Goodwill And Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets [Abstract]

Goodwill And Intangible Assets

5.GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the future economic benefits of a business combination to the extent that the purchase price exceeds the fair value of the net identified tangible and intangible assets acquired and liabilities assumed. The Company determines the estimated fair value of the net identified tangible and intangible assets acquired and liabilities assumed after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management.

The Company tests goodwill for impairment as of October 1 each year, or more frequently as circumstances indicate it is necessary. Testing compares the estimated fair values of our reporting units to the reporting units’ carrying values. The reportable segments with goodwill balances as of June 30, 2020 included Canada and Poland. For the quantitative goodwill impairment test, the current fair value of each reporting unit with goodwill balances is estimated using a combination of (i) the income approach using the discounted cash flow method for projected revenue, EBITDA and working capital, (ii) the market approach observing the price at which comparable companies or shares of comparable companies are bought or sold, and (iii) fair value measurements using either quoted market price or an estimate of fair value using a present value technique. The cost approach, estimating the cost of reproduction or replacement of an asset, was considered but not used because it does not adequately capture an operating company’s intangible value. If the carrying value of a reporting unit exceeds its estimated fair value, the fair value of each reporting unit is allocated to the reporting unit’s assets and liabilities to determine the implied fair value of the reporting unit’s goodwill and whether impairment is necessary.

The Company tests its indefinite-lived intangible assets as of October 1 each year, or more frequently as circumstances indicate it is necessary. The fair value is determined primarily using the multi period excess earnings model and the relief from royalty method under the income approach. The Company impaired the casino license at Century Casino Bath in December 2019.

During the first quarter of 2020, as a result of the COVID-19 pandemic and associated closure of its casinos, the Company concluded these triggering events could indicate possible impairment of its goodwill and indefinite-lived intangible assets. The Company performed a quantitative and qualitative impairment analysis and determined that goodwill and casino licenses related to certain reporting units were impaired. During the second quarter of 2020, the Company paid an additional $1.2 million related to the working capital adjustment for the Acquisition that resulted in additional goodwill. This amount was subsequently impaired in the same period. The Company recorded $1.2 million and $34.2 million to impairment – goodwill and intangible assets on its condensed consolidated statement of (loss) earnings for the three and six months ended June 30, 2020 related to the impairment of its goodwill and casino licenses for certain reporting units. The impairment analysis required management to make estimates about future operating results, valuation multiples and discount rates and assumptions based on historical data and consideration of future market conditions. Changes in the assumptions can materially affect these estimates. Given the uncertainty inherent in any projection, heightened by the possibility of additional effects of COVID-19, actual results may differ from the estimates and assumptions used, or conditions may change, which could result in additional impairment charges in the future. Such impairments could be material.

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Goodwill

Changes in the carrying amount of goodwill related to the United States, Canada and Poland segments are as follows:

Amounts in thousands		Balance at January 1, 2020		Acquisition		Impairment		Currency translation		Balance at ‎June 30, 2020
Goodwill, net by segment:
United States	$	18,629	$	1,157	$	(19,786)	$	—	$	—
Canada		7,550		—		(3,375)		(430)		3,745
Poland		6,757		—		—		(299)		6,458
	$	32,936	$	1,157	$	(23,161)	$	(729)	$	10,203

Intangible Assets

Intangible assets at June 30, 2020 and December 31, 2019 consisted of the following:

		June 30,		December 31,
Amounts in thousands	2020		2019
Finite-lived
Casino licenses	$	2,829	$	2,960
Less: accumulated amortization		(1,079)		(882)
		1,750		2,078
Trademarks		2,368		2,368
Less: accumulated amortization		(138)		(19)
		2,230		2,349
Players Club Lists		20,373		20,373
Less: accumulated amortization		(1,698)		(240)
		18,675		20,133
Total finite-lived intangible assets, net		22,655		24,560
Indefinite-lived
Casino licenses		29,265		40,782
Trademarks		1,647		1,719
Total indefinite-lived intangible assets		30,912		42,501
Total intangible assets, net	$	53,567	$	67,061

Trademarks

The Company currently owns three trademarks, the Century Casinos trademark, the Mountaineer trademark and the Casinos Poland trademark, which are reported as intangible assets on the Company’s condensed consolidated balance sheets.

