and account for this investment under the equity method.

In April 2011, CPL was granted a license for a new casino in Sosnowiec, Poland. Sosnowiec is a city of more than 200,000 inhabitants located nearby Katowice, the capital of the province Silesia, which we believe is one of the strongest economic regions in Poland. CPL will rent approximately 5,000 square feet for the new casino in a small, fully refurbished city center shopping/entertainment mall. The planned investment for the new casino is $1.5 million, which will be funded by CPL. We will not be required to invest any amounts. CPL expects to begin operations in this new casino during the fourth quarter of 2011. In addition, the license for the existing CPL casino in Wroclav was renewed on June 7, 2011.

In December 2010, we entered into a long-term management agreement to assist in the operation of a casino at the Radisson Aruba Resort, Casino & Spa. We receive a management fee consisting of a fixed fee, plus a percentage of the casino’s gross revenue and a percentage of the casino’s earnings before interest, taxes, depreciation and amortization. We were not required to invest any amounts under the management agreement.

- 17 -

Presentation of Foreign Currency Amounts - 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 six months
	ended June 30,				ended June 30,
Average Rates	2011		2010		2011		2010
Canadian dollar (CAD)		0.9678		1.0279		0.9769		1.0345
Euros (€)		0.6947		0.7859		0.7130		0.7548
Polish zloty (PLN)		2.7495		3.1575		2.8180		3.022
Source: Pacific Exchange Rate Service

RECENT DEVELOPMENTS

Developments that we believe have impacted or will impact our results of operations going forward are discussed below.

Century Casino & Hotel (Edmonton, Alberta, Canada)

During the second quarter of 2011, the Alberta Gaming and Liquor Commission (“AGLC”) continued conversion or replacement of old slot machines by installing four new slot machines and converting 39 slot machines. In addition, the AGLC added one video lottery terminal to the floor bringing the total on the floor to five.

The AGLC has approved the addition of 16 slot machines to the gaming floor. The additional machines will be added during the third quarter of 2011 and bring the total slot machine count to 700 at our property in Edmonton.

Century Casino in Calgary (Calgary, Alberta, Canada)

During the second quarter of 2011, the AGLC continued conversion or replacement of old slot machines by installing 16 new slot machines and converting 19 slot machines.

Century Casino & Hotel (Central City, Colorado)

In December 2010, new owners purchased the Fortune Valley Casino in Central City. Management believes the new Fortune Valley owner will add additional competition to the already very competitive Black Hawk and Central City market. However, our Central City property saw an increase in market share during the second quarter of 2011, which we believe was partly due to the disruption at the Fortune Valley Casino during the transition of ownership.

In addition, the Johnny Z Casino in Central City is undergoing an expansion project to be completed in August 2011 with 50 additional slot machines and a VIP lounge. Management believes the expansion will add competition to the Black Hawk and Central City market.

Century Casino & Hotel (Cripple Creek, Colorado)

A remodeling project at J.P. McGills Casino in Cripple Creek was completed in May 2011. Our Cripple Creek property continued to see an increase in market share during the second quarter of 2011, which we believe was partly due to the disruption at the J.P. McGills Casino during the remodel project.

Cruise Ships

During the second quarter of 2011, we began operating a new ship-based casino aboard the Mein Schiff 2 with TUI Cruises.

Other

On March 7, 2011, we announced that we applied for a casino license in the Canton of Neuchatel, Switzerland. We were one of four companies applying for the license. On June 22, 2011, we announced that Swiss authorities decided to award the casino license to a different project.

- 18 -

DISCUSSION OF RESULTS

Century Casinos, Inc. and Subsidiaries

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2011			2010			Change			% Change			2011			2010			Change			% Change
Gaming Revenue	$	15,928		$	13,239		$	2,689			20.3	%	$	30,753		$	25,821		$	4,932			19.1	%
Hotel, Bowling, Food and Beverage Revenue		3,141			2,756			385			14.0	%		6,384			5,521			863			15.6	%
Other Revenue		1,004			770			234			30.4	%		1,939			1,349			590			43.7	%
Gross Revenue		20,073			16,765			3,308			19.7	%		39,076			32,691			6,385			19.5	%
Less Promotional Allowances		(2,071	)		(1,825	)		(246	)		13.5	%		(3,959	)		(3,614	)		(345	)		9.5	%
Net Operating Revenue		18,002			14,940			3,062			20.5	%		35,117			29,077			6,040			20.8	%
Gaming Expenses		(7,341	)		(5,854	)		(1,487	)		25.4	%		(14,272	)		(11,287	)		(2,985	)		26.4	%
Hotel, Bowling, Food and Beverage Expenses		(2,553	)		(2,228	)		(325	)		14.6	%		(5,064	)		(4,338	)		(726	)		16.7	%
General and Administrative Expenses		(5,848	)		(5,150	)		(698	)		13.6	%		(11,216	)		(10,093	)		(1,123	)		11.1	%
Total Operating Costs and Expenses		(17,407	)		(14,756	)		(2,651	)		18.0	%		(33,858	)		(28,731	)		(5,127	)		17.8	%
Earnings from Equity Investment		382			160			222			138.8	%		474			348			126			36.2	%
Earnings from Operations		977			344			633			184.0	%		1,733			694			1,039			149.7	%
Net Earnings (Loss)	$	644		$	(259	)	$	903			348.6	%	$	1,008		$	(129	)	$	1,137			881.4	%

