Edgar Filing: CENTURY CASINOS INC /CO/

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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, 2012

¨ 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.

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:

24,233,174 shares of common stock, $0.01 par value per share, were outstanding as of July 27, 2012.

CENTURY CASINOS, INC.

FORM 10-Q INDEX


		Page
PART I	FINANCIAL INFORMATION	Number

Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011	3
	Condensed Consolidated Statements of Earnings for the Three and Six Months ended June 30, 2012 and 2011	4
	Condensed Consolidated Statements of Comprehensive (Loss) Earnings for the Three and Six Months ended June 30, 2012 and 2011	5
	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2012 and 2011	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II	OTHER INFORMATION

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	36
	SIGNATURES	36

PART I – FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
Amounts in thousands, except for share and per share information	2012			2011
ASSETS	(unaudited)
Current Assets:
Cash and cash equivalents	$	19,744		$	25,192
Receivables, net		1,082			1,108
Prepaid expenses		560			510
Inventories		334			273
Other current assets		1			113
Deferred income taxes		235			90
Total Current Assets		21,956			27,286
Property and equipment, net		98,748			99,605
Goodwill		4,823			4,833
Equity investment		3,209			2,756
Deferred income taxes		1,993			2,054
Other assets		655			193
Total Assets	$	131,384		$	136,727
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	333		$	9,100
Accounts payable and accrued liabilities		5,424			6,666
Accrued payroll		2,365			2,373
Taxes payable		2,139			3,100
Deferred income taxes		120			120
Total Current Liabilities		10,381			21,359
Long-term debt, less current portion		3,298			-
Taxes payable		227			203
Deferred income taxes		2,709			2,625
Total Liabilities		16,615			24,187
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; 24,233,174 and 23,993,174 shares issued; 24,117,362 and 23,877,362 shares outstanding		242			240
Additional paid-in capital		75,380			75,144
Accumulated other comprehensive earnings		3,001			3,291
Retained earnings		36,428			34,147
		115,051			112,822
Treasury stock – 115,812 shares at cost		(282	)		(282	)
Total Shareholders’ Equity		114,769			112,540
Total Liabilities and Shareholders’ Equity	$	131,384		$	136,727
See notes to condensed consolidated financial statements.

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)



	For the three months ended June 30,						For the six months ended June 30,
Amounts in thousands, except for per share information	2012			2011			2012			2011
Operating revenue:
Gaming	$	15,709		$	15,928		$	30,968		$	30,753
Hotel, bowling, food and beverage		3,135			3,141			6,456			6,384
Other		1,103			1,004			2,046			1,939
Gross revenue		19,947			20,073			39,470			39,076
Less: Promotional allowances		(2,156	)		(2,071	)		(4,110	)		(3,959	)
Net operating revenue		17,791			18,002			35,360			35,117
Operating costs and expenses:
Gaming		7,459			7,341			14,692			14,272
Hotel, bowling, food and beverage		2,420			2,553			4,857			5,064
General and administrative		5,320			5,848			10,624			11,216
Depreciation		1,180			1,665			2,358			3,306
Total operating costs and expenses		16,379			17,407			32,531			33,858
Earnings from equity investment		283			382			438			474
Earnings from operations		1,695			977			3,267			1,733
Non-operating income (expense):
Interest income		23			5			29			7
Interest expense		(395	)		(197	)		(543	)		(443	)
Gains on foreign currency transactions and other		22			114			17			189
Non-operating income (expense), net		(350	)		(78	)		(497	)		(247	)
Earnings before income taxes		1,345			899			2,770			1,486
Income tax provision		197			255			489			478
Net earnings	$	1,148		$	644		$	2,281		$	1,008

Earnings per share:
Basic	$	0.05		$	0.03		$	0.10		$	0.04
Diluted	$	0.05		$	0.03		$	0.09		$	0.04

See notes to condensed consolidated financial statements.

CENTURY CASINOS, INC. AND SUBSIDIARIES

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



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

Amounts in thousands	2012			2011		2012			2011

Net earnings	$	1,148		$	644	$	2,281		$	1,008
Foreign currency translation adjustments		(1,357	)		80		(290	)		1,374
Comprehensive (loss) earnings	$	(209	)	$	724	$	1,991		$	2,382

See notes to condensed consolidated financial statements.

