UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2019



OR



TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________



Commission file number  0-22900



CENTURY CASINOS, INC.

(Exact name of registrant as specified in its charter)





 

DELAWARE

84-1271317

(State or other jurisdiction of incorporation

(I.R.S. Employer

or organization)

Identification No.)



455 E. Pikes Peak Ave,  Suite 210,  Colorado Springs,  Colorado 80903

(Address of principal executive offices) (Zip Code)



(719)  527-8300

(Registrant’s telephone number, including area code)



Securities Registered Pursuant to Section 12(b) of the Act:



 

 

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $0.01 Per Share Par Value

CNTY

Nasdaq Capital Market, Inc.



Securities Registered Pursuant to Section 12(g) of the Act:

None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
    Yes  No  



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
    Yes  No   



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No 



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  No    



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

 

 



Large accelerated filer

 

Accelerated filer 

 



Non-accelerated filer

 

Smaller reporting company  

 



 

 

Emerging growth company  

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  



The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2019, based upon the closing price of $9.70 for the Common Stock on the Nasdaq Capital Market on that date, was $262,149,824. For purposes of this calculation only, executive officers and directors of the registrant are considered affiliates.



As of March 1, 2020, the registrant had 29,500,327  shares of Common Stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference the registrant’s definitive Proxy Statement for its 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2019

 

1

 


 

INDEX





 

 

Part I

 

Page

Item 1.

Business.

4

Item 1A.

Risk Factors.

20

Item 1B.

Unresolved Staff Comments.

32

Item 2.

Properties.

33

Item 3.

Legal Proceedings.

34

Item 4.

Mine Safety Disclosures.

34

Part II

Item 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

35

Item 6.

Selected Financial Data.

36

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

41

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

58

Item 8.

Financial Statements and Supplementary Data.

59

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

59

Item 9A.

Controls and Procedures.

59

Item 9B.

Other Information.

61

Part III

Item 10.

Directors, Executive Officers and Corporate Governance.

61

Item 11.

Executive Compensation.

61

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

61

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

62

Item 14.

Principal Accounting Fees and Services.

62

Part IV

Item 15.

Exhibits and Financial Statement Schedules.

63

Item 16.

Form 10-K Summary.

66

Signatures

67

 

2

 


 



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and the Private Securities Litigation Reform Act of 1995 and, as such, may involve risks and uncertainties. All statements included or incorporated by reference in this report, other than statements that are purely historical, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “could,” “potential,” “continue” or similar terminology. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. 



The forward-looking statements included or incorporated by reference in this report are subject to additional risks and uncertainties further discussed under Item 1A. “Risk Factors” and are based on information available to us on the filing date of this report. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements. 



PART I



As used in this report, the terms “Company,” “we,” “our,” or “us” refer to Century Casinos, Inc. and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.



This report includes amounts translated into US dollars from certain foreign currencies. For a description of the currency conversion methodology and exchange rates used for certain transactions, see Note 2 to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this report. The following information should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this report.



Item 1. Business.

General

Century Casinos, Inc., a Delaware corporation founded in 1992, is a casino entertainment company that develops and operates gaming establishments as well as related lodging, restaurant, horse racing (including off-track betting) and entertainment facilities primarily in North America. Our main goal is to grow our business by actively pursuing the development or acquisition of new gaming opportunities and reinvesting in our existing operations.



On December 6, 2019, we completed an acquisition (the “Acquisition”) of the operations of Isle Casino Cape Girardeau, located in Cape Girardeau, Missouri, Lady Luck Caruthersville, located in Caruthersville, Missouri, and Mountaineer Casino, Racetrack and Resort located in New Cumberland, West Virginia (collectively, the “Acquired Casinos”), from Eldorado Resorts, Inc. for an aggregate purchase price of approximately $110.6 million (subject to an adjustment based on the Acquired Casinos’ working capital and cash at closing), Immediately prior to the Acquisition, the real estate assets underlying the Acquired Casinos were sold to an affiliate of VICI Properties Inc. (“VICI PropCo”). On the closing date, certain of our subsidiaries and subsidiaries of VICI PropCo entered into a triple net lease agreement (the “Master Lease”) for the three Acquired Casino properties.  The Master Lease has an initial annual rent of approximately $25.0 million and an initial term of 15 years, with four five-year renewal options.



