SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
OR
☐ 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 |
(I.R.S. Employer Identification No.) |
|
incorporation or organization) |
|
455 E. Pikes Peak Ave., Suite 210, Colorado Springs, Colorado 80903
(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 ☑ 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 ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer ☐ |
|
Accelerated filer ☑ |
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
|
(Do not check if a smaller reporting company) |
|
Emerging growth company ☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
24,468,618 shares of common stock, $0.01 par value per share, were outstanding as of August 1, 2017.
1
INDEX
|
Part I |
FINANCIAL INFORMATION |
Page |
| 3 | ||
|
|
Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 |
3 |
|
|
5 | |
|
|
6 | |
|
|
Condensed Consolidated Statements of Equity as of June 30, 2017 and 2016 |
7 |
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 |
8 |
|
|
10 | |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
33 | |
| 53 | ||
| 53 | ||
|
Part II |
OTHER INFORMATION |
|
| 54 | ||
| 55 | ||
| 55 | ||
2
PART I – FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
Amounts in thousands, except for share and per share information |
|
2017 |
|
|
2016 |
|
|
ASSETS |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
38,810 |
|
$ |
38,837 |
|
Receivables, net |
|
|
3,234 |
|
|
4,706 |
|
Prepaid expenses |
|
|
1,283 |
|
|
1,224 |
|
Inventories |
|
|
618 |
|
|
568 |
|
Restricted cash |
|
|
974 |
|
|
0 |
|
Other current assets |
|
|
70 |
|
|
613 |
|
Total Current Assets |
|
|
44,989 |
|
|
45,948 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
143,745 |
|
|
140,763 |
|
Goodwill |
|
|
14,468 |
|
|
13,387 |
|
Deferred income taxes |
|
|
1,798 |
|
|
1,705 |
|
Casino licenses |
|
|
13,404 |
|
|
12,140 |
|
Trademarks |
|
|
1,756 |
|
|
1,558 |
|
Cost investment |
|
|
1,000 |
|
|
1,000 |
|
Deposits and other |
|
|
2,474 |
|
|
1,337 |
|
Total Assets |
|
$ |
223,634 |
|
$ |
217,838 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
5,407 |
|
$ |
5,583 |
|
Accounts payable |
|
|
2,080 |
|
|
1,864 |
|
Accrued liabilities |
|
|
7,019 |
|
|
9,088 |
|
Accrued payroll |
|
|
5,319 |
|
|
5,313 |
|
Taxes payable |
|
|
2,931 |
|
|
4,661 |
|
Contingent liability (note 8) |
|
|
2,433 |
|
|
2,099 |
|
Total Current Liabilities |
|
|
25,189 |
|
|
28,608 |
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion and deferred financing costs (note 7) |
|
|
49,268 |
|
|
50,026 |
|
Taxes payable and other |
|
|
854 |
|
|
620 |
|
Total Liabilities |
|
|
75,311 |
|
|
79,254 |
|
Commitments and Contingencies |
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial statements.
- Continued -
3
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)
|
|
||||||
|
|
June 30, |
December 31, |
||||
|
Amounts in thousands, except for share and per share information |
2017 |
2016 |
||||
|
Equity: |
||||||
|
Preferred stock; $0.01 par value; 20,000,000 shares authorized; no shares issued or outstanding |
|
|
0 |
|
|
0 |
|
Common stock; $0.01 par value; 50,000,000 shares authorized; 24,468,618 and 24,451,582 shares issued and outstanding |
|
|
245 |
|
|
245 |
|
Additional paid-in capital |
78,424 | 78,174 | ||||
|
Retained earnings |
70,365 | 66,386 | ||||
|
Accumulated other comprehensive loss |
(8,996) | (12,609) | ||||
|
Total Century Casinos, Inc. shareholders' equity |
140,038 | 132,196 | ||||
|
Non-controlling interest |
8,285 | 6,388 | ||||
|
Total Equity |
148,323 | 138,584 | ||||
|
Total Liabilities and Equity |
$ |
223,634 |
$ |
217,838 | ||
See notes to unaudited condensed consolidated financial statements.