CENTURY CASINOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	For the six months ended June 30,
Amounts in thousands	2012			2011

Cash Flows from Operating Activities:

Net earnings	$	2,281		$	1,008
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		2,358			3,306
Loss on disposition of fixed assets		22			53
Amortization of stock-based compensation		(2	)		192
Amortization of deferred financing costs		110			45
Deferred tax expense		1			119
Earnings from equity investment		(438	)		(474	)

Changes in Operating Assets and Liabilities:
Receivables		29			384
Prepaid expenses and other assets		(43	)		(288	)
Accounts payable and accrued liabilities		(1,217	)		(114	)
Inventories		(60	)		(2	)
Other operating assets		(77	)		(50	)
Accrued payroll		5			(479	)
Taxes payable		(923	)		(1,093	)
Net cash provided by operating activities		2,046			2,607

Cash Flows from Investing Activities:
Purchases of property and equipment		(1,620	)		(1,683	)
Proceeds from disposition of assets		2			16
Net cash used in investing activities		(1,618	)		(1,667	)

Cash Flows from Financing Activities:
Proceeds from borrowings		3,626			0
Payment of deferred financing costs		(394	)		0
Principal repayments		(9,092	)		(3,103	)
Proceeds from equity investment dividend		0			163
Proceeds from exercise of options		240			15
Net cash used in financing activities	$	(5,620	)	$	(2,925	)

Continued -

CENTURY CASINOS, INC. AND SUBSIDIARIES

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



	For the six months ended June 30,
Amounts in thousands	2012			2011

Effect of Exchange Rate Changes on Cash	$	(256	)	$	281

Decrease in Cash and Cash Equivalents		(5,448	)		(1,704	)

Cash and Cash Equivalents at Beginning of Period		25,192			21,461
Cash and Cash Equivalents at End of Period	$	19,744		$	19,757
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	486		$	429
Income taxes paid	$	88		$	149

See notes to condensed consolidated financial statements.

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, 2012, the Company owned casino operations in North America; managed cruise ship-based casinos on international waters; and owned a management contract 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 eight casinos in Poland. The Company continues to pursue other projects in various stages of development.

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 and 10-K/A for the year ended December 31, 2011. The results of operations for the period ended June 30, 2012 are not necessarily indicative of the operating results for the full year.

Presentation of Foreign Currency Amounts

Dollar amounts reported in this quarterly report are in U.S. dollars (“USD”) unless otherwise indicated. Transactions that are denominated in a foreign currency, which include the Canadian dollar (“CAD”), Euro (“€”) and Polish zloty (“PLN”) 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 exchange rate between such foreign currency and the U.S. dollar 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 exchange rate between such foreign currency and the U.S. dollar 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	2012		2011
Canadian dollar (CAD)		1.0191		1.0170
Euros (€)		0.7894		0.7709
Polish zloty (PLN)		3.3885		3.4174
Source: Pacific Exchange Rate Service

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	2012		2011		% Change			2012		2011		% Change
Canadian dollar (CAD)		1.0104		0.9678		(4.4	%)		1.0060		0.9769		(3.0	%)
Euros (€)		0.7796		0.6947		(12.2	%)		0.7712		0.7130		(8.2	%)
Polish zloty (PLN)		3.3181		2.7495		(20.7	%)		3.2724		2.8180		(16.1	%)
Source: Pacific Exchange Rate Service

2. EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

Following is the summarized financial information of CPL as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:


Amounts in thousands (in USD):	June 30, 2012		December 31, 2011
Balance Sheet:
Current assets	$	4,631	$	4,061
Noncurrent assets	$	13,114	$	9,523
Current liabilities	$	8,140	$	4,393
Noncurrent liabilities	$	2,057	$	3,230


	For the three months				For the six months
	ended June 30,				ended June 30,
	2012		2011		2012		2011
Operating Results
Net operating revenue	$	10,911	$	13,663	$	21,357	$	25,199
Net earnings	$	849	$	1,147	$	1,313	$	1,422

The Company’s maximum exposure to losses at June 30, 2012 was $3.2 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, 2012 are as follows:


Amounts in thousands (in USD)	Total
Balance – January 1, 2012	$	2,756
Equity earnings		438
Effect of foreign currency translation		15
Balance – June 30, 2012	$	3,209

3. GOODWILL

Changes in the carrying amount of goodwill related to the Company’s Edmonton property for the six months ended June 30, 2012 are as follows:


Amounts in thousands
Balance – January 1, 2012	$	4,833
Effect of foreign currency translation		(10	)
Balance – June 30, 2012	$	4,823

4. LONG-TERM DEBT

Long-term debt at June 30, 2012 and December 31, 2011 consisted of the following:


	June 30,			December 31,
Amounts in thousands	2012			2011
Credit Agreement - Bank of Montreal	$	3,631		$	0
Mortgage - Edmonton		0			9,100

Total long-term debt	$	3,631		$	9,100
Less current portion		(333	)		(9,100	)
Long-term portion	$	3,298		$	0

Credit Agreement- Bank of Montreal

On May 23, 2012, the Company, through its subsidiaries Century Resorts Alberta, Inc. (“CRA”) and Century Casino Calgary Inc. (“CAL”) entered into a CAD 28.0 million ($27.5 million) credit agreement with the Bank of Montreal (the “BMO Credit Agreement”). Proceeds from the BMO Credit Agreement were used to repay the Company’s mortgage debt related to the Edmonton property (the “Edmonton Mortgage”) and will also be used to pursue the development or acquisition of new gaming opportunities and for general corporate purposes. The BMO Credit Agreement has a term of five years and is guaranteed by the Company.

