Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2018

Significant Accounting Policies [Abstract]

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company also consolidates CPL, CDR, CBS and GHL as majority owned subsidiaries for which the Company has a controlling interest. The portion of CPL, CDR, CBS and GHL that are not wholly-owned are reflected as non-controlling interests in the accompanying consolidated financial statements. All intercompany transactions and balances have been eliminated.

Use Of Estimates

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Management’s use of estimates includes estimates for property and equipment, goodwill, intangible assets and income tax.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements – In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”). The objective of ASU 2016-02 is to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous US generally accepted accounting principles (“GAAP”). ASU 2016-02 requires lessees to account for leases as finance leases or operating leases. Both finance and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and, for operating leases, the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. The standard must be adopted by recognizing and measuring leases at the beginning of the earliest period being presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2018-11”), which provides that entities may elect not to recast the comparative periods presented upon transition.

Accounting Standards Codification (“ASC”) 842, which codifies ASU 2016-02, is effective for the Company in the first quarter of 2019. The Company expects the most significant impact will relate to its real estate operating leases and the related recognition of right-of-use assets and lease liabilities in both noncurrent assets and noncurrent liabilities on its consolidated balance sheet. The value of the right-of-use assets and lease liabilities that the Company recognizes on its balance sheet will depend on its lease portfolio and discount rates at the date of adoption. The Company will use the transition package of practical expedients permitted within the new standard, which, among other things, allows the carryforward of historical lease classification. The adoption of the new guidance will not have a material impact on the Company’s consolidated statement of earnings, cash flows or shareholders’ equity. See Note 14 for details on our current lease arrangements, the amounts of which represent the future undiscounted commitments.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify the subsequent measurement of goodwill by entities performing their annual goodwill impairment tests by comparing the fair value of a reporting unit, including income tax effects from any tax-deductible goodwill, with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds fair value. ASU 2017-04 is effective for fiscal years beginning after December 31, 2021, and interim periods within those fiscal years. Early adoption of ASU 2017-04 is permitted on goodwill impairment tests performed after January 1, 2017. ASU 2017-04 should be applied on a prospective basis. The Company is currently evaluating the impact of adopting ASU 2017-04; however, the standard is not expected to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (“ASU 2018-02”). The objective of ASU 2018-02 is to provide guidance on the impacts of the Tax Cuts and Jobs Act (“Tax Act”). The guidance permits the reclassification of certain income tax effects of the Tax Act from other comprehensive income to retained earnings (stranded tax effects). The guidance also requires certain new disclosures. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. Entities may adopt the guidance using one of two transition methods: retrospective to each period or periods in which the income tax effects of the Tax Act related to the items remaining in other comprehensive income are recognized, or at the beginning of the period of adoption. The Company has completed its evaluation and has determined that this standard will not have an impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”). The objective of ASU 2018-13 is to modify disclosure requirements on fair value measurements. The guidance is effective for fiscal years beginning after December 31, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be adopted using the prospective method for certain disclosures within the guidance and retrospectively upon the effective date. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). The objective of ASU 2018-15 is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with those incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 31, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied either retrospectively or prospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The objective of ASU 2018-17 is to improve applying variable interest entity guidance to private companies under common control and improving consideration of indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 31, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents – All highly liquid investments with an original maturity of three months or less are considered cash equivalents.

A reconciliation of cash, cash equivalents and restricted cash as stated in the Company’s statement of cash flows is presented in the following table:


	December 31,		December 31,
Amounts in thousands	2018		2017
Cash and cash equivalents	$	45,575	$	74,677
Restricted cash		—		1,023
Restricted cash included in deposits and other		709		744
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	46,284	$	76,444

For the year ended December 31, 2018, restricted cash included $0.6 million in deposits and other related to a cash guarantee for the Company’s CCB credit agreement and $0.1 million in deposits related to payments of prizes and giveaways for Casinos Poland.

Concentrations Of Credit Risk

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. Although the amount of credit exposure to any one institution may exceed federally insured amounts, the Company limits its cash investments to high quality financial institutions in order to minimize its credit risk.