Overview of Operations

We view each jurisdiction in which our casinos are located as separate operating segments and each casino within those jurisdictions as reportable units. Except as described below, we aggregate our operating segments into three reportable segments based on the geographical locations in which our casinos operate. We have additional business activities, including our Century Casino Bath operations, our concession, management and consulting agreements and certain other corporate and management operations that we report as Corporate and Other. The following are our reportable segments:



·

United States

·

Canada

·

Poland

·

Corporate and Other



3

 


 

United States

Colorado –



Century Casino & Hotel – Central City, Colorado (“CTL” or “Central City”). We opened this wholly-owned casino and hotel in July 2006, as part of a joint venture in which we owned a 65% interest. In December 2007, we acquired the remaining 35% interest in the joint venture. Central City is located approximately 35 miles west of Denver, serving a metropolitan population of over 2.8 million people. Century Casino & Hotel is located in Central City at the end of the Central City Parkway, a four lane highway that connects I-70, the main east/west interstate highway in Colorado, to Central City. The facility has 462 TITO slot machines, seven tables, 26 hotel rooms, a bar, two restaurants and a 500 space on-site covered parking garage.



Century Casino & Hotel – Cripple Creek, Colorado (“CRC” or “Cripple Creek”). We have owned and operated this wholly-owned casino and hotel since 1996. The town of Cripple Creek is located approximately 45 miles southwest of Colorado Springs, the second largest city in the state of Colorado, serving a metropolitan population of over 700,000 people. The facility has 431 TITO slot machines, six tables, 21 hotel rooms, two bars, a restaurant and 271 surface parking spaces neighboring the casino.



West Virginia –



Mountaineer Casino, Racetrack & Resort – New Cumberland, West Virginia (“MTR” or “Mountaineer”). We purchased this wholly-owned casino, hotel, entertainment and live thoroughbred horse racing facility in the Acquisition in December 2019. Mountaineer is located on the Ohio River bank at the northern tip of West Virginia’s northwestern panhandle approximately 30 miles from the Pittsburgh International Airport and a one hour drive from downtown Pittsburgh. The facility has 1,140 TITO slot machines, 32 tables, on-site pari-mutuel wagering, 357 hotel rooms, five dining venues and 5,248 surface parking spaces neighboring the casino. Mountaineer holds live thoroughbred races from March to December.



Missouri –



Century Casino Cape Girardeau – Cape Girardeau, Missouri (“CCG” or “Cape Girardeau”). We purchased this wholly-owned dockside casino in the Acquisition in December 2019. Cape Girardeau is located along the Mississippi River three and a half miles from Interstate 55 in southeast Missouri, approximately 120 miles south of St. Louis, Missouri. The facility has 844 TITO slot machines, 24 tables, three dining venues, a pavilion and entertainment center and 1,088 surface parking spaces neighboring the casino.



Century Casino Caruthersville – Caruthersville, Missouri (“CCV” or “Caruthersville”). We purchased this wholly-owned riverboat casino in the Acquisition in December 2019. Caruthersville is located in southeast Missouri on the Mississippi River approximately 95 miles north of Memphis, Tennessee. The facility has 511 TITO slot machines, nine tables, two dining venues, a 40,000 square foot pavilion, a 28 space RV park and 856 surface parking spaces neighboring the casino.



Canada

Edmonton – 



Century Casino & Hotel – Edmonton, Alberta, Canada (“CRA” or “Edmonton”). We opened this wholly-owned casino in November 2006 and the attached hotel in March 2007. Edmonton is the capital of the Canadian province of Alberta, serving a metropolitan population of over one million people. The facility has 800 ticket in/ticket out (“TITO”) slot machines, 35 tables (including a 24-hour poker room), 30 video lottery terminals and a full service off-track betting parlor. In addition, the property has 26 hotel rooms, a 10,700 square foot showroom that can seat approximately 500 customers, a 3,000 square foot showroom that can seat approximately 200 customers, where we host Yuk Yuks Comedy Club comedic performances, two restaurants, three bars, 600 surface parking spaces and a complimentary underground heated parking garage with 300 additional spaces.