The BMO Credit Agreement consists of three credit facilities to be utilized as follows:

1.	Credit Facility A is a CAD 1.0 million ($1.0 million) revolving credit facility to be used for the costs of the financing, ongoing working capital requirements and operating regulatory requirements.

Credit Facility B is a CAD 25.0 million ($24.5 million) committed, non-revolving, reducing standby facility. Up to CAD 11 million ($10.8 million) of the Credit Facility B may be used to repay all or part of the Edmonton Mortgage with the remainder available for working capital requirements and general corporate purposes. As described below, CAD 3.7 million ($3.6 million) was drawn down under Credit Facility B and was used, with cash on hand, to repay in full the Edmonton Mortgage.

Once the principal balance of the advance under Credit Facility B has been repaid, it cannot be re-borrowed.

3.	Credit Facility C is a CAD 2.0 million ($2.0 million) treasury management risk facility as defined by the BMO Credit Agreement.

As of June 30, 2012, the Company had approximately CAD 24.3 million ($23.8 million) available for borrowing under the BMO Credit Agreement.

The BMO Credit Agreement bears interest based on credit facilities as follows:

1.	Advances under Credit Facility A may be in the form of :

i.	Advances denominated in CAD and bearing interest at the lender’s floating rate for loans made in CAD plus a margin as defined by the BMO Credit Agreement, and/or

ii.	Advances denominated in USD and bearing interest at the lender’s floating rate for loan made in USD plus a margin as defined by the BMO Credit Agreement, and/or

iii.	Issuances of a CAD Letter of Credit (maximum face value CAD 100,000), bearing interest at a floating margin rate as defined by the BMO Credit Agreement.

2.	Advances under Credit Facility B may be in the form of:

i.	Advances denominated in CAD and bearing interest at the lender’s floating rate for loans made in CAD plus a margin as defined by the BMO Credit Agreement (CAD 500,000 minimum and CAD 100,000 increments thereafter);

ii.	Advances denominated in USD and bearing interest at the lender’s floating rate for loans made in USD plus a margin as defined by the BMO Credit Agreement ($500,000 minimum and $100,000 increments thereafter);

iii.	Advances denominated in USD and bearing interest at the LIBOR rate fixed for 1-6 months ($1 million minimum and $500,000 increments thereafter); and/or

iv.	A Bankers Acceptance denominated in CAD and bearing interest at a fixed rate as defined by the BMO Credit Agreement for 1-6 months (CAD 1 million minimum and CAD 500,000 increments thereafter).

Longer term fixed rates of interest, up to and including the full five year term of the BMO Credit Agreement, can be achieved through the use of interest rate swaps with a deemed risk up to the maximum amount of Credit Facility C. As of June 30, 2012, no interest rate swaps were in use by the Company.

4.	Any funds that are not drawn down under either Credit Facility A or B are classified as a CAD Standby Facility.

Mortgage - Edmonton

On May 23, 2012, the Company repaid the outstanding balance of approximately $6.3 million on the Edmonton Mortgage. The repayment consisted of $6.1 million in principal and interest due on the Edmonton Mortgage and $0.2 million in prepayment penalties and unamortized deferred financing charges. This loan payoff was funded with a $3.6 million borrowing under the BMO Credit Agreement and $2.7 million of cash on hand. The repayment by the Company terminated the Edmonton Mortgage.

Deferred financing charges, which are reported as a component of other assets, are summarized as follows:

Credit Agreement - Bank of Montreal	June 30,		December 31,
Amounts in thousands	2012		2011
Deferred financing charges - current	$	79	$	0
Deferred financing charges - long-term	$	308	$	0
Total	$	387	$	0

Mortgage - Edmonton	June 30,		December 31,
Amounts in thousands		2012		2011
Deferred financing charges - current	$	0	$	101
Deferred financing charges - long-term	$	0	$	0
Total	$	0	$	101

Amortization expense relating to deferred financing charges was $0.1 million for both the six months ended June 30, 2012 and June 30, 2011, and is included in interest expense in the accompanying condensed consolidated statements of earnings.

As of June 30, 2012, the Company was in compliance with all covenants related to its borrowings. Covenants of the BMO Credit Agreement include the following:

a)	Senior Funded Debt to EBITDA Ratio as defined by the BMO Credit Agreement may not be greater than 3.00:1.00;

b)	Fixed Charge Coverage Ratio as defined by the BMO Credit Agreement may not be less than 1.20:1.00;

c)	CRA and CAL combined shareholder’s equity may not be less than CAD 20 million; and

d)	Capital expenditures in any fiscal year may not exceed CAD 4.0 million in aggregate, without the lender’s consent.

