1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Century Casinos, Inc. (the “Company”) is an international casino entertainment company. The Company’s operations as of March 31, 2019 are detailed below.

The Company owns, operates and manages the following casinos through wholly-owned subsidiaries in North America and England:

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”)

The Century Casino Calgary, Alberta, Canada (“CAL”)

The Century Casino & Hotel in Central City, Colorado (“CTL”)

The Century Casino & Hotel in Cripple Creek, Colorado (“CRC”); and

The Century Casino Bath in Bath, England (“CCB”)

Century Mile is a multi-level REC in the Edmonton market area that the Company opened on April 1, 2019. Century Mile includes a one-mile horse racetrack. The Company held the first horse race on April 28, 2019. In addition, Century Mile operates the pari-mutuel off-track betting network in Northern Alberta, Canada. The project cost CAD 61.5 million ($46.0 million based on the exchange rate in effect on March 31, 2019) and was financed with cash from the Company’s equity offering in November 2017 and additional financing from the Company’s credit agreement with the Bank of Montreal (“BMO”). See Note 5 for additional information on the Company’s credit agreement with BMO.

The Company has a controlling financial interest through its wholly-owned subsidiary Century Resorts Management GmbH (“CRM”) in the following majority-owned subsidiaries:

The Company owns 66.6% of Casinos Poland Ltd (“CPL” or “Casinos Poland”). As of March 31, 2019, CPL owned licenses for seven casinos operating 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:

As of March 31, 2019, the Company operated nine ship-based casinos through concession agreements with three cruise ship owners. The concession agreements to operate the ship-based casinos onboard the Wind Spirit and Star Pride ended in January 2019 and March 2019, respectively. The concession agreements to operate the ship-based casinos onboard the Wind Surf and Star Breeze ended in April 2019, and the concession agreement to operate the ship-based casino onboard the Star Legend will end in May 2019.

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”). See Note 3 for additional information related to MCE.

The Company, through its subsidiary CRM, has a 51% ownership interest in Golden Hospitality Ltd. (“GHL”). GHL is consolidated as a majority-owned subsidiary for which the Company has a controlling financial interest. Unaffiliated shareholders own the remaining 49% of GHL, which is reported as a non-controlling financial interest. GHL has entered into a purchase agreement with Minh Chau Ltd. (“MCL”) and MCL’s owners to purchase up to 51% of MCL over a three-year period, with an option to purchase an additional 19% ownership interest in MCL for a total of 70% of MCL under certain conditions. MCL is the owner of a small hotel and international entertainment and gaming club in the Cao Bang province of Vietnam near the Vietnamese – Chinese border station. In addition to the purchase agreement, GHL and MCL have entered into a management agreement which provides that GHL will manage the operations at MCL in exchange for receiving a portion of MCL’s net profit. See Note 3 for additional information related to GHL and MCL.

Additional Projects and Other Developments

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 will feature approximately 200 slot machines, 17 live table games, one or more electronic table games and a high limit area and salon privé. 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 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 will also provide a $5.0 million loan for the purchase of casino equipment if the license is awarded.

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, 2018. The results of operations for the quarter ended March 31, 2019 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 statement of cash flows is presented in the following table:


	March 31,		March 31,
Amounts in thousands	2019		2018
Cash and cash equivalents	$	49,533	$	65,939
Restricted cash		—		1,062
Restricted cash included in deposits and other		736		729
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	50,269	$	67,730

For the three months ended March 31, 2019, restricted cash included $0.6 million in deposits and other related to a cash guarantee for the Company’s CCB loan agreement and $0.1 million in deposits and other related to payments of prizes and giveaways for Casinos Poland.

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:


	March 31,	December 31,
Ending Rates	2019	2018
Canadian dollar (CAD)	1.3363	1.3642
Euros (EUR)	0.8908	0.8738
Polish zloty (PLN)	3.8313	3.7606
British pound (GBP)	0.7672	0.7823

The average exchange rates to the US dollar used to translate balances during each reported period are as follows:



	For the three months
	ended March 31,
Average Rates	2019	2018	% Change
Canadian dollar (CAD)	1.3294	1.2643	(5.1%)
Euros (EUR)	0.8808	0.8136	(8.3%)
Polish zloty (PLN)	3.7869	3.3992	(11.4%)
British pound (GBP)	0.7683	0.7186	(6.9%)
Source: Pacific Exchange Rate Service