Description Of Business And Basis Of Presentation

3 Months Ended

Mar. 31, 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 March 31, 2020 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 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”)

The Century Casino Cape Girardeau, Missouri (“Cape Girardeau” or “CCG”)

The Century Casino Caruthersville, Missouri (“Caruthersville” or “CCV”)

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”)

In March 2020, the Company announced that it had temporarily closed its casinos to comply with quarantines issued by governments to contain the spread of the coronavirus (“COVID-19”) pandemic. On March 17, 2020, the Company also announced that it had permanently closed Century Casino Bath (“CCB”). On May 6, 2020, CCB entered into a Creditors Voluntary Liquidation (“CVL”). Prior to entering into the CVL, CCB voluntarily surrendered its casino gaming license on April 28, 2020.

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 March 31, 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 March 31, 2020, the Company had concession agreements with TUI Cruises for five ship-based casinos. The ships have not sailed since March 2020 due to COVID-19. The Company’s concession agreement for four of the ship-based casinos that the Company operated prior to their closures in March 2020 ended on May 12, 2020.

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 (loss) earnings 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.

Going Concern and 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 first quarter 2020 results of operations and financial condition, and the Company expects this situation will have an adverse impact on the Company’s second quarter 2020 results. Between March 14, 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 anticipates a phased approach to reopening will be recommended by government officials in the jurisdictions where it operates, which could include reduced levels of gaming space, social distancing at slot machines and table games or reduced capacity within the casino, limited restaurant operating hours or continued closure of restaurants, requirements to wear face masks, including the potential to require guests to wear face masks, increased frequency of disinfecting surfaces and other measures to account for varying levels of demand. The Company’s casinos rely on a local customer base and, as such, the Company anticipates that its operations could resume at a quicker rate than those of casinos at destination resorts. The timing for reopening the Company’s locations will depend on determinations by governments in each jurisdiction. The Company’s Polish locations reopened on May 18, 2020. Based on information currently available, the Company is anticipating reopening most other locations beginning in June 2020 and no later than August 2020. However, the Company cannot predict how quickly customers will return to its casinos. The Company permanently closed Century Casino Bath in March 2020, and the Company’s concession agreement for four of the ship-based casinos that the Company operated prior to their closures in March 2020 ended on May 12, 2020.

Due to the temporary closures of its casinos, hotels and other facilities, the Company has taken actions to reduce operating costs, including furloughing most of its personnel and implementing reduced work weeks for other personnel. During the closures, the Company will continue to pay benefits to its United States and Canadian employees, inclusive of part time employees, through May 2020. In Poland, all employees were paid reduced salaries based on local employment laws. As of April 30, 2020, the Company had $50.0 million in cash on hand to fund future operations and make required payments under its credit agreements as they become due within one year after the date that these condensed consolidated financial statements are issued. The Company currently is not generating any revenue from its properties and estimates that the net cash outflow during the time the operations continue to be fully suspended will be, on average, approximately $8.0 million per month. Management estimates that the Company will need approximately $19.8 million to reopen operations and cover short-term cash needs at the casinos.

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In March 2020, as a proactive measure to increase its cash position and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic, the Company borrowed an additional $17.4 million on its revolving credit facility with Macquarie Capital (“Macquarie”) and its credit agreement with UniCredit Bank Austria AG (“UniCredit”). The Company has no remaining availability under these credit facilities. As of March 31, 2020, the Company was in compliance with all financial covenants under its credit agreements. However, based on the anticipated timing of reopening the Company’s casinos, hotels and other operations, management is projecting a potential violation of a financial covenant related to the Macquarie revolving credit facility. If the financial covenant is not met and the amount outstanding under the revolving credit facility exceeds $3.5 million, Macquarie could demand repayment of the outstanding balance, and there is uncertainty whether the Company would have sufficient liquidity to finance its operations and repay its revolving credit facility within one year after the condensed consolidated financial statements are issued. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

In response to these conditions and events, management obtained from Macquarie a proposal for a covenant waiver and terms for additional financing under the revolving credit facility which would be sufficient to mitigate conditions and events that raise substantial doubt. Management plans to execute one or both of these proposals only if there is an actual covenant violation or need for additional liquidity. As a result, the Company has concluded that management’s plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.

Additional Projects and Other Developments

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.

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 ended March 31, 2020 are not necessarily indicative of the operating results for the full year.

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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:

	March 31,		March 31,
Amounts in thousands	2020		2019
Cash and cash equivalents	$	63,676	$	49,533
Restricted cash included in deposits and other		831		736
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	64,507	$	50,269

As of March 31, 2020, restricted cash included $0.6 million in deposits and other related to a cash guarantee under the CCB loan agreement 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:

	March 31,	December 31,
Ending Rates	2020	2019
Canadian dollar (CAD)	1.4187	1.2988
Euros (EUR)	0.9104	0.8906
Polish zloty (PLN)	4.1339	3.7873
British pound (GBP)	0.8059	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
	ended March 31,
Average Rates	2020	2019	% Change
Canadian dollar (CAD)	1.3429	1.3294	(1.0%)
Euros (EUR)	0.9074	0.8808	(3.0%)
Polish zloty (PLN)	3.9221	3.7869	(3.6%)
British pound (GBP)	0.7816	0.7683	(1.7%)
Source: Pacific Exchange Rate Service

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