The consolidated weighted average interest rate on all borrowings for the Company was 17.2% for the six months ended June 30, 2012. The Company currently pays a floating interest rate on its borrowings under the BMO Credit Agreement. The current interest rate is approximately 4.0%. The weighted average interest rate is higher than the 7.0% interest rate of the Edmonton Mortgage and the 4.0% interest rate under on the BMO Credit Agreement because the Company wrote off a total of $0.1 million in deferred financing costs and paid $0.2 million in prepayment penalties in May 2012 in connection with the repayment of the Edmonton Mortgage.

As of June 30, 2012, scheduled maturities of the long-term debt is as follows:

Amounts in thousands	CAD		USD
2012	$	154	$	151
2013		370		363
2014		370		363
2015		370		363
2016		370		363
Thereafter		2,066		2,028
Total	$	3,700	$	3,631

5. PROMOTIONAL ALLOWANCES

Hotel accommodations, bowling 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 points were earned. The value of unused or unredeemed points is included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. The expiration of unused points results in a reduction of the liability. As of June 30, 2012, the outstanding balance of this liability was $1.0 million.

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


	For the three months				For the six months
	ended June 30,				ended June 30,
	2012		2011		2012		2011
Amounts in thousands
Hotel, bowling, food and beverage	$	984	$	909	$	1,898	$	1,741
Coupons		487		502		941		947
Player points		685		660		1,271		1,271
Total promotional allowances	$	2,156	$	2,071	$	4,110	$	3,959

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 taxable income.

As of June 30, 2012, the Company has established a valuation allowance for its U.S. deferred tax assets of $5.2 million, a $0.9 million valuation allowance on its Calgary property and a $1.3 million valuation allowance on the Century Casinos Europe subsidiary deferred tax assets due to the uncertainty of future taxable income. The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. The ultimate realization of deferred income tax assets depends on generation of future taxable income in the jurisdictions where the assets are located during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax expense after considering the following factors:

·	The level of historical taxable income and projections for future taxable income in the jurisdictions where the assets are located 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
Amounts in thousands	ended June 30,
	2012		2011
U.S. Federal - Current	$	122	$	52
U.S. Federal - Deferred		0		0
Provision for U.S. federal income taxes		122		52

Foreign - Current	$	366	$	307
Foreign - Deferred		1		119
Provision for foreign income taxes		367		426
Total provision for income taxes	$	489	$	478

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, 2012							ended June 30, 2011
	Pre-tax income		Income tax		Effective tax rate			Pre-tax income (loss)			Income tax		Effective tax rate
Canada	$	1,563	$	361		23.1	%	$	1,258		$	403		32.0	%
United States		144		122		85.1	%		(1,056	)		52		-4.9	%
Mauritius		147		4		3.0	%		1,133			22		1.9	%
Austria		539		1		0.2	%		(222	)		1		-0.5	%
Poland		377		-		0.0	%		373			-		0.0	%
Total	$	2,770	$	489		17.7	%	$	1,486		$	478		32.2	%

The US income tax rate has increased significantly due to a one-time withholding tax payment of $0.1 million related to a Canadian intercompany payable.

7. 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 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, 2012 and 2011 were as follows:

	For the three months				For the six months
	ended June 30,				ended June 30,
	2012		2011		2012		2011
Weighted average common shares, basic		23,890,405		23,717,165		23,883,919		23,714,215
Dilutive effect of stock options		169,917		308,930		170,985		301,732
Weighted average common shares, diluted		24,060,322		24,026,095		24,054,904		24,015,947

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,
	2012		2011		2012		2011
Unvested restricted stock		-		160,000		-		160,000
Stock options		886,710		886,710		886,710		886,710

8. SEGMENT INFORMATION

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

	Long Lived Assets
	At June 30,		At December 31,
Amounts in thousands	2012		2011

United States	$	55,661	$	56,294
International:
Canada	$	48,771	$	48,423
Europe		3,647		3,228
International waters		1,349		1,496
Total international		53,767		53,147
Total	$	109,428	$	109,441

	Net Operating Revenue				Net Operating Revenue
	For the three months				For the six months
	ended June 30,				ended June 30,
Amounts in thousands	2012		2011		2012		2011
United States	$	7,731	$	7,731	$	15,119	$	14,969
International:
Canada	$	8,404	$	8,652	$	16,947	$	16,994
International waters		1,578		1,509		3,138		2,931
Aruba		78		110		156		223
Total international		10,060		10,271		20,241		20,148
Total	$	17,791	$	18,002	$	35,360	$	35,117

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 Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. In addition, Century Casinos, Inc. (together with its subsidiaries, 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 at the time such statements are made. 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, 2011. 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. The term “CAD” refers to Canadian dollars.

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

We also operate 12 ship-based casinos onboard four cruise lines; Oceania Cruises, TUI Cruises, Windstar Cruises and Regent Seven Seas Cruises.