4
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
For the six months |
||||||||
|
|
|
ended June 30, |
|
ended June 30, |
||||||||
|
Amounts in thousands, except for per share information |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
||||
|
Operating revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
33,412 |
|
$ |
30,901 |
|
$ |
65,900 |
|
$ |
59,060 |
|
Hotel |
|
|
494 |
|
|
490 |
|
|
932 |
|
|
935 |
|
Food and beverage |
|
|
3,413 |
|
|
3,028 |
|
|
6,754 |
|
|
5,920 |
|
Other |
|
|
2,582 |
|
|
2,988 |
|
|
5,156 |
|
|
6,725 |
|
Gross revenue |
|
|
39,901 |
|
|
37,407 |
|
|
78,742 |
|
|
72,640 |
|
Less: Promotional allowances |
|
|
(2,571) |
|
|
(2,206) |
|
|
(5,013) |
|
|
(4,212) |
|
Net operating revenue |
|
|
37,330 |
|
|
35,201 |
|
|
73,729 |
|
|
68,428 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
16,056 |
|
|
14,251 |
|
|
31,702 |
|
|
27,616 |
|
Hotel |
|
|
154 |
|
|
134 |
|
|
297 |
|
|
273 |
|
Food and beverage |
|
|
3,099 |
|
|
2,659 |
|
|
6,065 |
|
|
5,222 |
|
General and administrative |
|
|
12,362 |
|
|
11,499 |
|
|
23,429 |
|
|
22,569 |
|
Depreciation and amortization |
|
|
2,018 |
|
|
2,117 |
|
|
4,103 |
|
|
4,127 |
|
Total operating costs and expenses |
|
|
33,689 |
|
|
30,660 |
|
|
65,596 |
|
|
59,807 |
|
Earnings from operations |
|
|
3,641 |
|
|
4,541 |
|
|
8,133 |
|
|
8,621 |
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
27 |
|
|
14 |
|
|
48 |
|
|
31 |
|
Interest expense |
|
|
(915) |
|
|
(802) |
|
|
(1,837) |
|
|
(1,580) |
|
Gain on foreign currency transactions, cost recovery income and other |
|
|
281 |
|
|
1,560 |
|
|
485 |
|
|
1,758 |
|
Non-operating (expense) income, net |
|
|
(607) |
|
|
772 |
|
|
(1,304) |
|
|
209 |
|
Earnings before income taxes |
|
|
3,034 |
|
|
5,313 |
|
|
6,829 |
|
|
8,830 |
|
Income tax expense |
|
|
(864) |
|
|
(987) |
|
|
(1,859) |
|
|
(1,765) |
|
Net earnings |
|
|
2,170 |
|
|
4,326 |
|
|
4,970 |
|
|
7,065 |
|
Net earnings attributable to non-controlling interests |
|
|
(368) |
|
|
(2,077) |
|
|
(1,008) |
|
|
(2,536) |
|
Net earnings attributable to Century Casinos, Inc. shareholders |
|
$ |
1,802 |
|
$ |
2,249 |
|
$ |
3,962 |
|
$ |
4,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Century Casinos, Inc. shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.07 |
|
$ |
0.09 |
|
$ |
0.16 |
|
$ |
0.18 |
|
Diluted |
|
$ |
0.07 |
|
$ |
0.09 |
|
$ |
0.16 |
|
$ |
0.18 |
|
Weighted average shares outstanding - basic |
|
|
24,466 |
|
|
24,432 |
|
|
24,460 |
|
|
24,445 |
|
Weighted average shares outstanding - diluted |
|
|
24,962 |
|
|
24,548 |
|
|
24,911 |
|
|
24,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial statements.
5
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
For the six months |
||||||||
|
|
|
ended June 30, |
|
ended June 30, |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
2,170 |
|
$ |
4,326 |
|
$ |
4,970 |
|
$ |
7,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
3,000 |
|
|
(1,309) |
|
|
4,560 |
|
|
2,419 |
|
Other comprehensive income (loss) |
|
|
3,000 |
|
|
(1,309) |
|
|
4,560 |
|
|
2,419 |
|
Comprehensive income |
|
$ |
5,170 |
|
$ |
3,017 |
|
$ |
9,530 |
|
$ |
9,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to non-controlling interests |
|
|
(368) |
|
|
(2,077) |
|
|
(1,008) |
|
|
(2,536) |
|
Foreign currency translation adjustments |
|
|
(563) |
|
|
383 |
|
|
(947) |
|
|
2 |
|
Comprehensive income attributable to Century Casinos, Inc. shareholders |
|
$ |
4,239 |
|
$ |
1,323 |
|
$ |
7,575 |
|
$ |
6,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial statements.