Century Casino St. Albert – Edmonton, Alberta, Canada (“CSA” or “St. Albert”). We acquired this wholly-owned casino in October 2016. St. Albert is located 13 miles from CRA. The casino includes 407 TITO slot machines, 11 tables, 24 video lottery terminals and a full service off-track betting parlor. In addition, the property has a restaurant, a bar, a lounge, a banquet facility and 585 surface parking spaces. 



4

 


 

Century Mile Racetrack and Casino – Edmonton, Alberta, Canada (“CMR” or “Century Mile”). We opened this wholly-owned horse racing facility in April 2019. Century Mile is a one-mile horse racetrack and a multi-level Racing and Entertainment Center (“REC”). The REC has  590 TITO slot machines, 14 video lottery terminals, a full-service restaurant, a buffet restaurant on race days,  two bars, two delis, an off-track betting parlor and grandstand. Century Mile holds a minimum of 100 racing days per year. CMR operates the northern Alberta pari-mutuel network under which CMR provides pari-mutuel content and live video to 20 off-track betting parlors throughout northern Alberta and has agreements with over 90 racetracks world-wide to broadcast races through the off-track betting network. The off-track betting parlors include the parlors at Century Mile, CRA and CSA. The REC is located on Edmonton International Airport land close to the city of Leduc, south of Edmonton.



Calgary – 



Century Casino Calgary – Calgary, Alberta, Canada (“CAL” or “Calgary”). We acquired this wholly-owned casino in January 2010. Calgary is the largest city in the province of Alberta, serving a metropolitan population of over one million people. The casino includes 504 TITO slot machines, 16 tables, 20 video lottery terminals and a full service off-track betting parlor. In addition, the property has a restaurant, a lounge, a 1,000 square foot showroom that can seat approximately 100 customers, a 30 lane bowling alley and 18 hole miniature golf course that we operate as Century Sports, 465 owned surface parking spaces and 41 leased surface parking spaces neighboring the casino.



Century Downs Racetrack and Casino – Calgary, Alberta, Canada (“CDR” or “Century Downs”). Our subsidiary Century Resorts Management GmbH (“CRM”) owns 75% of United Horsemen of Alberta Inc. dba Century Downs Racetrack and Casino, which in turn owns and operates a REC. The REC, which opened in April 2015, is located 17 miles from CAL and 4.5 miles from the Calgary International Airport. The casino includes 663 TITO slot machines and 10 video lottery terminals. In addition, the property has a 5.5 furlong (0.7 mile) racetrack, a bar, a lounge, a restaurant facility, an off-track betting area, an entertainment area and 700 surface parking spaces. We hold a minimum of 100 racing days per year during the horse racing season from March through November, and we host both standardbred and thoroughbred horse races. CDR is consolidated as a majority-owned subsidiary for which we have a controlling financial interest.



Century Bets! Inc. – Calgary, Alberta, Canada (“CBS” or “Century Bets”). Our subsidiary CRM formed Century Bets! Inc. in January 2015 and owned a 75% controlling financial interest until August 2019. In August 2019, we purchased the remaining 25% non-controlling financial interest in CBS from Rocky Mountain Turf Club. CBS operates the southern Alberta pari-mutuel network consisting of the sourcing of common pool pari-mutuel wagering content for racetracks throughout North America and world-wide. CBS provides pari-mutuel wagering content and live video to 12 off-track betting parlors throughout southern Alberta and has agreements with over 90 racetracks world-wide to broadcast races through the off-track betting network.



Poland

Casinos Poland – Poland (“CPL” or “Casinos Poland”). CPL has been in operation since 1989 and is the owner and operator of casinos throughout PolandIn March 2007, our subsidiary CRM acquired 33.3% of the outstanding shares of Casinos Poland Ltd. In April 2013, CRM increased its ownership interest in CPL to 66.6% and we began consolidating CPL as a majority-owned subsidiary for which we have a controlling financial interest.