The following table summarizes the cruise lines for which we have entered into agreements and the associated ships on which we operate ship-based casinos.


Cruise Line	Ship
Oceania Cruises	Regatta
Oceania Cruises	Nautica
Oceania Cruises	Insignia*
Oceania Cruises	Marina
Oceania Cruises	Riviera**
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 casino operation on board Insignia was suspended on April 5, 2012, as the vessel was leased to a different cruise line by Oceania Cruises. We will not operate the ship-based casino as long as it is leased to a different cruise line.

** The Riviera ship-based casino began operations on May 3, 2012.

We also hold a 33.3% ownership interest in and actively participate in the management of Casinos Poland Ltd (“CPL”), the owner and operator of eight casinos in Warsaw, Katowice, Gydnia, Wroclaw, Lodz (opened February 16, 2012) Krakow (opened March 29, 2012), Sosnowiec (opened April 18, 2012) and Posnan (opened June 28, 2012) in Poland. We account for this investment under the equity method.

The Lodz casino is undergoing a full refurbishment and will have a grand re-opening during the fourth quarter of 2012. CPL has obtained an additional gaming license in the city of Plock, which is scheduled to open in the second half of 2012. In addition, CPL is participating in other license applications, including Warsaw. Decisions from the Polish Minister of Finance on these applications are pending.

We have a long-term management agreement to direct the operation of the casino at the Radisson Aruba Resort, Casino & Spa. We receive a management fee consisting of a fixed fee, plus a percentage of earnings before interest, taxes, depreciation and amortization.

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 ended June 30,							For the six months ended June 30,
Average Rates	2012		2011		% Change			2012		2011		% Change
Canadian dollar (CAD)		1.0104		0.9678		(4.4	%)		1.0060		0.9769		(3.0	%)
Euros (€)		0.7796		0.6947		(12.2	%)		0.7712		0.7130		(8.2	%)
Polish zloty (PLN)		3.3181		2.7495		(20.7	%)		3.2724		2.8180		(16.1	%)
Source: Pacific Exchange Rate Service

RECENT DEVELOPMENTS

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

Century Casino & Hotel (Edmonton, Alberta, Canada)

On July 13, 2012, the Alberta Gaming and Liquor Commission approved the addition of 30 slot machines to the gaming floor. The additional slot machines are expected to be added gradually during the third quarter of 2012. Once added, the 30 additional machines will bring the total slot machine count to 750 at our property in Edmonton.

In June 2012, construction began on Fort Road immediately in front of the casino entrance. Construction is expected to last through September 2012. This may adversely affect traffic to our casino during the third quarter of 2012.

Century Casino & Hotel (Cripple Creek, Colorado, United States)

The Waldo Canyon Wildfire, which occurred in and near Colorado Springs, Colorado in late June and early July 2012, had a significant negative impact on our business in Cripple Creek during the second quarter of 2012. Several thousand people in Colorado Springs, the metropolitan population which the casino primarily serves, were evacuated and the main highway to the casino, Highway 24, was closed for eight days from June 24, 2012 through July 1, 2012. We estimate that this event adversely affected our revenues for the second quarter by $0.2 million.

In August 2012, new owners of the Gold Rush Casino in Cripple Creek are planning to open the casino with approximately 300 slot machines and 3 table games. This casino is directly across the street from our property in Cripple Creek, and management believes the new casino will add additional competition to the already very competitive Cripple Creek market.

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	2012			2011			Change			% Change			2012			2011			Change			% Change
Gaming Revenue	$	15,709		$	15,928		$	(219	)		(1.4	%)	$	30,968		$	30,753		$	215			0.7	%
Hotel, Bowling, Food and Beverage Revenue		3,135			3,141			(6	)		(0.2	%)		6,456			6,384			72			1.1	%
Other Revenue		1,103			1,004			99			9.9	%		2,046			1,939			107			5.5	%
Gross Revenue		19,947			20,073			(126	)		(0.6	%)		39,470			39,076			394			1.0	%
Less Promotional Allowances		(2,156	)		(2,071	)		85			4.1	%		(4,110	)		(3,959	)		151			3.8	%
Net Operating Revenue		17,791			18,002			(211	)		(1.2	%)		35,360			35,117			243			0.7	%
Gaming Expenses		(7,459	)		(7,341	)		118			1.6	%		(14,692	)		(14,272	)		420			2.9	%
Hotel, Bowling, Food and Beverage Expenses		(2,420	)		(2,553	)		(133	)		(5.2	%)		(4,857	)		(5,064	)		(207	)		(4.1	%)
General and Administrative Expenses		(5,320	)		(5,848	)		(528	)		(9.0	%)		(10,624	)		(11,216	)		(592	)		(5.3	%)
Total Operating Costs and Expenses		(16,379	)		(17,407	)		(1,028	)		(5.9	%)		(32,531	)		(33,858	)		(1,327	)		(3.9	%)
Earnings from Equity Investment		283			382			(99	)		(25.9	%)		438			474			(36	)		(7.6	%)
Earnings from Operations		1,695			977			718			73.5	%		3,267			1,733			1,534			88.5	%
Net Earnings	$	1,148		$	644		$	504			78.3	%	$	2,281		$	1,008		$	1,273			126.3	%