6
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in thousands, except share information |
Common Shares |
|
|
Common |
|
|
Additional |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Retained Earnings |
|
|
Total Century Casinos Shareholders' Equity |
|
|
Noncontrolling Interest |
|
|
Total Equity |
|
BALANCE AT January 1, 2016 |
24,414,083 |
|
$ |
244 |
|
$ |
77,318 |
|
$ |
(12,683) |
|
$ |
57,171 |
|
$ |
122,050 |
|
$ |
4,737 |
|
$ |
126,787 |
|
Net earnings |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
4,529 |
|
|
4,529 |
|
|
2,536 |
|
|
7,065 |
|
Foreign currency translation adjustment |
0 |
|
|
0 |
|
|
0 |
|
|
2,421 |
|
|
0 |
|
|
2,421 |
|
|
(2) |
|
|
2,419 |
|
Amortization of stock-based compensation |
0 |
|
|
0 |
|
|
381 |
|
|
0 |
|
|
0 |
|
|
381 |
|
|
0 |
|
|
381 |
|
Distribution to non-controlling interest |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(1,626) |
|
|
(1,626) |
|
Exercise of stock options |
20,488 |
|
|
0 |
|
|
46 |
|
|
0 |
|
|
0 |
|
|
46 |
|
|
0 |
|
|
46 |
|
BALANCE AT June 30, 2016 |
24,434,571 |
|
$ |
244 |
|
$ |
77,745 |
|
$ |
(10,262) |
|
$ |
61,700 |
|
$ |
129,427 |
|
$ |
5,645 |
|
$ |
135,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT January 1, 2017 |
24,451,582 |
|
$ |
245 |
|
$ |
78,174 |
|
$ |
(12,609) |
|
$ |
66,386 |
|
$ |
132,196 |
|
$ |
6,388 |
|
$ |
138,584 |
|
Cumulative effect of accounting change (1) |
0 |
|
|
0 |
|
|
(17) |
|
|
0 |
|
|
17 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Net earnings |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
3,962 |
|
|
3,962 |
|
|
1,008 |
|
|
4,970 |
|
Foreign currency translation adjustment |
0 |
|
|
0 |
|
|
0 |
|
|
3,613 |
|
|
0 |
|
|
3,613 |
|
|
947 |
|
|
4,560 |
|
Amortization of stock-based compensation |
0 |
|
|
0 |
|
|
235 |
|
|
0 |
|
|
0 |
|
|
235 |
|
|
0 |
|
|
235 |
|
Distribution to non-controlling interest |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(58) |
|
|
(58) |
|
Exercise of stock options |
17,036 |
|
|
0 |
|
|
32 |
|
|
0 |
|
|
0 |
|
|
32 |
|
|
0 |
|
|
32 |
|
BALANCE AT June 30, 2017 |
24,468,618 |
|
$ |
245 |
|
$ |
78,424 |
|
$ |
(8,996) |
|
$ |
70,365 |
|
$ |
140,038 |
|
$ |
8,285 |
|
$ |
148,323 |
See notes to unaudited condensed consolidated financial statements.