The following table summarizes information about the casinos that CPL operated as of December 31, 2019. 





 

 

 

 

 

City

Population

Location

License Expiration

Number of Slots

Number of Tables

Warsaw

1.8 million

Marriott Hotel

July 2024

70

37

Warsaw

1.8 million

Hilton Hotel

September 2022

70

26

Warsaw

1.8 million

LIM Center

June 2025

62

4

Bielsko-Biala

170,000

Hotel President

October 2023

48

5

Katowice

290,000

Park Inn by Radisson

October 2023

70

14

Wroclaw

640,000

Double Tree Hilton Hotel

November 2023

70

17

Krakow

770,000

Dwor Kosciuszko Hotel

May 2024

68

5

Lodz

680,000

Manufaktura Entertainment Complex

June 2024

65

10



5

 


 

In Poland, casino licenses are granted for six years. Before a casino license expires, the Polish Minister of Finance notifies the public of its availability and interested parties can submit an application for the casino license. Following approval of a casino license by the Minister of Finance, there is a period in which applicants can appeal the decision. In April 2019, CPL combined the two licenses used to operate casinos in the Warsaw Marriott Hotel into one license and transferred the remaining license to the Hilton Hotel in Warsaw. This transfer extended the Hilton Hotel’s license to September 2022 and the Marriott Hotel’s license to July 2024. CPL opened a third casino in Warsaw at the LIM Center, where it had previously operated a casino, in August 2019.



Corporate and Other

Cruise Ships. Through concession agreements with TUI Cruises, we currently operate five ship-based casinos. The following table summarizes information about the ship-based casinos that we operated as of December 31, 2019.  



Cruise Line

Ship

Concession

Agreement End Date

Number of Slots

Number of Tables

TUI Cruises

Mein Schiff Herz

June 2022 (1)

17

1

TUI Cruises

Mein Schiff 3

May 2020

20

1

TUI Cruises

Mein Schiff 4

May 2020

17

1

TUI Cruises

Mein Schiff 5

May 2020

17

1

TUI Cruises

Mein Schiff 6

May 2020

17

1



(1)

Estimated - The ship is scheduled to be sold to a different cruise line no earlier than the second quarter of 2022.



Our concession agreements to operate ship-based casinos onboard four Windstar Cruises ships ended in January 2019, March 2019, April 2019 and May 2019.  



In June 2019, we evaluated our agreement with Diamond Cruises related to the operation of the ship-based casino onboard the Glory Sea. We determined that it was more likely than not that the agreement was impaired and wrote-down $1.0 million in property and equipment and net receivables in June 2019. The Glory Sea is currently not sailing, and we have not determined whether we will continue to operate this ship-based casino if the ship begins sailing again.



Century Casino Bath (“CCB”). We opened this wholly-owned subsidiary in May 2018. CCB is located in the evening leisure district of Bath, serving a metropolitan population of 0.2 million people. The facility has 57 TITO slot and electronic roulette machines, 14 tables, three bars, and a lounge area. In December 2019, we determined that the long-lived assets, right-of-use operating lease asset and intangible asset at CCB were impaired. The impairment was determined after evaluating losses incurred by the casino since operations began and future forecasts of continued losses due to changes in the current regulatory environment for casinos in England requiring enhanced due diligence of customers.



Mendoza Central Entretenimientos S.A. (“MCE”). In October 2014, our subsidiary CRM purchased 7.5% of the shares of MCE for $1.0 million. The shares are reported on our consolidated balance sheet using the cost method of accounting. MCE has an exclusive agreement with the Instituto Provincial de Juegos y Casinos (“IPJC”) to lease slot machines and provide related services to Casino de Mendoza, a casino located in Mendoza, Argentina and owned by the Province of Mendoza. MCE may also pursue other gaming opportunities. MCE leases 600 TITO slot machines to Casino de Mendoza. CRM has appointed one director to MCE’s board of directors. In addition, CRM and MCE have entered into a consulting services agreement pursuant to which CRM provides advice on casino matters and receives a service fee consisting of a fixed fee plus a percentage of MCE’s earnings before interest, taxes, depreciation and amortization (“EBITDA”). See Note 4 to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of this report.