Inventories

Inventories – Inventories, which consist primarily of food, beverage, retail merchandise and operating supplies, are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method.

Property And Equipment

Property and Equipment - Property and equipment are stated at cost. Depreciation of assets in service is determined using the straight-line method over the estimated useful lives of the assets. Leased property and equipment under capital leases are amortized over the lives of the respective leases or over the service lives of the assets, whichever is shorter. Estimated service lives used are as follows:

Buildings and improvements	5–39 years
Gaming equipment	3–7 years
Furniture and non-gaming equipment	3–7 years

The Company evaluates long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication of impairment, determined by the excess of the carrying value in relation to anticipated undiscounted future cash flows, the carrying amount of the asset is written down to its estimated fair value by a charge to operations. During the year ended December 31, 2017, the Company wrote down the leasehold improvements at Casinos Poland’s LIM Center casino in Warsaw based on the transfer of the casino license to the Hilton Warsaw casino and charged $0.1 million to operating costs and expenses. During the year ended December 31, 2016, the Company wrote down the leasehold improvements at Casinos Poland’s Katowice casino based on the expiration of the license for that location and charged $0.4 million to operating costs and expenses. No long-lived asset impairment charges were recorded for the year ended December 31, 2018.

Goodwill

Goodwill—Goodwill represents the excess purchase price over the fair value of the net identifiable assets acquired related to third party business combinations. See Note 6.

Intangible Assets

Intangible Assets—Identifiable intangible assets include trademarks and casino licenses. The Company’s trademarks, CDR’s licenses issued by Alberta Gaming, Liquor and Cannabis (“AGLC”) and Horse Racing Alberta (“HRA”), CSA’s license issued by the AGLC and CCB’s licenses issued by the Great Britain Gambling Commission are indefinite-lived intangible assets and therefore are not amortized. The Company’s casino licenses related to CPL are finite-lived intangible assets and are amortized over their respective useful lives. See Note 6

Foreign Currency

Foreign Currency – The Company’s functional currency is the US dollar (“USD” or “$”). Foreign subsidiaries with a functional currency other than the US 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 non-operating income (expense) as they occur.

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


	December 31,	December 31,
Ending Rates	2018	2017
Canadian dollar (CAD)	1.3642	1.2545
Euros (EUR)	0.8738	0.8334
Polish zloty (PLN)	3.7606	3.4841
British pound (GBP)	0.7823	0.7396



	For the year
	ended December 31,			% Change
Average Rates	2018	2017	2016	2018/2017	2017/2016
Canadian dollar (CAD)	1.2960	1.2981	1.3256	0.2%	2.1%
Euros (EUR)	0.8473	0.8871	0.9041	4.5%	1.9%
Polish zloty (PLN)	3.6103	3.7764	3.9455	4.4%	4.3%
British pound (GBP)	0.7497	0.7767	0.7410	3.5%	(4.8%)
Source: Pacific Exchange Rate Service

Comprehensive Income

Comprehensive Income – Comprehensive income includes the effect of fluctuations in foreign currency rates on the values of the Company’s foreign investments.

Revenue Recognition

Revenue Recognition – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The objective of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard under US GAAP and International Financial Reporting Standards. The Company adopted ASU 2014-09 in its consolidated financial statements for 2018 using the modified retrospective approach. The Company applied ASU 2014-09 to contracts that were not completed as of January 1, 2018. The Company determined that all contractual performance obligations were completed as of December 31, 2017 and that no adjustment to retained earnings was required. The Company determined there was no impact to its consolidated balance sheet, consolidated statement of comprehensive (loss) income or consolidated statement of cash flows. The standard impacts the presentation of the Company’s consolidated statement of earnings in its consolidated financial statements for the year ended December 31, 2018, and the Company has added the following additional disclosures in this Note 2 related to the impact of ASU 2014-09.

Changes Related to Adoption of ASU 2014-09

The most significant impacts on the Company of its adoption of ASU 2014-09 were as follows:

Promotional Allowances: The Company recognizes revenue for goods and services provided to customers for free as an inducement to gamble as gaming revenue with an offset to gaming revenue based on the stand-alone selling price rather than an offset to promotional allowances. This change primarily resulted in a reclassification between revenue line items.