|
(1) |
Cumulative effect of accounting change relates to the adoption of Accounting Standards Update 2016-09. See Note 2 of the unaudited condensed consolidated financial statements for further details on the adoption of this accounting standard. |
7
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the six months |
||||
|
|
|
ended June 30, |
||||
|
Amounts in thousands |
|
2017 |
|
2016 |
||
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|||
|
Net earnings |
|
$ |
4,970 |
|
$ |
7,065 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
4,103 |
|
|
4,127 |
|
Loss on disposition of fixed assets |
|
|
255 |
|
|
37 |
|
Unrealized (gain) loss on interest rate swaps |
|
|
(35) |
|
|
23 |
|
Amortization of stock-based compensation expense |
|
|
235 |
|
|
381 |
|
Amortization of deferred financing costs |
|
|
86 |
|
|
57 |
|
Deferred taxes |
|
|
45 |
|
|
(197) |
|
Changes in Operating Assets and Liabilities, Net of Acquisition: |
|
|
|
|
|
|
|
Receivables, net |
|
|
1,602 |
|
|
(381) |
|
Prepaid expenses and other assets |
|
|
(2,458) |
|
|
(847) |
|
Accounts payable |
|
|
246 |
|
|
(257) |
|
Accrued liabilities |
|
|
33 |
|
|
717 |
|
Inventories |
|
|
(23) |
|
|
2 |
|
Other operating assets |
|
|
0 |
|
|
(489) |
|
Other operating liabilities |
|
|
47 |
|
|
3 |
|
Accrued payroll |
|
|
(169) |
|
|
(296) |
|
Taxes payable |
|
|
(1,696) |
|
|
(1,038) |
|
Net cash provided by operating activities |
|
|
7,241 |
|
|
8,907 |
|
|
|
|
|
|
|
|
|
Cash Flows used in Investing Activities: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(3,064) |
|
|
(3,805) |
|
Acquisition of Century Casino St. Albert (net of cash acquired) (Note 3) |
|
|
(1,494) |
|
|
0 |
|
Acquisition of Saw Close Casino, Ltd. Licenses (Note 1) |
|
|
(126) |
|
|
0 |
|
Proceeds from disposition of assets |
|
|
1 |
|
|
10 |
|
Net cash used in investing activities |
|
|
(4,683) |
|
|
(3,795) |
– Continued –
See notes to unaudited condensed consolidated financial statements.
8
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
For the six months |
||||
|
|
|
ended June 30, |
||||
|
Amounts in thousands |
|
2017 |
|
2016 |
||
|
|
|
|
|
|
|
|
|
Cash Flows used in Financing Activities: |
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
0 |
|
|
379 |
|
Principal payments |
|
|
(2,952) |
|
|
(2,426) |
|
Distribution to non-controlling interest |
|
|
(644) |
|
|
(1,626) |
|
Proceeds from exercise of stock options |
|
|
32 |
|
|
46 |
|
Net cash used in financing activities |
|
|
(3,564) |
|
|
(3,627) |
|
|
||||||
|
Effect of Exchange Rate Changes on Cash |
|
$ |
979 |
|
$ |
416 |
|
|
|
|
|
|
|
|
|
(Decrease) Increase in Cash and Cash Equivalents |
|
$ |
(27) |
|
$ |
1,901 |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Period |
|
$ |
38,837 |
|
$ |
29,366 |
|
Cash and Cash Equivalents at End of Period |
|
$ |
38,810 |
|
$ |
31,267 |
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
Interest paid |
|
$ |
3,120 |
|
$ |
1,459 |
|
Income taxes paid |
|
$ |
1,774 |
|
$ |
1,896 |
|
|
|
|
|
|
|
|
|
Non-Cash Investing Activities: |
|
|
|
|
|
|
|
Purchase of property and equipment on account |
|
$ |
437 |
|
$ |
740 |
|
Non-Cash Financing Activities: |
|
|
|
|
|
|
|
Assets acquired under capital lease obligation |
|
$ |
20 |
|
$ |
0 |
See notes to unaudited condensed consolidated financial statements.
9
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, 2017, the Company owned casino operations in North America; was developing a casino in England; held a majority ownership interest in six casinos throughout Poland, a racetrack and entertainment center (“REC”) in Canada and the pari-mutuel off-track betting network in southern Alberta, Canada; managed cruise ship-based casinos on international waters; managed a casino in Aruba and provided gaming services in Argentina.