Terminated Projects

Golden Hospitality Limited (“GHL”) and Minh Chau Ltd. (“MCL”). In April 2018, our subsidiary CRM entered into a Shareholder’s Agreement with GHL and GHL’s shareholders, pursuant to which CRM purchased a 51% ownership interest in GHL. The remaining 49% of GHL was owned by unaffiliated shareholders.  As of May 2019, GHL owned approximately 9.21% of MCL, which owns a small hotel and entertainment and gaming club in Vietnam. We sold our interest in GHL to the unaffiliated shareholders of GHL in May 2019 for a $0.7 million non-interest bearing promissory note. The sale of our equity interest in GHL also ended our equity interest in MCL.



6

 


 

Additional Projects and Other Developments

In August 2017, we announced that, together with the owner of the Hamilton Princess Hotel & Beach Club in Hamilton, Bermuda, we 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 Parliament of Bermuda has not yet adopted these rules and regulations. 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 the license is awarded. CRM will also provide a $5.0 million loan for the purchase of casino equipment if the license is awarded.



We have additional potential gaming projects and acquisition opportunities that we are currently exploring. Along with the capital needs of potential projects, there are various other risks which, if they materialize, could affect our ability to complete a proposed project or acquisition or could eliminate its feasibility altogether. For more information on these and other risks related to our business, see Item 1A, “Risk Factors” below.  



Capital Needs, Uses and Cash Flow

As a gaming company, our operating results are highly dependent on the volume of customers at our casinos. Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our industry is capital intensive, and we rely heavily on the ability of our casinos to generate operating cash flow to maintain operations, fund reinvestment in existing properties for both refurbishment and expansion projects, repay third party debt, and pursue additional growth via new development and acquisition opportunities. When necessary and available, we supplement the cash flows generated by our operations with either cash on hand or funds provided by bank borrowings or other debt or equity financing.



Marketing and Competition

We face intense competition from other casinos within the jurisdictions in which we operate. Many of our competitors are larger and have substantially greater name recognition and financial and marketing resources than we do. We seek to compete through promotion of our players’ clubs, enhancement of social networking initiatives and other marketing efforts. In addition to our players’ clubs, we also have various cash and prize promotions and market our casinos through a variety of media outlets including internet, television, radio, print and billboard advertising. Our marketing focuses on competition and other facts and circumstances of each market area in which we operate. Our primary marketing strategy centers on attracting new customers and rewarding repeat customers through our players’ club programs. All visitors to our properties are offered the opportunity to join our players’ club. We maintain a proprietary database that consists primarily of slot machine customers that allows us to create effective targeted marketing and promotional programs, cash and merchandise giveaways, coupons, downloadable promotional credits, preferred parking, food, lodging, game tournaments and other special events. In the United States, our players’ club cards allow us to update our database and track member gaming preferences, including, but not limited to, maximum, minimum, and total amounts wagered and frequency of visits. We have designed reward programs based on total amount wagered and frequency of visits to reward customer loyalty and attract new customers to our properties. Those who qualify for VIP status receive additional benefits compared to regular club membership, such as invitations to exclusive VIP events.



United States

·

Colorado –  Cripple Creek, Central City and Black Hawk are the only three cities in Colorado that allow gaming, exclusive of two Native American gaming operations in southwestern Colorado, and are located in historic mining towns dating back to the late 1800’s that have developed into tourist attractions. The casino operations in Black Hawk constitute a significant portion of the overall casino gaming market in Colorado (exclusive of the Native American gaming operations), with 53% of the total gaming devices in Colorado and approximately 75% of total gaming revenue in Colorado in 2019. Unlike other regions in which we operate, gaming in Colorado is “limited stakes”, which restricts any single wager to a current maximum of one hundred dollars. Our marketing objective for the casinos in Colorado is to create public awareness by positioning our casinos as the premier provider of personal service, convenient parking, the latest gaming products and superior food. In addition to our players’ clubs, we also have various cash and prize promotions and market our casinos through a variety of channels including radio, billboard, print and social media.