Loyalty Accounting: Complimentary points earned through game play at the Company’s casinos are identified as separate performance obligations and recorded as a reduction in gaming revenue when earned at the retail value of the benefits owed to the customer (less estimated breakage) and an increase to the loyalty program liability representing outstanding performance obligations. Such amounts are recognized as revenue in the line item of the corresponding good or service provided when the performance obligation is fulfilled. This change primarily resulted in a reclassification between revenue line items.

Estimated Cost of Promotional Allowances: The Company no longer reclassifies the estimated direct cost of providing promotional allowances from other expense line items to the gaming expense line item. This change resulted in a reclassification between expense line items that reduced gaming expense and increased hotel and food and beverage expenses by $1.2 million for the year ended December 31, 2018.

Revenue

The Company derives revenue from:

contracts with customers,

financial instruments,

cost recovery payments, and

dividends from its cost investment.

A breakout of the Company’s derived revenue is presented in the table below.


	For the year
	ended December 31,
Amounts in thousands	2018		2017		2016
Revenue from contracts with customers	$	168,938	$	154,069	$	139,234
Interest income		103		92		72
Cost recovery income		—		604		2,186
Dividend revenue		—		43		—
Total revenue	$	169,041	$	154,808	$	141,492

The Company’s performance obligations related to contracts with customers consist of the following:

Gaming

The majority of the Company’s revenue is derived from gaming transactions involving wagers wherein, upon settlement, the Company either retains the customer’s wager, or returns the wager to the customer. Gaming revenue is reported as the net difference between wins and losses. Gaming revenue is reduced by the incremental amount of unpaid progressive jackpots in the period during which the jackpot increases and the dollar value of points earned through tracked play. In Canada, gaming revenue is also reduced by amounts retained by the AGLC and HRA. Performance obligations are satisfied upon completion of the wager with liabilities recognized for points earned through play. The Company does not extend lines of credit to customers.

Hotel accommodations and food and beverage furnished without charge, coupons and downloadable credits provided to customers to entice play are considered marketing incentives to induce play and are presented as a reduction to gaming revenue at the retail value on the date of redemption. Members of the Company’s casinos’ player clubs earn points based on, among other things, their volume of play at the Company’s casinos. Players can accumulate points over time that they may redeem at their discretion under the terms of the program. The value of the points is offset against the revenue in the period in which the points were earned. The Company records a liability based on the redemption value of the points earned with an estimate for breakage, and records a corresponding reduction in gaming revenue. The value of unused or unredeemed points is included in accrued liabilities on the Company’s consolidated balance sheets.

Hotel, Food and Beverage, Bowling and Other Sales

Goods and services provided include hotel room rentals, food and beverage sales, bowling lane rentals and retail sales. Revenue is recognized over time as specified in the contract; however, the majority of the contracts are satisfied on the same day and revenue is recognized on the date of the sale. Revenue that is collected before the date of sale is recorded as deferred revenue. In the normal course of business, the Company does not accept product returns. The Company has elected the practical expedient permitted under ASU 2014-09 and excludes taxes assessed by a governmental authority and collected by the Company from the transaction price.

Pari-Mutuel

Pari-mutuel revenue involves wagers on horse racing. The Company facilitates wagers on horse racing through live racing at the Company’s racetrack, off-track betting parlors at the Company’s casinos, and the operation of the Southern Alberta off-track betting network. The Company has determined that it is the principal in the performance obligations through which amounts are wagered on horse races run at the Company’s racetrack. For these performance obligations, the Company records revenue as the commission retained on wagers with revenue recognized on the date of the wager. The Company has determined that it is acting as the agent for all wagers placed through the Company’s off-track betting parlors and the off-track betting network. For these performance obligations, the Company records pari-mutuel revenue as the commission retained on wagers less the expense for host fees to the host racetrack with revenue recognized on the date of the wager. Expenses related to licenses and HRA levies are expensed in the same month as revenue is recognized. The Company takes future bets for the Kentucky Derby only and recognizes wagers on the Kentucky Derby as deferred revenue.