The Company currently owns, operates and manages the following casinos through wholly-owned subsidiaries in North America:
|
· |
The Century Casino & Hotel in Edmonton, Alberta, Canada (“Century Resorts Alberta” or “CRA”) |
|
· |
The Century Casino St. Albert in Edmonton, Alberta, Canada (“CSA”) |
|
· |
The Century Casino Calgary, Alberta, Canada (“CAL”) |
|
· |
The Century Casino & Hotel in Central City, Colorado (“CTL”); and |
|
· |
The Century Casino & Hotel in Cripple Creek, Colorado (“CRC”) |
The Company currently has a controlling financial interest through its subsidiary CCE in the following majority-owned subsidiaries:
|
· |
The Company owns 66.6% of Casinos Poland Ltd (“CPL” or “Casinos Poland”). CPL is the owner and operator of six casinos throughout Poland. CPL is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. Polish Airports Company (“Polish Airports”) owns the remaining 33.3% of CPL, which is reported as a non-controlling financial interest. |
|
· |
The Company owns 75% of United Horsemen of Alberta Inc. dba Century Downs Racetrack and Casino (“CDR” or “Century Downs”). CDR operates Century Downs Racetrack and Casino, a REC in Balzac, a north metropolitan area of Calgary, Alberta, Canada. CDR is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. The remaining 25% of CDR is owned by unaffiliated shareholders and is reported as a non-controlling financial interest. |
|
· |
The Company owns 75% of Century Bets! Inc. (“CBS” or “Century Bets”). CBS operates the pari-mutuel off-track betting network in Southern Alberta, Canada. CBS is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. Rocky Mountain Turf Club (“RMTC”) owns the remaining 25% of CBS, which is reported as a non-controlling financial interest. |
The Company has the following concession, management and consulting service agreements:
|
· |
The Company operates 14 ship-based casinos through concession agreements with four cruise ship owners. The Company began operating the ship-based casino onboard Mein Schiff 6, a new 2,500 passenger cruise ship, in May 2017. |
In connection with a concession agreement with Diamond Cruise International Co., Ltd. (“Diamond”) for the operation of the ship-based casino onboard Glory Sea, the Company has a Cooperation Agreement with Dynamic Partners International, Ltd. (“Dynamic”). Under this agreement, Dynamic markets and promotes the casino to VIP players along with facilitating the concession agreement between Diamond and the Company, for which the Company pays Dynamic a portion of the net profit from the casino onboard Glory Sea.
10
In March 2015, in connection with an agreement with Norwegian Cruise Line Holdings (“Norwegian”) to terminate the Company’s concession agreements with Oceania Cruises (“Oceania”) and Regent Seven Seas Cruises (“Regent”), the Company entered into a two-year consulting agreement, which became effective on June 1, 2015, under which the Company provided limited consulting services for the ship-based casinos of Oceania and Regent in exchange for receiving a consulting fee of $2.0 million, which was payable $250,000 per quarter through May 2017.
|
· |
The Company has a management agreement to direct the operation of the casino at the Hilton Aruba Caribbean Resort & Casino from which the Company receives a monthly management fee. The management agreement ends in December 2017, and the Company does not anticipate extending this agreement. |
|
· |
The Company, through its subsidiary CCE, has a 7.5% ownership interest in Mendoza Central Entretenimientos S.A., an Argentina company (“MCE”). The shares are reported on the condensed consolidated balance sheet using the cost method of accounting. MCE has an exclusive concession agreement with Instituto Provincial de Juegos y Casinos to lease slot machines and provide related services to Casino de Mendoza, a casino located in Mendoza, Argentina and owned by the Province of Mendoza. In addition, CCE and MCE have entered into a consulting services agreement pursuant to which CCE provides advice on casino matters and receives a service fee consisting of a fixed fee plus a percentage of MCE’s earnings before interest, taxes, depreciation and amortization (“EBITDA”). See Note 4 for additional information related to MCE. |
Additional Projects and Other Developments
In September 2016, the Company was selected by Horse Racing Alberta (“HRA”) as the successful applicant to own, build and operate a horse racing facility in the Edmonton market area, which the Company is planning to operate as Century Mile Racetrack and Casino. In March 2017, the Company received approval for the Century Mile project from the Alberta Gaming and Liquor Commission (“AGLC”). Century Mile will be a one-mile horse racetrack and a multi-level REC. The multi-level REC is expected to have 550 slot machines, restaurants, bars, delis, an off-track betting parlor and grandstand and to hold a minimum of 100 horse races per year. The project is located on Edmonton International Airport land close to the city of Leduc, south of Edmonton. Century Mile will be approximately 30 miles from both CRA and CSA. The Company estimates this project will cost approximately CAD 60.0 million ($46.2 million based on the exchange rate in effect on June 30, 2017). Construction of the Century Mile project began in July 2017. The Company estimates that construction of this project will take approximately 15 months and that it will be completed by the fourth quarter of 2018. The Company is seeking to obtain financing for the Century Mile project.