§

Century Casino & Hotel in Cripple Creek – Located approximately 45 miles southwest of Colorado Springs, Cripple Creek has 12 active casinos operating. Our casino has 271 close proximity surface parking spaces and 26 hotel rooms. Four of our competitors offer covered parking garages and three of our competitors offer more hotel rooms, which may negatively impact our casino, particularly during inclement weather and the peak tourist season.



7

 


 

§

Century Casino & Hotel in Central City – Located approximately 35 miles west of Denver, the cities of Central City and Black Hawk are adjoining small mountain tourist towns. There are eight active casino licensees operating in Central City and 16 active casino licensees operating in Black Hawk. Central City and Black Hawk are located approximately one mile apart and compete with one another for market share. As a result, we view the two cities as one combined market servicing the Denver area. Black Hawk, which we believe does not maintain the same rigorous historical preservation standards as Central City, has been able to successfully attract major casino industry leaders with the ability to offer larger hotels, upscale dining facilities, performance centers and spa facilities. Our casino has a 500-space covered parking garage offering free public parking; however, several other casinos in the Central City/Black Hawk market also have covered parking garages. In addition, five of our competitors in the Central City and Black Hawk market have more hotel rooms, providing them with an advantage during inclement weather and the peak tourist season. 



·

West VirginiaMountaineer is located on the Ohio River bank at the northern tip of West Virginia’s northwestern panhandle approximately 30 miles from the Pittsburgh International Airport and a one hour drive from downtown Pittsburgh. Mountaineer has four competitors within 50 miles; two in Pennsylvania, one in West Virginia and one in Ohio. Mountaineer primarily attracts customers from neighboring Ohio and from the greater Pittsburgh area. We market this casino as a destination for year-round entertainment. Mountaineer also hosts the annual West Virginia Derby horse racing event.



·

Missouri – Cape Girardeau and Caruthersville have competitors in Missouri, Arkansas, Illinois and Kentucky. The distance between our Cape Girardeau and Caruthersville properties is 85 miles. We do not believe that our properties compete against one another for customers. We market these casinos as the premier providers of personal service. In addition to our players’ clubs, we also have various cash and prize promotions and market our casinos through a variety of channels including radio, billboard, print and social media.



§

Century Casino Cape Girardeau – Cape Girardeau is located on the Mississippi River bank in the historic river city of Cape Girardeau approximately 120 miles south of St. Louis, Missouri. This property includes an event center. Cape Girardeau draws customers mostly from within a 50-mile radius from the property. The two closest competitors are 60 miles and 85 miles away. A potential casino in south Illinois could increase competition at our Cape Girardeau casino.



§

Century Casino Caruthersville – Caruthersville is a riverboat casino located on the Mississippi River in Caruthersville, approximately 95 miles north of Memphis, Tennessee. This property includes a 40,000 square foot pavilion and a 28-space RV park. The two closest competitors are 85 and 90 miles away. Caruthersville draws customers from western Tennessee, southeastern Missouri and northeastern Arkansas.  



Canada

·

Edmonton  Century Casino & Hotel in Edmonton, Canada, Century Casino St. Albert and Century Mile Racetrack and Casino have five competitors, all casinos, in the Edmonton market. The distance between CRA and CSA is approximately 13 miles, and CMR is approximately 30 miles from each of those properties. We do not believe that our properties compete against one another for customers. 



§

Century Casino & Hotel in Edmonton – This property is one of two casinos in Edmonton that have both a hotel and showrooms. The property’s showrooms allow us to attract customers to the casino through live music concerts, private concerts, comedic performances, catering and banquet events. In addition, the property is the only casino in the Edmonton market to offer a heated and complimentary parking garage. Our main marketing activity focuses on branding the casino, through various forms of media, as the ultimate entertainment destination and as a provider of a sophisticated, interactive and intimate gaming experience. The casino is located in a densely populated area with the closest competing casino approximately five miles away.



§

Century Casino St. Albert – This property is located in St. Albert, the second largest city in the Edmonton capital region. The closest competitor is located approximately five miles away. Our main marketing focus is our distinct casino branding, the players’ club program and promotions made through various marketing channels such as print, mail and social media. The property positions itself as a fine entertainment venue with a restaurant, a small concert and event venue and a well-appointed gaming floor.