Management and Consulting Fees

Revenue from the Company’s consulting services agreement with MCE and the management agreement with MCL are recorded monthly as services are provided. Payments are typically due within 30 days of the month to which the services relate. The agreed upon price in the contract does not contain variable consideration. The Company did not incur any costs to obtain its current agreements with MCE or MCL.

The Company operates gaming establishments as well as related lodging, restaurant, horse racing (including off-track betting) and entertainment facilities around the world. The Company generates revenue at its properties by providing the following types of products and services: gaming, hotel, food and beverage, and pari-mutuel and other. Disaggregation of the Company’s revenue from contracts with customers by type of revenue and geographical location is presented in the tables below.


	For the year ended December 31, 2018
Amounts in thousands		Canada		United States		Poland		Corporate Other		Total
Gaming	$	40,470	$	27,736	$	67,289	$	4,806	$	140,301
Hotel		542		1,444		—		—		1,986
Food and Beverage		10,528		3,931		782		501		15,742
Other		9,821		372		138		578		10,909
Net Operating Revenue	$	61,361	$	33,483	$	68,209	$	5,885	$	168,938



	For the year ended December 31, 2017
Amounts in thousands		Canada		United States		Poland		Corporate Other		Total
Gaming	$	39,866	$	34,610	$	60,180	$	3,215	$	137,871
Hotel		554		1,389		—		—		1,943
Food and Beverage		10,017		3,782		714		—		14,513
Other		8,427		334		158		1,209		10,128
Promotional Allowances (1)		(1,132)		(7,961)		(1,256)		(37)		(10,386)
Net Operating Revenue	$	57,732	$	32,154	$	59,796	$	4,387	$	154,069



	For the year ended December 31, 2016
Amounts in thousands		Canada		United States		Poland		Corporate Other		Total
Gaming	$	34,009	$	32,398	$	54,791	$	2,157	$	123,355
Hotel		561		1,345		—		—		1,906
Food and Beverage		8,501		3,397		602		—		12,500
Other		8,035		352		214		1,815		10,416
Promotional Allowances (1)		(869)		(7,357)		(717)		—		(8,943)
Net Operating Revenue	$	50,237	$	30,135	$	54,890	$	3,972	$	139,234

(1)

With the adoption of ASU 2014-09, promotional allowances are presented as a reduction in gaming revenue for the year ended December 31, 2018.

For the majority of the Company’s contracts with customers, payment is made in advance of the services and contracts are settled on the same day the sale occurs with revenue recognized on the date of the sale. For contracts that are not settled, a contract liability is created. The expected duration of the performance obligation is less than one year.

The amount of revenue recognized that was included in the opening contract liability balance was $0.2 million for each of the years ended December 31, 2018 and 2017. This revenue consists primarily of the Company’s deferred gaming revenue from player points earned through play at the Company’s casinos located in the United States. Activity in the Company’s contract receivables and liabilities is presented in the table below.


	For the year				For the year
	ended December 31, 2018				ended December 31, 2017
Amounts in thousands	Receivables		Contract Liability		Receivables		Contract Liability
Opening	$	266	$	235	$	270	$	232
Closing		305		219		266		235
Increase/(Decrease)	$	39	$	(16)	$	(4)	$	3

The Company did not have any contract assets for the years ended December 31, 2018 and 2017.

Receivables are included in accounts receivable and contract liabilities are included in accrued liabilities on the Company’s consolidated balance sheets. There were no impairment losses for the Company’s receivables or contract liabilities recognized for the years ended December 31, 2018 and 2017.

Substantially all of the Company’s contracts and contract liabilities have an original duration of one year or less. The Company applies the practical expedient for such contracts and does not consider the effects of the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue.

The current period amounts within the Company’s consolidated statement of earnings have been revised in the table below to provide a comparison of revenue and the direct cost of providing promotional allowances to the Company’s consolidated statement of earnings for the year ended December 31, 2018.


