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Description Of Business And Basis Of Presentation | 9 Months Ended
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Sep. 30, 2020
Description Of Business And Basis Of Presentation [Abstract] |
Description Of Business And Basis Of Presentation | 1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Century Casinos, Inc. (the “Company”) is a casino entertainment company with operations primarily in North America. The Company’s operations as of September 30, 2020 are detailed below. The Company owns, operates and manages the following casinos through wholly-owned subsidiaries in North America: The Century Casino & Hotel in Central City, Colorado (“CTL”) The Century Casino & Hotel in Cripple Creek, Colorado (“CRC”) Mountaineer Casino, Racetrack & Resort in New Cumberland, West Virginia (“Mountaineer” or “MTR”) (1) The Century Casino Cape Girardeau, Missouri (“Cape Girardeau” or “CCG”) (1) The Century Casino Caruthersville, Missouri (“Caruthersville” or “CCV”) (1) The Century Casino & Hotel in Edmonton, Alberta, Canada (“Century Resorts Alberta” or “CRA”) The Century Casino St. Albert in Edmonton, Alberta, Canada (“CSA”) Century Mile Racetrack and Casino in Edmonton, Alberta, Canada (“CMR” or “Century Mile”); and The Century Casino Calgary, Alberta, Canada (“CAL”) (1)VICI Properties Inc. (“VICI PropCo”) owns the real estate assets. On March 17, 2020, the Company announced that it had permanently closed Century Casino Bath (“CCB”). CCB voluntarily surrendered its casino gaming license on April 28, 2020 and entered into a creditors voluntary liquidation on May 6, 2020. See below in Note 1 for additional information about CCB. Mountaineer, Cape Girardeau and Caruthersville (the “Acquired Casinos”) were acquired on December 6, 2019 from Eldorado Resorts, Inc. (“Eldorado Resorts”) (the “Acquisition”). See Note 3 for additional information about the Acquired Casinos and the Acquisition. Century Bets!, Inc. (“CBS” or “Century Bets”) operates the pari-mutuel off-track betting network in southern Alberta, Canada. Prior to August 2019, the Company had a 75% controlling financial interest in CBS through its wholly-owned subsidiary Century Resorts Management GmbH (“CRM”). In August 2019, the Company purchased the remaining 25% non-controlling financial interest from Rocky Mountain Turf Club for CAD 0.2 million ($0.2 million based on the exchange rate in effect on August 5, 2019), resulting in CBS becoming a wholly-owned subsidiary. The Company has a controlling financial interest through its wholly-owned subsidiary CRM in the following majority-owned subsidiaries: The Company owns 66.6% of Casinos Poland Ltd (“CPL” or “Casinos Poland”). As of September 30, 2020, CPL owned and operated eight 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 racing and entertainment center (“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 has the following concession, management and consulting service agreements: As of September 30, 2020, the Company had a concession agreement with TUI Cruises for four ship-based casinos, one of which was operating. The other three ships have not sailed since March 2020 due to the coronavirus (“COVID-19”) pandemic. The agreement ends in May 2021. The Company, through its subsidiary CRM, has a 7.5% ownership interest in Mendoza Central Entretenimientos S.A., an Argentinian company (“MCE”). In addition, CRM provides advice to MCE on casino matters pursuant to a consulting agreement in exchange for a fixed fee plus a percentage of MCE’s earnings before interest, taxes, depreciation and amortization (“EBITDA”). In March 2020, the Company impaired the $1.0 million MCE investment and wrote-down a $0.3 million receivable related to MCE due to assessments made related to the impact of COVID-19 on MCE. See Note 4 for additional information related to MCE. The Company, through its subsidiary CRM, had a 51% ownership interest in Golden Hospitality Ltd. (“GHL”). The Company sold its interest in GHL to the unaffiliated shareholders of GHL in May 2019 for a $0.7 million non-interest bearing promissory note. The Company recognized a loss on the sale of its investment of less than $0.1 million in general and administrative expenses on its condensed consolidated statement of earnings (loss) for the year ended December 31, 2019. The sale of the Company’s equity interest in GHL also ended its equity interest in Minh Chau Ltd. (“MCL”). See Note 4 for additional information related to GHL and MCL. Recent Developments Related to COVID-19 The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In late 2019, an outbreak of COVID-19 was identified in China and has since spread throughout