Earnings Per Share
Basic	$	0.03		$	(0.01	)	$	0.04			400.0	%	$	0.04		$	(0.01	)	$	0.05			500.0	%
Diluted	$	0.03		$	(0.01	)	$	0.04			400.0	%	$	0.04		$	(0.01	)	$	0.05			500.0	%

Net operating revenue increased by $3.1 million or 20.5% and $6.0 million or 20.8% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively, due to increased revenue from all properties. The increase in net operating revenue at our Canadian properties is due in part to higher customer volumes and an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

The increase in net operating revenue at our Central City property is due in part to increased table games revenue generated from craps and player banked poker, increased customer volumes, increased revenue from slot machines that were moved from the lower level to the main level and increased video poker play. The increase in net operating revenue at our Cripple Creek property is due in part to increased slot revenue from new slot machines, additional table games revenue generated after moving the table games pit from the back of the casino to the front, improved customer service and new marketing strategies aimed at improving the gaming floor atmosphere and differentiating our casino from competitors.

The increase in net operating revenue from our ship-based casinos and other is primarily due to additional ship-based casinos placed into operation during the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010.

- 19 -

Total operating costs and expenses increased by $2.7 million or 18.0% and $5.1 million or 17.8% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively, due to increased operating costs at all of our properties. Total operating costs and expenses at our property in Edmonton increased primarily due to the increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

Total operating costs and expenses at our property in Calgary increased due to the addition of a player’s club point redemption program and additional staffing costs incurred in order to provide improved customer service for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010. The increase is also attributable to an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

Total operating costs and expenses at our Colorado properties increased due to increased marketing costs from more aggressive marketing campaigns, increased gaming taxes as a result of higher gaming revenue and increased staffing costs in order to provide improved customer service for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010.

Total operating costs and expenses from our ship-based casinos increased for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010 as a result of increased concession and annual fees paid to cruise ship operators for the ability to operate ship-based casinos.

Net earnings increased by $0.9 million and $1.1 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase is due to increased earnings from operations at our Edmonton, Central City and Cripple Creek properties offset by losses from operations at our Calgary property. In addition, the increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively, contributed to the increase in net earnings.

- 20 -

Casinos

Edmonton

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2011			2010			Change			% Change			2011			2010			Change			% Change
Gaming	$	4,452		$	3,880		$	572			14.7	%	$	8,536		$	7,665		$	871			11.4	%
Hotel, Food and Beverage		1,449			1,284			165			12.9	%		2,871			2,592			279			10.8	%
Other		533			515			18			3.5	%		997			934			63			6.7	%
Gross Revenue		6,434			5,679			755			13.3	%		12,404			11,191			1,213			10.8	%
Less Promotional Allowances		(249	)		(182	)		(67	)		36.8	%		(466	)		(334	)		(132	)		39.5	%
Net Operating Revenue		6,185			5,497			688			12.5	%		11,938			10,857			1,081			10.0	%
Gaming Expenses		(1,681	)		(1,600	)		(81	)		5.1	%		(3,293	)		(3,109	)		(184	)		5.9	%
Hotel, Food and Beverage Expenses		(959	)		(857	)		(102	)		11.9	%		(1,882	)		(1,711	)		(171	)		10.0	%
General & Administrative Expenses		(1,382	)		(1,274	)		(108	)		8.5	%		(2,760	)		(2,625	)		(135	)		5.1	%
Total Operating Costs and Expenses		(4,399	)		(4,087	)		(312	)		7.6	%		(8,676	)		(8,141	)		(535	)		6.6	%
Earnings from Operations		1,786			1,410			376			26.7	%		3,262			2,716			546			20.1	%
Net Earnings	$	1,182		$	855		$	327			38.2	%	$	2,080		$	1,574		$	506			32.1	%

Net operating revenue at our property in Edmonton increased by $0.7 million or 12.5% and $1.1 million or 10.0% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase is primarily due to an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, net operating revenue increased $0.3 million or 6.0% and $0.4 million or 3.8% for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively. The increase in net operating revenue is also due to an increase in gaming revenue of $0.6 million or 14.7% and $0.9 million or 11.4% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in gaming revenue is due to increased customer volumes and an increase in table games hold percentage.