Consolidated Statement of Earnings
Amounts in thousands	As Reported		Changes Related to Adoption of ASU 2014-09		Revised
For the year ended December 31, 2018
Operating revenue:
Gaming	$	140,301	$	11,609	$	151,910
Operating revenue		168,938		11,609		180,547
Less: Promotional allowances		—		(11,609)		(11,609)
Net operating revenue		168,938		—		168,938
Operating costs and expenses
Gaming		73,328		1,208		74,536
Hotel		727		(49)		678
Food and beverage	$	15,854	$	(1,159)	$	14,695

Promotional Allowances

Promotional Allowances – Prior to the adoption of ASU 2014-09, hotel accommodations and food and beverage furnished without charge to customers were included in gross revenue at retail value and were deducted as promotional allowances to arrive at net operating revenue. The Company issues coupons and downloadable promotional credits to customers for the purpose of generating future revenue. The value of coupons and downloadable promotional credits redeemed is applied against the revenue generated on the day of the redemption. The estimated cost of providing promotional allowances is included in casino expenses. For the years ended December 31, 2018, 2017, and 2016, the estimated direct cost of providing promotional allowances were as follows:



	For the year
	ended December 31,
Amounts in thousands	2018		2017		2016
Hotel	$	49	$	47	$	49
Food and beverage		1,159		1,117		1,047
	$	1,208	$	1,164	$	1,096

See “Revenue Recognition – Gaming” above for a discussion of the impact of the adoption of ASU 2014-09 on the presentation of promotional allowances.

Loyalty Programs

Loyalty Programs - Members of the Company’s casinos’ player clubs earn points based on, among other things, their volume of play at the Company’s casinos. Players can accumulate points over time that they may redeem at their discretion under the terms of the program. The Company records a liability based on the redemption value of the points earned, and records a corresponding reduction in casino revenue. Points can be redeemed for cash, downloadable promotional credits and/or various amenities at the casino, such as meals, hotel stays and gift shop items. The value of the points is offset against the revenue in the period in which the points were earned. The value of unused or unredeemed points is included in accrued liabilities on the Company’s consolidated balance sheets. The expiration of unused points results in a reduction of the liability. As of December 31, 2018 and 2017, the outstanding balance of this liability on the Company’s consolidated balance sheet was $0.7 million.

Stock-Based Compensation

Stock-Based Compensation – Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. The Company accounts for forfeitures as they occur. The Company uses the Black-Scholes option pricing model for all non-performance option grants and the Monte Carlo option pricing model for all performance stock unit grants related to total shareholder return to determine the fair value of all such grants. See Note 10.

Advertising Costs

Advertising Costs – Advertising costs are expensed when incurred by the Company. Advertising costs were $2.2 million, $2.1 million and $2.0 million in the years ended December 31, 2018, 2017 and 2016, respectively.

Income Taxes

Income Taxes – The Company accounts for income taxes using the asset and liability method, which provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, at a rate expected to be in effect when the differences become deductible or payable. Recorded deferred tax assets are evaluated for impairment by reviewing internal estimates for future taxable income.

The Tax Act, which was enacted on December 22, 2017, included significant changes to the Internal Revenue Code, including, among other items, a reduction of the federal corporate tax rate to 21%, a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, and the creation of new taxes on certain foreign earnings. The Company has completed its analysis of the tax impact resulting from the enactment of the Tax Act. See Note 11 for more discussion of the provisional amounts recorded by the Company related to the Tax Act.

Earnings Per Share

Earnings Per Share – The calculation of basic earnings per share considers the weighted average outstanding common shares in the computation. The calculation of diluted earnings per share also gives effect to all potentially dilutive securities. The calculation of diluted earnings per share is based upon the weighted average number of common shares outstanding during the period, plus, if dilutive, the assumed exercise of stock options using the treasury stock method. Weighted average shares outstanding for the years ended December 31, 2018, 2017 and 2016 were as follows:



	For the year
	ended December 31,
Amounts in thousands	2018		2017		2016
Weighted average common shares, basic		29,401		25,068		24,435
Dilutive effect of stock options		561		491		233
Weighted average common shares, diluted		29,962		25,559		24,668

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



	For the year
	ended December 31,
Amounts in thousands	2018		2017		2016
Stock options		69		—		35