Earnings Per Share
Basic	$	0.05		$	0.03		$	0.02			66.7	%	$	0.10		$	0.04		$	0.06			150.0	%
Diluted	$	0.05		$	0.03		$	0.02			66.7	%	$	0.09		$	0.04		$	0.05			125.0	%

Net operating revenue decreased by $0.2 million, or 1.2%, and increased by $0.2 million, or 0.7%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of net operating revenue by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:

●	Net operating revenue at our property in Edmonton decreased by $0.2 million, or 2.9%, and increased by less than $0.1 million, or 0.1%;
●	Net operating revenue at our property in Calgary decreased by $0.1 million, or 2.8%, and decreased by $0.1 million, or 1.1%;
●	Net operating revenue at our property in Central City increased by $0.1 million, or 1.3%, and increased by $0.2 million, or 1.9%;
●	Net operating revenue at our property in Cripple Creek decreased by $0.1 million, or 1.9%, and decreased by less than $0.1 million, or 0.3%; and
●	Net operating revenue from our ship-based casinos and other increased by less than $0.1 million, or 2.3%, and increased by $0.1 million, or 4.4%.

Total operating costs and expenses decreased by $1.0 million, or 5.9%, and $1.3 million, or 3.9%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of total operating costs and expenses by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:

·	Total operating costs and expenses at our property in Edmonton decreased by $0.1 million, or 2.7%, and decreased by $0.1 million, or 1.2%;

·	Total operating costs and expenses at our property in Calgary increased by less than $0.1 million, or 1.4%, and decreased by $0.1 million, or 1.7%;

·	Total operating costs and expenses at our property in Central City decreased by $0.3 million, or 7.2%, and decreased by $0.5 million, or 6.1%;

·	Total operating costs and expenses at our property in Cripple Creek decreased by $0.1 million, or 4.0%, and decreased by less than $0.1 million, or 1.3%;

·	Total operating costs and expenses for our ship-based casinos and other increased by $0.1 million, or 6.5%, and increased by $0.2 million, or 6.2%; and

·	Total operating costs and expenses for corporate other decreased by $0.6 million, or 31.4%, and decreased by $0.7 million, or 21.6%.

As a result of the foregoing, net earnings increased by $0.5 million, or 78.3%, and $1.3 million, or 126.3%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of net earnings by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:

●	Net earnings at our property in Edmonton decreased by $0.1 million, or 9.1%, and increased by $0.1 million, or 3.5%;
●	Net earnings at our property in Calgary decreased by less than $0.1 million, or 26.0%, and increased by $0.2 million, or 64.4%;
●	Net earnings at our property in Central City increased by $0.2 million, or 123.7%, and increased by $0.4 million, or 108.6%;
●	Net earnings at our property in Cripple Creek increased by less than $0.1 million, or 11.9%, and increased by less than $0.1 million, or 7.3%;
●	Net earnings from our ship-based casinos and other decreased by $0.1 million, or 43.1%, and decreased by $0.1 million, or 21.5%; and
●	Net loss for corporate other decreased by $0.5 million, or 41.8%, and decreased by $0.7 million, or 34.9%.

Results by property are discussed in further detail in the following pages.

Casinos

Edmonton

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2012			2011			$ Change			% Change			2012			2011			$ Change			% Change
Gaming Revenue	$	4,290		$	4,452		$	(162	)		(3.6	%)	$	8,468		$	8,536		$	(68	)		(0.8	%)
Hotel, Food and Beverage Revenue		1,433			1,449			(16	)		(1.1	%)		2,911			2,871			40			1.4	%
Other Revenue		569			533			36			6.8	%		1,097			997			100			10.0	%
Gross Revenue		6,292			6,434			(142	)		(2.2	%)		12,476			12,404			72			0.6	%
Less Promotional Allowances		(286	)		(249	)		37			14.9	%		(528	)		(466	)		62			13.3	%
Net Operating Revenue		6,006			6,185			(179	)		(2.9	%)		11,948			11,938			10			0.1	%
Gaming Expenses		(1,681	)		(1,681	)		0			0.0	%		(3,390	)		(3,293	)		97			2.9	%
Hotel, Food and Beverage Expenses		(1,032	)		(959	)		73			7.6	%		(2,024	)		(1,882	)		142			7.5	%
General and Administrative Expenses		(1,324	)		(1,382	)		(58	)		(4.2	%)		(2,674	)		(2,760	)		(86	)		(3.1	%)
Total Operating Costs and Expenses		(4,281	)		(4,399	)		(118	)		(2.7	%)		(8,574	)		(8,676	)		(102	)		(1.2	%)
Earnings from Operations		1,725			1,786			(61	)		(3.4	%)		3,374			3,262			112			3.4	%
Net Earnings	$	1,075		$	1,182		$	(107	)		(9.1	%)	$	2,153		$	2,080		$	73			3.5	%

