Description Of Business And Basis Of Presentation

6 Months Ended

Jun. 30, 2022

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 June 30, 2022 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”); and

Century Mile Racetrack and Casino in Edmonton, Alberta, Canada (“CMR” or “Century Mile”) ⁽²⁾

(1)VICI Properties Inc. (“VICI PropCo”) owns the real estate assets underlying these properties.

(2) CMR leases the land on which CMR’s racing and entertainment centre (“REC”) and racetrack are located.

On February 10, 2022, the Company sold the land and building in Calgary, transferred the lease agreement for the casino premises to the buyer, and ceased operating Century Sports, a sports bar, bowling and entertainment facility located on the property. See below in this Note 1 for additional information about the Calgary property.

Through August 2021, the Company operated the pari-mutuel off-track betting network in southern Alberta, Canada through Century Bets! Inc. (“CBS” or “Century Bets”). In September 2021, the Company transferred these contracts to Century Mile.

The Company’s Colorado and West Virginia subsidiaries have partnered with sports betting and iGaming operators to offer sports wagering and online betting through mobile apps.

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 June 30, 2022, 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 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.

Through its wholly owned subsidiary Century Nevada Acquisition, Inc., the Company has a 50% equity interest in Smooth Bourbon, LLC (“PropCo” or “Smooth Bourbon”). The Company reports this interest as an equity investment.

As of June 30, 2022, the Company had a concession agreement with TUI Cruises for one ship-based casino that ends in the second quarter of 2023. The table below illustrates the ships operating during the three and six months ended June 30, 2022 and 2021.

Ship	Operated From	Operated To
Mein Schiff Herz	April 5, 2022	Currently operating
Mein Schiff 6	June 11, 2021	April 18, 2022

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Recent Developments Related to COVID-19

The COVID-19 pandemic impacted the Company’s results of operations in the first half of 2021 because of closures at the Company’s Canada and Poland properties during this period. The table below provides a summary of the time periods in which the Company’s casinos, hotels and other facilities were closed in December 2020 and during 2021 to comply with quarantines issued by governments to contain the spread of COVID-19. The Company’s casinos have varied their operations based on the governmental health and safety requirements in the jurisdictions in which they are located. Currently the Company’s operations are open and have no health and safety requirements for entry and few COVID-19 related restrictions.

Operating Segment	Closure Date	Reopen Date
Edmonton	December 13, 2020	June 10, 2021
Calgary	December 13, 2020	June 10, 2021
Poland	December 29, 2020	February 12, 2021
	March 20, 2021	May 28, 2021

The duration and impact of the COVID-19 pandemic remains uncertain. The Company cannot predict the negative impacts that COVID-19 will have on its consumer demand, workforce, suppliers, contractors and other partners and whether future closures will be required. Such closures have had a material impact on the Company’s financial results. The effects of COVID-19, ongoing governmental health and safety requirements and any future closures could have a material impact on the Company. The Company will continue to monitor its liquidity and make reductions to marketing and operating expenditures, where possible, if future government mandates or closures are required that would have an adverse impact on the Company.

Other Projects and Developments

Nugget Casino Resort in Sparks, Nevada

On February 22, 2022, the Company entered into a definitive agreement with Marnell Gaming, LLC (“Marnell”), pursuant to which a newly formed subsidiary of the Company (i) purchased from Marnell 50% of the membership interests in PropCo, and (ii) will purchase 100% of the membership interests in Nugget Sparks, LLC (“OpCo”). OpCo owns and operates the Nugget Casino Resort in Sparks, Nevada, and PropCo owns the real property on which the casino is located.

The Company purchased 50% of the membership interests in PropCo for approximately $95.0 million (the “PropCo Acquisition”) at the first closing, which occurred on April 1, 2022 (the “First Closing”). The Company used approximately $29.3 million of cash on hand and borrowings under the Goldman Credit Agreement (see Note 5) in connection with the First Closing. Subject to approval from the Nevada Gaming Commission, the Company’s purchase of 100% of the membership interests in OpCo for approximately $100.0 million (subject to certain adjustments) (the “OpCo Acquisition” and, together with the PropCo Acquisition, the “Nugget Acquisition”) is expected to close within one year after the First Closing (the “Second Closing”). The purchase price for the OpCo Acquisition will be paid from proceeds of the Term Loan (as defined below) deposited in escrow (“Acquisition Escrow”) on the First Closing date. Following the Second Closing, the Company will own the operating assets of Nugget Casino Resort and 50% of the membership interests in PropCo. The Company also has a five year option to acquire the remaining 50% of the membership interests in PropCo for $105.0 million plus 2% per annum. At the First Closing, PropCo entered into a lease with OpCo for an annual rent of $15.0 million.

Caruthersville Hotel

In July 2021, the Company announced that it had purchased land and a small two-story hotel near Century Casino Caruthersville with plans to refurbish the existing hotel’s 36 rooms. The Company plans to open the hotel in August 2022. The Company estimates this project will cost approximately $3.6 million. As of June 30, 2022, the Company has spent $2.2 million on this project.