Net operating revenue also increased due to higher hotel, food and beverage revenue of $0.2 million or 12.9% and $0.3 million or 10.8% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in hotel, food and beverage revenue is primarily the result of increased food and beverage revenue from the Yuk Yuk’s Comedy Club, which we began operating without a third party provider in September 2010. The increase is also due to an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, hotel, food and beverage revenue increased $0.1 million for both the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively.

Promotional allowances increased by $0.1 million or 36.8% and $0.1 million or 39.5% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increases are primarily due to increased player’s club point redemptions. Total operating costs and expenses increased by $0.3 million or 7.6% and $0.5 million or 6.6% at our property in Edmonton due to an increase in the average exchange rate between the U.S. dollar and Canadian dollar for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010 of 5.8% and 5.6%, respectively. In Canadian dollars, total operating costs and expenses in Edmonton increased by $0.1 million for both the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

Net earnings increased by $0.3 million and $0.5 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, net earnings increased by $0.3 million and $0.4 million for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively.

- 21 -

Calgary

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2011			2010			Change			% Change			2011			2010			Change			% Change
Gaming	$	1,646		$	1,452		$	194			13.4	%	$	3,163		$	2,505		$	658			26.3	%
Bowling, Food and Beverage		747			600			147			24.5	%		1,711			1,237			474			38.3	%
Other		211			133			78			58.6	%		436			235			201			85.5	%
Gross Revenue		2,604			2,185			419			19.2	%		5,310			3,977			1,333			33.5	%
Less Promotional Allowances		(137	)		(87	)		(50	)		57.5	%		(254	)		(136	)		(118	)		86.8	%
Net Operating Revenue		2,467			2,098			369			17.6	%		5,056			3,841			1,215			31.6	%
Gaming Expenses		(912	)		(846	)		(66	)		7.8	%		(1,859	)		(1,373	)		(486	)		35.4	%
Bowling, Food and Beverage Expenses		(666	)		(526	)		(140	)		26.6	%		(1,383	)		(1,011	)		(372	)		36.8	%
General & Adminstrative Expenses		(769	)		(752	)		(17	)		2.3	%		(1,595	)		(1,304	)		(291	)		22.3	%
Total Operating Costs and Expenses		(2,541	)		(2,191	)		(350	)		16.0	%		(5,220	)		(3,796	)		(1,424	)		37.5	%
(Losses) Earnings from Operations		(74	)		(93	)		19			20.4	%		(164	)		45			(209	)		(464.4	%)
Net (Loss) Earnings	$	(73	)	$	(62	)	$	(11	)		(17.7	%)	$	(236	)	$	32		$	(268	)		(837.5	%)

Net operating revenue at our property in Calgary increased by $0.4 million or 17.6% and $1.2 million or 31.6% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase is primarily due to an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, net operating revenue increased $0.2 million or 10.9% and $1.0 million or 24.5% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in net operating revenue is also due to increased gaming revenues of $0.2 million or 13.4% and $0.7 million or 26.3% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in gaming revenue is due to an increase in slot revenue from higher customer volumes at our property in Calgary.

The increase in net operating revenue is also due to increased bowling, food and beverage revenue of $0.2 million or 24.5% and $0.5 million or 38.3% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase is due to new bowling lanes, bowling leagues that utilize our facility, additional customer volumes in the casino and improved customer service and food quality at all of our Calgary food and beverage outlets. The increase is also due to an increase in the average exchange rate between the U.S. dollar and Canadian dollar of 5.8% and 5.6% for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, bowling, food, and beverage revenue increased $0.1 million or 17.6% and $0.4 million or 30.7% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

Total operating costs and expenses increased by $0.4 or 16.0% and $1.4 million or 37.5% at the Century Casino in Calgary during the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in operating costs and expenses is due to the addition of a player’s club point redemption program, additional marketing costs and additional staffing costs in order to provide improved customer service. In addition, the increase in total operating costs and expenses is attributable to an increase in the average exchange rate between the U.S. dollar and Canadian dollar for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010 of 5.8% and 5.6%, respectively. In Canadian dollars, total operating costs and expenses in Calgary increased by $0.2 million and $1.2 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

Net earnings decreased by less than $0.1 million and $0.3 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. In Canadian dollars, net earnings increased by $0.1 million and less than $0.1 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