On June 20, 2017, the Company’s subsidiary, Century Casinos Europe GmbH (“CCE”), entered into a Share Purchase Agreement (the “Agreement”), by and among Global Gaming Ventures (Group) Limited, Saw Close Casino Ltd. (“SCCL”), Anthony Wollenberg and CCE pursuant to which CCE has acquired 100% of the outstanding common stock of SCCL as well as casino licenses held by SCCL (the “SCCL License Acquisition”) for a total consideration of GBP 0.6 million ($0.8 million based on the exchange rate in effect on June 30, 2017) as well as assumed liabilities of GBP 0.2 million ($0.2 million based on the exchange rate in effect on June 30, 2017). The Company will utilize the casino licenses to develop and operate a casino in Bath, England. The Company paid GBP 0.1 million ($0.1 million) at closing. Payment of the remaining purchase consideration will be made after the receipt of certain regulatory and governmental approvals and the opening of the casino. Payment of the assumed liabilities is subject to certain performance criteria being met once the casino is in operation. The Company estimates that construction of the casino will cost GBP 5.0 million ($6.5 million based on the exchange rate in effect on June 30, 2017) and that the casino will open in the first half of 2018.
Preparation of Financial Statements
The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial reporting, the rules and regulations of the Securities and Exchange Commission which apply to interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated.
11
In the opinion of management, all adjustments considered necessary for the fair presentation of financial position, results of operations and cash flows of the Company have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the period ended June 30, 2017 are not necessarily indicative of the operating results for the full year.
Presentation of Foreign Currency Amounts
The Company’s functional currency is the U.S. dollar (“USD” or “$”). Foreign subsidiaries with a functional currency other than the U.S. dollar translate assets and liabilities at current exchange rates at the end of the reporting periods, while income and expense accounts are translated at average exchange rates for the respective periods. The Company and its subsidiaries enter into various transactions made in currencies different from their functional currencies. These transactions are typically denominated in the Canadian dollar (“CAD”), Euro (“EUR”), Polish zloty (“PLN”) and British pound (“GBP”). Gains and losses resulting from changes in foreign currency exchange rates related to these transactions are included in income from operations as they occur.
The exchange rates to the U.S. dollar used to translate balances at the end of the reported periods are as follows:
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
Ending Rates |
|
2017 |
|
2016 |
|
Canadian dollar (CAD) |
|
1.2977 |
|
1.3427 |
|
Euros (EUR) |
|
0.8761 |
|
0.9476 |
|
Polish zloty (PLN) |
|
3.7027 |
|
4.2065 |
|
British pound (GBP) |
|
0.7696 |
|
0.8106 |
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 |
|
2017 |
|
2016 |
|
% Change |
|
2017 |
|
2016 |
|
% Change |
|
Canadian dollar (CAD) |
|
1.3451 |
|
1.2890 |
|
(4.4%) |
|
1.3343 |
|
1.3311 |
|
(0.2%) |
|
Euros (EUR) |
|
0.9096 |
|
0.8856 |
|
(2.7%) |
|
0.9240 |
|
0.8961 |
|
(3.1%) |
|
Polish zloty (PLN) |
|
3.8354 |
|
3.8726 |
|
1.0% |
|
3.9459 |
|
3.9141 |
|
(0.8%) |
|
British pound (GBP) |
|
0.7822 |
|
0.6976 |
|
(12.1%) |
|
0.7947 |
|
0.6979 |
|
(13.9%) |
|
Source: Pacific Exchange Rate Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Correction of Prior Period Balances
Subsequent to the issuance of the Company’s Quarterly Report on Form 10-Q for the three and six month periods ended June 30, 2016, the Company determined that it had erroneously recognized a reduction in pari-mutuel revenue for CBS totaling $0.7 million in its condensed consolidated statement of earnings for the six months ended June 30, 2016. This error also affected the Company’s income tax expense, net earnings attributable to non-controlling interests and consolidated statements of comprehensive income (loss), equity, cash flows and Note 12 “Segment and Geographic Information” for the six months ended June 30, 2016.
The prior period amounts within the Company’s condensed consolidated financial statements for the six months ended June 30, 2016 have been revised to reflect the correct balances as presented below.