Three Months Ended June 30, 2012 and 2011

Net operating revenue at our property in Edmonton decreased by $0.2 million, or 2.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net operating revenue is due to a decrease in the average exchange rate between the U.S. dollar and Canadian dollar of 4.4% for the three months ended June 30, 2012 compared to the three months June 30, 2011 (the “4.4% exchange rate decrease”).

In CAD, net operating revenue increased by $0.1 million, or 1.3%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to increases in gaming, hotel, food, beverage and other revenue for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase in gaming revenue is due to 32 additional slot machines added to the floor during the second quarter of 2012. The increase in hotel, food and beverage revenue is due to higher hotel room occupancy. The increase in other revenue is due to increased showroom and Comedy Club ticket sales for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

Total operating costs and expenses decreased by $0.1 million, or 2.7%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in total operating costs and expenses occurred as a result of the 4.4% exchange rate decrease.

In CAD, total operating costs and expense increased by $0.1 million, 1.6%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs of $0.2 million offset by a decrease in depreciation expense of $0.1 million for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

As a result of the foregoing, earnings from operations decreased by $0.1 million, or 3.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, earnings from operations increased by less than $0.1 million, or 0.6%, for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.

Net earnings decreased by $0.1 million, or 9.1%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to foregoing operational items as well as an increase in interest expense and deferred financing charges of $0.2 million resulting from prepayment penalties related to early payoff of the mortgage related to the Edmonton property (“Edmonton Mortgage”) offset by a decrease in income tax expense of $0.1 million. In CAD, net earnings decreased by $0.2 million, or 22.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to an increase in interest expense of $0.2 million from the early payoff of the Edmonton Mortgage and an increase in foreign currency losses of $0.2 million due to the 4.4% exchange rate decrease offset by a decrease in income tax expense of $0.1 million.

Six Months Ended June 30, 2012 and 2011

Net operating revenue at our property in Edmonton increased by less than $0.1 million, or 0.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in net operating revenue is due to increases in hotel, food, beverage and other revenue offset by a decrease in gaming revenue for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

The increase in hotel, food and beverage revenue is due to higher hotel room occupancy, increased customer volumes on the gaming floor as well as increased showroom event attendance for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in other revenue is due to increased showroom and Comedy Club ticket sales for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in gaming revenue is due a decrease in the average exchange rate between the U.S. dollar and Canadian dollar of 3.0% for the six months ended June 30, 2012 compared to the three months June 30, 2011 (the “3.0% exchange rate decrease”). In CAD, gaming revenue increased by $0.2 million, or 2.2%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 due to a total of 56 additional slot machines added to the floor during the third quarter of 2011 and first and second quarter of 2012. In CAD, net operating revenue increased by $0.4 million, or 3.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Total operating costs and expenses decreased by $0.1 million, or 1.2%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in total operating costs and expenses is due to the 3.0% exchange rate decrease.

In CAD, total operating costs and expense increased by $0.2 million, or 1.8%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs of $0.4 million offset by a decrease in depreciation expense of $0.2 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

As a result of the foregoing, earnings from operations increased by $0.1 million, or 3.4%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, earnings from operations increased by $0.2, or 6.6%, million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. In addition, net earnings increased by $0.1 million, or 3.5%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, net earnings increased by $0.1 million, or 2.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Calgary

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2012			2011			$ Change			% Change			2012			2011			$ Change			% Change
Gaming Revenue	$	1,588		$	1,646		$	(58	)		(3.5	%)	$	3,266		$	3,163		$	103			3.3	%
Bowling, Food and Beverage Revenue		683			747			(64	)		(8.6	%)		1,533			1,711			(178	)		(10.4	%)
Other Revenue		283			211			72			34.1	%		457			436			21			4.8	%
Gross Revenue		2,554			2,604			(50	)		(1.9	%)		5,256			5,310			(54	)		(1.0	%)
Less Promotional Allowances		(156	)		(137	)		19			13.9	%		(257	)		(254	)		3			1.2	%
Net Operating Revenue		2,398			2,467			(69	)		(2.8	%)		4,999			5,056			(57	)		(1.1	%)
Gaming Expenses		(1,089	)		(912	)		177			19.4	%		(2,052	)		(1,859	)		193			10.4	%
Bowling, Food and Beverage Expenses		(517	)		(666	)		(149	)		(22.4	%)		(1,106	)		(1,383	)		(277	)		(20.0	%)
General and Administrative Expenses		(762	)		(769	)		(7	)		(0.9	%)		(1,558	)		(1,595	)		(37	)		(2.3	%)
Total Operating Costs and Expenses		(2,577	)		(2,541	)		36			1.4	%		(5,129	)		(5,220	)		(91	)		(1.7	%)
(Losses) from Operations		(179	)		(74	)		(105	)		(141.9	%)		(130	)		(164	)		34			20.7	%
Net (Loss)	$	(92	)	$	(73	)	$	(19	)		(26.0	%)	$	(84	)	$	(236	)	$	152			64.4	%