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Central City

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2011			2010			Change			% Change			2011			2010			Change			% Change
Gaming	$	4,930		$	4,543		$	387			8.5	%	$	9,694		$	9,118		$	576			6.3	%
Hotel, Food and Beverage		601			570			31			5.4	%		1,159			1,104			55			5.0	%
Other		40			36			4			11.1	%		75			74			1			1.4	%
Gross Revenue		5,571			5,149			422			8.2	%		10,928			10,296			632			6.1	%
Less Promotional Allowances		(1,051	)		(939	)		(112	)		11.9	%		(2,008	)		(1,915	)		(93	)		4.9	%
Net Operating Revenue		4,520			4,210			310			7.4	%		8,920			8,381			539			6.4	%
Gaming Expenses		(2,157	)		(1,928	)		(229	)		11.9	%		(4,216	)		(3,854	)		(362	)		9.4	%
Hotel, Food and Beverage Expenses		(540	)		(497	)		(43	)		8.7	%		(1,038	)		(961	)		(77	)		8.0	%
General & Administrative Expenses		(886	)		(838	)		(48	)		5.7	%		(1,772	)		(1,699	)		(73	)		4.3	%
Total Operating Costs and Expenses		(4,247	)		(3,937	)		(310	)		7.9	%		(8,345	)		(7,860	)		(485	)		6.2	%
Earnings from Operations		273			273			0			0			575			521			54			10.4	%
Net Earnings	$	177		$	176		$	1			0.6	%	$	372		$	338		$	34			10.1	%

Net operating revenue at our property in Central City increased by $0.3 million or 7.4% and $0.5 million or 6.4% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase is due to increases in gaming revenue of $0.4 million or 8.5% and $0.6 million or 6.3% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in gaming revenue is due to increased table games revenue generated from craps and player banked poker, increased customer volumes that we believe resulted from the disruption at the Fortune Valley Casino in Central City during the transition of ownership, increased revenue from slot machines that were moved from the lower to the main level and increased video poker play.

Total operating costs and expenses increased by $0.3 million or 7.9% and $0.5 million or 6.2% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in total operating costs and expenses is due to increased marketing costs for promotional prizes and giveaways as well as player participation in bus ridership rewards in which the casino reimburses a portion of players’ bus fare to the casino, increased gaming taxes as a result of higher gaming revenue, and increased staffing costs in order to provide improved customer service.

Net earnings remained flat at $0.2 million for both the three months ended June 30, 2011 and the three months ended June 30, 2010 and increased less than $0.1 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010.

Cripple Creek

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2011			2010			Change			% Change			2011			2010			Change			% Change
Gaming	$	3,474		$	2,901		$	573			19.8	%	$	6,588		$	5,471		$	1,117			20.4	%
Hotel, Food and Beverage		343			302			41			13.6	%		644			589			55			9.3	%
Other		27			31			(4	)		(12.9	%)		48			52			(4	)		(7.7	%)
Gross Revenue		3,844			3,234			610			18.9	%		7,280			6,112			1,168			19.1	%
Less Promotional Allowances		(633	)		(617	)		(16	)		2.6	%		(1,231	)		(1,230	)		(1	)		0.1	%
Net Operating Revenue		3,211			2,617			594			22.7	%		6,049			4,882			1,167			23.9	%
Gaming Expenses		(1,364	)		(1,094	)		(270	)		24.7	%		(2,520	)		(2,143	)		(377	)		17.6	%
Hotel, Food and Beverage Expenses		(388	)		(348	)		(40	)		11.5	%		(761	)		(659	)		(102	)		15.5	%
General & Administrative Expenses		(769	)		(686	)		(83	)		12.1	%		(1,547	)		(1,399	)		(148	)		10.6	%
Total Operating Costs and Expenses		(2,779	)		(2,422	)		(357	)		14.7	%		(5,344	)		(4,784	)		(560	)		11.7	%
Earnings from Operations		432			195			237			121.5	%		705			98			607			619.4	%
Net Earnings	$	268		$	121		$	147			121.5	%	$	437		$	61		$	376			616.4	%

Net operating revenue at our property in Cripple Creek increased by $0.6 million or 22.7% and $1.2 million or 23.9% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increases are due to increases in gaming revenue of $0.6 million or 19.8% and $1.1 million or 20.4% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in gaming revenue is due to increased slot revenues from new slot machines, additional table games revenue generated after moving the table games pit from the back of the casino to the front, improved customer service and new marketing strategies aimed at improving the gaming floor atmosphere and differentiating our casino from competitors.

Total operating costs and expenses increased by $0.4 million or 14.7% and $0.6 million or 11.7% for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively. The increase in total operating costs and expenses is due to increased marketing costs for more aggressive marketing campaigns, increased gaming taxes as a result of higher gaming revenue and increased staffing costs in order to provide improved customer service.

Net earnings increased by $0.2 million and $0.4 million for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010, respectively.

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Cruise Ships and Other

	For the three months ended June 30,									For the six months ended June 30,
Amounts in thousands	2011		2010		Change		% Change			2011		2010		Change		% Change
Gaming	$	1,426	$	464	$	962		207.3	%	$	2,772	$	1,062	$	1,710		161.0	%
Other