much of the world. The COVID-19 pandemic has had an adverse effect on the Company’s results of operations and financial condition for the first three quarters of 2020, and the Company expects this situation will continue to have an adverse impact on its results for the remainder of 2020 and perhaps into 2021. The duration and impact of the COVID-19 pandemic otherwise remains uncertain. Between March 13, 2020 and March 17, 2020, the Company closed all of its casinos, hotels and other facilities to comply with quarantines issued by governments to contain the spread of COVID-19. The Company’s Polish locations reopened on May 18, 2020 and its North American operations reopened between June 1, 2020 and June 17, 2020. The Company’s casinos have varied their operations based on the governmental health and safety requirements in the jurisdictions in which they are located. These include capacity and gaming floor restrictions and limited hours of operation. The Company continues to monitor its liquidity in light of the uncertainty resulting from COVID-19. The Company plans to continue its reduced marketing expenditures for the remainder of 2020 along with reducing operating costs where possible. The majority of the Company’s 2020 planned capital expenditure projects remain on hold and will be reevaluated in the first quarter of 2021. In March 2020, as a proactive measure to increase its cash position and preserve financial flexibility, the Company borrowed an additional $9.95 million on its revolving credit facility (the “Revolving Facility”) under its credit facility (“Macquarie Credit Agreement”) with Macquarie Capital (“Macquarie”) and $7.4 million on its credit agreement with UniCredit Bank Austria AG (“UniCredit”). The Revolving Facility was repaid in July 2020 except for a $50,000 letter of credit that the Company cash collateralized. See Note 6 for further discussion of the Macquarie Credit Agreement and the UniCredit credit agreement, including discussion of a recent amendment to the Macquarie Credit Agreement that, among other things, waives compliance with a financial covenant under the Macquarie Credit Agreement. The Company cannot predict the negative impacts that the failure to suppress the spread of COVID-19 will have on its consumer demand, workforce, suppliers, contractors and other partners and, although all locations have reopened, whether future closures will be required. Such closures have had and will continue to have a material impact on the Company. While the severity and duration of such business impacts cannot currently be estimated, the effects of COVID-19 and the requirements of health and safety protocols are expected to continue to have a material impact on the Company. ‎ Additional Projects and Other Developments Century Casino Calgary On August 5, 2020, the Company announced that it had entered into a definitive agreement to sell the casino operations of Century Casino Calgary for CAD 10.0 million ($7.5 million based on the exchange rate on August 5, 2020) plus a three year quarterly earn out as specified in the agreement. The CAD 10.0 million that the Company received at the execution of the definitive agreement is non-refundable except in the event the Company is in breach of certain covenants set out in the agreement and subject to working capital and other adjustments. The Company will continue to operate Century Sports, a sports bar, bowling and entertainment facility, and to own the underlying real estate. Upon closing of the transaction, the Company will enter into a three year lease agreement with the purchaser of the casino operations for annual net rent of CAD 0.5 million ($0.4 million based on the exchange rate on September 30, 2020). The transaction is expected to close on November 30, 2020 subject to customary closing conditions. The Company recorded a loss of $0.1 million to general and administrative expenses on its condensed consolidated statement of earnings (loss) for the nine months ended September 30, 2020 related to the estimated costs the Company will incur for the sale. Held for sale assets on the Company’s condensed consolidated balance sheet as of September 30, 2020 include $0.1 million in inventories and $0.6 million in property and equipment, net. Held for sale liabilities on the Company’s condensed consolidated balance sheet as of September 30, 2020 include $0.3 million in accrued liabilities. Bermuda In August 2017, the Company announced that, together with the owner of the Hamilton Princess Hotel & Beach Club in Hamilton, Bermuda, it had submitted a license application to the Bermudan government for a casino at the Hamilton Princess Hotel & Beach Club. The casino would