Three Months Ended June 30, 2012 and 2011

Net operating revenue at our property in Calgary decreased by $0.1 million, or 2.8%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net operating revenue is due to the 4.4% exchange rate decrease.

In CAD, net operating revenue increased by less than $0.1 million, or 1.5%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Net operating revenue increased due to increased other revenue of $0.1 million, or 41.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2012 due to higher showroom ticket sales when the casino began self-promoting concert events at the casino and featured a concert by BB King. The increase in other revenue was offset by a less than $0.1 million, or 5.0% decrease in bowling, food and beverage revenue due to a decrease in the participation of bowling leagues for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

Total operating costs and expenses increased by less than $0.1 million, or 1.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, total operating costs and expenses in Calgary increased by $0.2 million, or 5.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

As a result of the foregoing, earnings from operations decreased by $0.1 million, or 141.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, earnings from operations decreased by $0.1 million, or 152.8% for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.

Net earnings decreased by less than $0.1 million, or 26.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to the foregoing operational items as well as an increase in income tax benefit of $0.1 million. In CAD, net earnings decreased by $0.2 million, or 700.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to an increase in foreign currency losses of $0.2 million due to the 4.4% exchange rate decrease partially offset by an increase in the income tax benefit of $0.1 million.

Six Months Ended June 30, 2012 and 2011

Net operating revenue at our property in Calgary decreased by $0.1 million, or 1.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in net operating revenue is due to the 3.0% exchange rate decrease.

In CAD, net operating revenue increased by $0.1 million, or 1.8%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Net operating revenue increased due to higher gaming revenue of $0.2 million, or 6.3%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in gaming revenue is due to an enhanced slot floor layout and improved slot machine mix for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increased gaming revenue was offset by a $0.1 million, or 8.0%, decrease in bowling, food and beverage revenue. The decrease in bowling, food and beverage revenue is due to a decrease in the participation of bowling leagues for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Total operating costs and expenses decreased by $0.1 million, or 1.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in total operating costs and expenses is due to the 3.0% exchange rate decrease.

In CAD, total operating costs and expenses increased by $0.1 million, or 1.2%, primarily due to increased depreciation costs for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

As a result of the foregoing, earnings from operations increased by less than $0.1 million, or 20.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, earnings from operations increased by less than $0.1 million, or 18.0%, for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.

Net earnings increased by $0.2 million, or 64.4%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in net earnings is due to foregoing operational items as well as an increase in income tax benefit of $0.1 million and a decrease in foreign currency losses of $0.1 million due to the 3.0% exchange rate decrease. In CAD, net earnings decreased by $0.2 million, or 279.0%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in net earnings is due an increase in foreign currency losses of $0.2 million due to the 3.0% exchange rate decrease.

Central City

	For the three months ended June 30,												For the six months ended June 30,
Amounts in thousands	2012			2011			$ Change			% Change			2012			2011			$ Change			% Change
Gaming Revenue	$	4,947		$	4,930		$	17			0.3	%	$	9,755		$	9,694		$	61			0.6	%
Hotel, Food and Beverage Revenue		637			601			36			6.0	%		1,294			1,159			135			11.6	%
Other Revenue		48			40			8			20.0	%		99			75			24			32.0	%
Gross Revenue		5,632			5,571			61			1.1	%		11,148			10,928			220			2.0	%
Less Promotional Allowances		(1,051	)		(1,051	)		0			0.0	%		(2,058	)		(2,008	)		50			2.5	%
Net Operating Revenue		4,581			4,520			61			1.3	%		9,090			8,920			170			1.9	%
Gaming Expenses		(2,119	)		(2,157	)		(38	)		(1.8	%)		(4,186	)		(4,216	)		(30	)		(0.7	%)
Hotel, Food and Beverage Expenses		(520	)		(540	)		(20	)		(3.7	%)		(1,052	)		(1,038	)		14			1.3	%
General and Administrative Expenses		(956	)		(886	)		70			7.9	%		(1,900	)		(1,772	)		128			7.2	%
Total Operating Costs and Expenses		(3,942	)		(4,247	)		(305	)		(7.2	%)		(7,839	)		(8,345	)		(506	)		(6.1	%)
Earnings from Operations		639			273			366			134.1	%		1,251			575			676			117.6	%
Net Earnings	$	396