8.COMMITMENTS AND CONTINGENCIES

Litigation

Casinos Poland

In March 2011, the Polish Internal Revenue Service (“Polish IRS”) started conducting a series of tax audits of CPL to review the calculation and payment of personal income tax by CPL employees. Based on the March 2011 audit, the Polish IRS concluded that CPL should calculate, collect and remit to the Polish IRS personal income tax on tips received by CPL employees from casino customers for the periods from December 1, 2007 to December 31, 2008, January 1, 2009 to December 31, 2009 and January 1, 2011 to January 31, 2011. The Company has recorded a contingent liability on its condensed consolidated balance sheet and the balance for all open periods as of March 31, 2015 is estimated at PLN 12.0 million ($3.2 million based on the exchange rate in effect on March 31, 2015).

After the proceedings with the Polish IRS, the Director of the Tax Chamber in Warsaw upheld the decision of the Polish IRS in November 2012 for review of the period from January 1, 2011 to January 31, 2011. CPL paid PLN 0.1 (less than $0.1 million) to the Polish IRS for taxes and interest owed resulting from the decision. CPL appealed the decision to the Regional Administrative Court in Warsaw in December 2012. In September 2013, the Regional Administrative Court in Warsaw denied CPL’s appeal. CPL appealed the decision to the Supreme Administrative Court and expects a decision by the end of 2015.

After further proceedings and appeals between CPL and the Polish IRS, the Director of the Tax Chamber in Warsaw also upheld the decision of the Polish IRS in December 2013 for review of the period from December 2007 to December 2008. CPL paid PLN 3.5 million ($1.2 million) to the Polish IRS for taxes and interest owed resulting from the decision. CPL appealed the decision to the Voivodship Administrative Court. In January 2014, the Voivodship Administrative Court denied CPL’s appeal. CPL appealed the decision to the Supreme Administrative Court on December 19, 2014 and expects a decision by the end of 2015.

After further proceedings and appeals with the Polish IRS, the Director of the Tax Chamber in Warsaw also upheld the decision of the Polish IRS in December 2014 for review of the period from January 2009 to December 2009. CPL paid PLN 2.8 million ($0.9 million) for taxes and interest owed resulting from the decision. CPL appealed the decision to the Voivodship Administrative Court in January 2015 and expects a decision by the end of 2015.

Century Downs Racetrack and Casino

A contingent liability has been recorded for the litigation between CDR and 1369454 Alberta Ltd. See Note 3 for additional information regarding the contingent liability. CDR paid 1369454 Alberta Ltd. CAD 0.2 million in satisfaction of the promissory note on April 2, 2015.

Standby Letter of Credit

Century Downs Racetrack and Casino

On February 25, 2015, the Company through its subsidiary Century Resorts Alberta Inc. entered into a standby letter of credit with the Bank of Montreal for CAD 0.3 million ($0.2 million based on the exchange rate in effect on March 31, 2015). The letter of credit is imposed by Rocky View County and covers 150% of the landscaping cost of the REC project. The letter of credit has an expiration date of September 30, 2015.

Termination Agreement

On March 19, 2015, the Company, through its subsidiary Century Resorts International Ltd (“CRI”), signed the Termination Agreement with Oceania and Regent, indirect subsidiaries of Norwegian, to terminate its concession agreements with Oceania and Regent effective June 1, 2015. Norwegian operates the ship-based casinos onboard its vessels and acquired Oceania and Regent in November 2014. In consideration of the early termination of the concession agreements, the Company will receive $4.0 million. The Company will transition operation of the eight ship-based casinos that it currently operates onboard Oceania and Regent vessels to Norwegian in April and May 2015 depending on the sailing schedules of the ships.

Pursuant to the Termination Agreement, the Company will release possession of its assets onboard the Oceania and Regent vessels to Norwegian on June 1, 2015. As a result, these assets have been classified as held for sale assets on the Company’s consolidated balance sheet as of March 31, 2015. The assets held for sale consist mainly of gaming equipment and have a book value of $0.6 million. The Company has determined that this transaction does not constitute a discontinued operation because the transaction does not represent a disposal of a major operating segment.

The assets held for sale are summarized in the table below:



		March 31,
Amounts in thousands		2015
Gaming equipment	$	2,537
Furniture and non-gaming equipment		24
	$	2,561
Less accumulated depreciation		(1,952)
Assets held for sale, net	$	609

The Company also entered into a two year consulting agreement, which will become effective on June 1, 2015, under which the Company will provide limited consulting services for the ship-based casinos of Oceania and Regent in exchange for receiving a consulting fee of $2.0 million, payable in eight quarterly installments of $250,000 commencing in July 2015.