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Earnings for the six months ended June 30, 2016: |
|||||||||
|
Amounts in thousands, except for per share information |
|
As Previously Reported |
|
Correction |
|
As Corrected |
|||
|
Operating Revenue: |
|
|
|
|
|
|
|
|
|
|
Other |
|
$ |
6,028 |
|
$ |
697 |
|
$ |
6,725 |
|
Gross revenue |
|
|
71,943 |
|
|
697 |
|
|
72,640 |
|
Net operating revenue |
|
|
67,731 |
|
|
697 |
|
|
68,428 |
|
Earnings from operations |
|
|
7,924 |
|
|
697 |
|
|
8,621 |
|
Earnings before income taxes |
|
|
8,133 |
|
|
697 |
|
|
8,830 |
|
Income tax expense |
|
|
(1,584) |
|
|
(181) |
|
|
(1,765) |
|
Net earnings |
|
|
6,549 |
|
|
516 |
|
|
7,065 |
|
Net earnings attributable to non-controlling interests |
|
|
(2,407) |
|
|
(129) |
|
|
(2,536) |
|
Net earnings attributable to Century Casinos, Inc. shareholders |
|
|
4,142 |
|
|
387 |
|
|
4,529 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Century Casinos, Inc. shareholders: |
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
$ |
0.17 |
|
$ |
0.01 |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Comprehensive Income for the six months ended June 30, 2016: |
|||||||||
|
Amounts in thousands |
|
As Previously Reported |
|
Correction |
|
As Corrected |
|||
|
Net earnings |
|
$ |
6,549 |
|
$ |
516 |
|
$ |
7,065 |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
2,447 |
|
|
(28) |
|
|
2,419 |
|
Other comprehensive income |
|
|
2,447 |
|
|
(28) |
|
|
2,419 |
|
Comprehensive income |
|
$ |
8,996 |
|
$ |
488 |
|
$ |
9,484 |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to non-controlling interests |
|
|
(2,407) |
|
|
(129) |
|
|
(2,536) |
|
Foreign currency translation adjustments |
|
|
(5) |
|
|
7 |
|
|
2 |
|
Comprehensive income attributable to Century Casinos, Inc. shareholders |
|
$ |
6,584 |
|
$ |
366 |
|
$ |
6,950 |
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Equity for the six months ended June 30, 2016: |
|||||||||
|
Amounts in thousands |
|
As Previously Reported |
|
Correction |
|
As Corrected |
|||
|
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) balance at January 1, 2016 |
|
$ |
(12,704) |
|
$ |
21 |
|
$ |
(12,683) |
|
Foreign currency translation adjustment |
|
|
2,442 |
|
|
(21) |
|
|
2,421 |
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
|
Retained earnings balance at January 1, 2016 |
|
|
57,558 |
|
|
(387) |
|
|
57,171 |
|
Net earnings |
|
|
4,142 |
|
|
387 |
|
|
4,529 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Century Casinos shareholders' equity |
|
|
|
|
|
|
|
|
|
|
Total Century Casinos shareholders' equity balance at January 1, 2016 |
|
|
122,416 |
|
|
(366) |
|
|
122,050 |
|
Net earnings |
|
|
4,142 |
|
|
387 |
|
|
4,529 |
|
Foreign currency translation adjustment |
|
|
2,442 |
|
|
(21) |
|
|
2,421 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
Non-controlling interest balance at January 1, 2016 |
|
|
4,859 |
|
|
(122) |
|
|
4,737 |
|
Net earnings |
|
|
2,407 |
|
|
129 |
|
|
2,536 |
|
Foreign currency translation adjustment |
|
|
5 |
|
|
(7) |
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
|
|
|
|
Total equity balance at January 1, 2016 |
|
|
127,275 |
|
|
(488) |
|
|
126,787 |
|
Net earnings |
|
|
6,549 |
|
|
516 |
|
|
7,065 |
|
Foreign currency translation adjustment |
|
|
2,447 |
|
|
(28) |
|
|
2,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2016: |
|||||||||
|
Amounts in thousands |
|
As Previously Reported |
|
Correction |
|
As Corrected |
|||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
6,549 |
|
$ |
516 |
|
$ |
7,065 |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
|
|
Receivables, net |
|
|
278 |
|
|
(659) |
|
|
(381) |
|
Taxes payable |
|
|
(1,209) |
|
|
171 |
|
|
(1,038) |
|
Net cash provided by operating activities |
|
|
8,879 |
|
|
28 |
|
|
8,907 |