feature approximately 200 slot machines, 17 live table games, one or more electronic table games and a high limit area and salon privé. The Company’s subsidiary, CRM, entered into a long-term management agreement with the owner of the hotel to manage the operations of the casino and receive a management fee if a license is awarded. CRM would also provide a $5.0 million loan for the purchase of casino equipment if the license is awarded. In September 2017, the Bermuda Casino Gaming Commission granted a provisional casino gaming license, which is subject to certain conditions and approvals including the adoption of certain rules and regulations by the Parliament of Bermuda. The Parliament of Bermuda has not yet adopted these rules and regulations, and the Company does not currently expect this project to go forward. Century Casino Bath In March 2020, Century Casino Bath was closed due to COVID-19. Due to challenging conditions that included historical and forecast losses due to changes in the regulatory environment for casinos in England requiring enhanced due diligence of customers, CCB’s board of directors determined that it would enter into creditors voluntary liquidation and control of CCB was relinquished. Under Accounting Standards Codification (“ASC”) 810, Consolidation, specifically ASC 810-10-15, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Accordingly, when a subsidiary is in legal reorganization or files for bankruptcy, it is appropriate for the parent to deconsolidate the subsidiary. The Company will not regain control of CCB and determined that it was appropriate to deconsolidate CCB effective as of May 6, 2020. The Company will not retain any ownership in CCB and CCB will be dissolved as a company following its liquidation. The Company recognized a gain of $7.4 million in general and administrative expenses on its statement of earnings (loss) for the nine months ended September 30, 2020. Prior to the deconsolidation, the Company impaired the assets related to CCB and wrote-down $16.5 million during the fourth quarter of 2019. ‎ 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. 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, 2019. The results of operations for the quarter and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year. Cash, Cash Equivalents and Restricted Cash A reconciliation of cash, cash equivalents and restricted cash as stated in the Company’s condensed consolidated statements of cash flows is presented in the following table:
|  | September 30, |  | September 30,
Amounts in thousands |  | 2020 |  | 2019
Cash and cash equivalents |  | $ | 62,068 |  | $ | 44,029
Restricted cash included in deposits and other |  |  | 861 |  |  | 874
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |  | $ | 62,929 |  | $ | 44,903
As of September 30, 2020, restricted cash included $0.6 million in deposits and other related to a cash guarantee under the UniCredit loan agreement with CCB that CRM assumed in February 2020, $0.2 million in deposits and other related to payments of prizes and giveaways for Casinos Poland and less than $0.1 million in deposits and other related to an insurance policy. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Management’s use of estimates includes estimates for property and equipment, goodwill, intangible assets and income tax. ‎ Presentation of Foreign Currency Amounts The Company’s functional currency is the US dollar (“USD” or “$”). 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 income from operations as they occur. The exchange rates to the US dollar used to translate balances at the end of the reported periods are as follows:
|  | September 30, |  | December 31,
Ending Rates |  | 2020 |  | 2019
Canadian dollar (CAD) |  | 1.3339 |  | 1.2988
Euros (EUR) |  | 0.8534 |  | 0.8906
Polish zloty (PLN) |  | 3.8684 |  | 3.7873
British pound (GBP) |  | 0.7756 |  | 0.7563
The average exchange rates to the US dollar used to translate balances during each reported period are as follows:
|  | For the three months |  |  |  | For the nine months |  |
|  | ended September 30, |  |  |  | ended September 30, |  |
Average Rates |  | 2020 |  | 2019 |  | % Change |  | 2020 |  | 2019 |  | % Change
Canadian dollar (CAD) |  | 1.3325 |  | 1.3205 |  | (0.9%) |  | 1.3539 |  | 1.3292 |  | (1.9%)
Euros (EUR) |  | 0.8557 |  | 0.8997 |  | 4.9% |  | 0.8905 |  | 0.8901 |  | —
Polish zloty (PLN) |  | 3.8013 |  | 3.8850 |  | 2.2% |  | 3.9397 |  | 3.8270 |  | (2.9%)
British pound (GBP) |  | 0.7745 |  | 0.8111 |  | 4.5% |  | 0.7874 |  | 0.7859 |  | (0.2%)
Source: Pacific Exchange Rate Service |  |  |  |  |  |  |  |  |  |  |  |

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