Trademarks: Finite-Lived

The Company has determined that the Mountaineer trademark, reported in the United States segment, has a useful life of ten years after considering, among other things, the expected use of the asset, the expected useful life of other related assets or asset groups, any legal, regulatory, or contractual provisions that may limit the useful life, the effects of obsolescence, demand and other economic factors, and the maintenance expenditures required to promote and support the trade name. As such the trademark will be amortized over its useful life. Costs incurred to renew trademarks that are indefinite-lived are expensed over the renewal period to general and administrative expenses on the Company’s condensed consolidated statements of (loss) earnings. Changes in the carrying amount of the Mountaineer trademark are as follows:

Amounts in thousands		Balance at ‎January 1, 2020		Amortization		Balance at June 30, 2020
United States	$	2,349	$	(119)	$	2,230

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As of June 30, 2020, estimated amortization expense of the Mountaineer trademark over the next five years was as follows:

Amounts in thousands
2020	$	118
2021		237
2022		237
2023		237
2024		237
Thereafter		1,164
	$	2,230

The weighted-average amortization period of the Mountaineer trademark is 9.4 years.

Trademarks: Indefinite-Lived

The Company has determined the Century Casinos trademark, reported in the Corporate and Other segment, and the Casinos Poland trademark, reported in the Poland segment, have indefinite useful lives and therefore the Company does not amortize these trademarks. Costs incurred to renew trademarks that are indefinite-lived are expensed over the renewal period as general and administrative expenses on the Company’s condensed consolidated statement of (loss) earnings. Changes in the carrying amount of the indefinite-lived trademarks are as follows:

Amounts in thousands		Balance at January 1, 2020		Currency translation		Balance at June 30, 2020
Poland	$	1,611	$	(72)	$	1,539
Corporate and Other		108		—		108
	$	1,719	$	(72)	$	1,647

Casino Licenses: Finite-Lived

As of June 30, 2020, Casinos Poland had eight casino licenses, each with an original term of six years, which are reported as finite-lived intangible assets and are amortized over their respective useful lives. Changes in the carrying amount of the Casinos Poland licenses are as follows:

Amounts in thousands		Balance at January 1, 2020		Amortization		Currency translation		Balance at June 30, 2020
Poland	$	2,078	$	(234)	$	(94)	$	1,750

As of June 30, 2020, estimated amortization expense for the CPL casino licenses over the next five years was as follows:

Amounts in thousands
2020	$	236
2021		472
2022		459
2023		394
2024		161
Thereafter		28
	$	1,750

These estimates do not reflect the impact of future foreign exchange rate changes or the continuation of the licenses following their expiration. The weighted average period before the current CPL casino licenses expire is 3.6 years. In Poland, gaming licenses are not renewable. Once a gaming license has expired, any gaming company can apply for the license.

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Casino Licenses: Indefinite-Lived

The Company has determined that the casino licenses held in the United States segment from the Missouri Gaming Commission and the West Virginia Lottery Commission and held in the Canada segment from the Alberta Gaming, Liquor and Cannabis Commission and Horse Racing Alberta are indefinite-lived. Costs incurred to renew licenses that are indefinite-lived are expensed over the renewal period to general and administrative expenses on the Company’s condensed consolidated statement of (loss) earnings. Changes in the carrying amount of the licenses are as follows:

Amounts in thousands		Balance at January 1, 2020		Impairment		Currency translation		Balance at June 30, 2020
United States	$	28,922	$	(10,960)	$	—	$	17,962
Canada		11,860		—		(557)		11,303
	$	40,782	$	(10,960)	$	(557)	$	29,265

Player’s Club Lists

The Company has determined that the player’s club lists, reported in the United States segment, have a useful life of seven years based on estimated revenue attrition among the player’s club members over each property’s historical operations as estimated by management. As such, the player’s club lists will be amortized over their useful lives. Changes in the carrying amount of the player’s club lists are as follows:

Amounts in thousands		Balance at ‎January 1, 2020		Amortization		Balance at June 30, 2020
United States	$	20,133	$	(1,458)	$	18,675

As of June 30, 2020, estimated amortization expense for the player’s club lists over the next five years was as follows:

Amounts in thousands
2020	$	1,455
2021		2,910
2022		2,910
2023		2,910
2024		2,910
Thereafter		5,580
	$	18,675

The weighted-average amortization period for the player’s club lists is 6.4 years.