Cape Girardeau Hotel

The Company is building a hotel at its Cape Girardeau location. The hotel is planned as a six story building with 68,000 square feet that will be adjacent to and connected with the existing casino building. The hotel project has been approved by the City of Cape Girardeau. Additional state and local approvals from other agencies will also be required. Planning, design and preparations for the project are substantially complete. A project start date has not been finalized, and the Company will consider project costs, including the timing of supply chain deliveries, in deciding when to commence construction. The Company estimates a project cost of approximately $26.0 million. The Company is financing the project with cash on hand. As of June 30, 2022, the Company has spent $1.1 million on this project.

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Caruthersville Casino and Hotel

In July 2021, the Missouri law requiring each casino to be a floating facility was amended to allow casino facilities to be built as a standard building with a container with at least 2,000 gallons of water beneath the facility. Subsequently, a lawsuit was filed by the City of St. Louis that seeks to block the implementation of the omnibus bill that included the amendment to the definition of a floating facility. In June 2022, the Missouri governor signed a standalone bill to amend the definition of a floating facility. This change provides an opportunity for Century Casino Caruthersville, the last remaining riverboat casino on open water in Missouri, to move to a non-floating facility. The Company plans to move the casino from the riverboat to a new land-based casino with a small hotel adjacent to and connected with the existing building. While preparation for the project is substantially complete, the Company is working to optimize the construction timeline in order to minimize supply chain challenges. The Company estimates an opening date of the casino in mid 2024 with an estimated project cost of $47.0 million. The Company plans to finance the cost of this project with cash on hand, financing, or a combination of the two. As of June 30, 2022, the Company has spent $1.8 million on this project.

Terminated Projects

Century Sports

In August 2020, the Company announced that it had entered into an 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 transaction closed on December 1, 2020. During the first quarter of 2021, the Company paid CAD 0.1 million ($0.1 million based on the exchange rate on February 12, 2021) in working capital adjustments under the purchase agreement. Upon closing of the transaction, the Company entered into a three year lease agreement with the purchaser of the casino operations for annual net rent for the land and building of CAD 0.5 million ($0.4 million based on the exchange rate on June 30, 2022).

After the sale, the Company continued to operate Century Sports, and to own the underlying real estate. On February 10, 2022, the Company sold the land and building in Calgary for CAD 8.0 million ($6.3 million based on the exchange rate on February 10, 2022) at which time the Company transferred the lease agreement for the casino premises to the buyer and ceased operating Century Sports. As of December 31, 2021, the assets held for sale included $4.8 million in land and $3.6 million in buildings and improvements, net of accumulated depreciation. Century Sports was included in the Canada reportable segment.

Mendoza Central Entretenimientos S.A.

The Company, through its subsidiary CRM, had a 7.5% ownership interest in Mendoza Central Entretenimientos S.A, an Argentina company (“MCE”), which leases slot machines and provides related services to Casino de Mendoza, a casino located in Mendoza, Argentina that is owned by the Province of Mendoza. In November 2021, CRM sold its ownership interest in MCE for nominal consideration. In addition, a consulting services agreement between CRM and MCE was terminated.

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, 2021. The results of operations for the six months ended June 30, 2022 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:

	June 30,		June 30,
Amounts in thousands	2022		2021
Cash and cash equivalents	$	96,168	$	80,163
Restricted cash		100,050		—
Restricted cash included in deposits and other		193		272
Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows	$	196,411	$	80,435

As of June 30, 2022, the Company had $100.0 million related to the Acquisition Escrow in restricted cash on its condensed consolidated balance sheet. As of June 30, 2022 and 2021, restricted cash included in deposits and other included $0.2 million related to payments of prizes and giveaways for Casinos Poland, and less than $0.1 million 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”) and Polish zloty (“PLN”).  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:

	As of June 30,	As of December 31,
Ending Rates	2022	2021
Canadian dollar (CAD)	1.2898	1.2678
Euros (EUR)	0.9566	0.8810
Polish zloty (PLN)	4.4631	4.0492

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 six months
	ended June 30,			ended June 30,
Average Rates	2022	2021	% Change	2022	2021	% Change
Canadian dollar (CAD)	1.2754	1.2286	(3.8%)	1.2711	1.2476	(1.9%)
Euros (EUR)	0.9380	0.8302	(13.0%)	0.9145	0.8299	(10.2%)
Polish zloty (PLN)	4.3599	3.7627	(15.9%)	4.2390	3.7660	(12.6%)
Source: 2022 Xe Currency Converter, 2021 Pacific Exchange Rate Service

Equity Investment – On April 1, 2022, the Company purchased 50% of the membership interests in Smooth Bourbon. Smooth Bourbon owns the real property on which the Nugget Casino is located. The additional 50% of the membership interest in Smooth Bourbon is held by Marnell. At Smooth Bourbon, decision making is controlled by Marnell, the managing member. The Company completed an assessment of whether Smooth Bourbon is a variable interest entity in which it has a financial interest. Based on this assessment, the Company concluded that Smooth Bourbon is not subject to consolidation under the guidance for variable interest entities. The Company will evaluate its investment in Smooth Bourbon for impairment on an annual basis or whenever events or circumstances indicate the carrying amount may not be recoverable. See Note 3 for additional information about Smooth Bourbon.