§

Century Mile Racetrack and Casino – This property is the only REC in the Edmonton area. We market the casino using numerous forms of media, concentrating on marketing the casino floor, the players’ club and the racetrack. Unique to this property is an 8.0 furlong (1.0 mile) horse racetrack. This property is located on Edmonton International Airport land, just south of Edmonton with the closest competition 17 miles away.

8

 


 



·

Calgary - Century Casino Calgary and Century Downs have six competitors (two of which have a combination of hotel and casino) in the Calgary market. Both of our casinos have off-track betting parlors, and there is only one other casino in the Calgary market with an off-track betting parlor. The distance between our properties is 17 miles. We do not believe that our properties compete against one another for customers.



§

Century Casino Calgary – Unique to this property is a 30 lane bowling alley, an 18 hole miniature golf course, an amusement arcade, a lounge and a showroom. Using numerous forms of media, such as print, radio, mail and social media, we concentrate our marketing on the casino floor, the players’ club and the Century Sports bowling and miniature golf entertainment center. This property is located in an industrial area approximately three miles from downtown Calgary with the closest competition located three blocks away.



§

Century Downs – Unique to this property is a 5.5 furlong (0.7 mile) horse racetrack. Using numerous forms of media, such as radio, television and billboards, we concentrate our marketing on the casino floor, the players’ club and racetrack. This property is located one mile north of the city limits of Calgary, one mile from the Crossiron Mills Mall and 4.5 miles from the Calgary International Airport with the closest competition located approximately 13 miles away.



·

Pari-mutuel networks  Century Mile and Century Bets are the exclusive operators of the northern and southern Alberta pari-mutuel networks, respectively. In addition to permitting customers to place wagers at off-track betting locations, the networks offer advance deposit wagering for online wagering.



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Loyalty Program – Our casinos in Alberta participate in  the Winner’s Edge, an Alberta-wide casino loyalty program implemented by the Alberta Gaming, Liquor and Cannabis Commission (“AGLC”). Players that sign up for the program can earn points that can be redeemed for free play, take part in monthly contests and receive discounts on food in casino restaurants. Our casinos offer Winner’s Edge in addition to our own loyalty program.



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Online gamingAn online gaming website is being launched by the AGLC that is expected to compete with unregulated online gaming websites that are currently available to Alberta residents. This online gaming website is expected to begin operating in mid-2020 and may compete with our casinos and RECs in Alberta.    



Poland

There are 52 casino licenses available throughout Poland. The Polish government generally forbids the marketing of gaming activities outside of a casino, but the marketing of entertainment is permissible. CPL relies on the locations of its casinos, which are primarily in hotels in major cities throughout Poland, to attract customers. The Polish government issues casino licenses in Poland by district, and there are additional casinos in each district in which CPL operates. For example, five other casinos in the Warsaw district compete with our three casinos operating in Warsaw. The Polish Minister of Finance does not disclose individual casino data. Changes to the Polish gaming law that went into effect in April 2017 legalize online gaming and reintroduce slot arcades through a state-run company. Slot arcades began operating in June 2018 and online gaming began in December 2018. We have not experienced a negative impact to our results of operations in Poland from slot arcades or online gaming; however, the increased competition from slot arcades that are located in the cities in which our casinos are located as well as online gaming could occur and adversely affect our results of operations in the future. 



Corporate and Other

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Cruise Ships – We have limited marketing opportunities on our ship-based casinos. We work jointly with the onboard revenue departments of the cruise lines on casino promotions and signage, which are in line with the cruise line’s guidelines. While we offer modern gaming products, we compete with other activities on the ship as well as onshore activities, including land-based casinos.



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Argentina – The Casino de Mendoza has four competitors in the Mendoza market. The IPJC is responsible for the marketing efforts for the casino, which are targeted at local residents as well as tourists.



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Bath, England – CCB currently is the only casino in the city of Bath. No additional casino licenses can be created in, or moved to, Bath without new legislation by the British Parliament. The casino is located in a new development in the center of Bath’s evening leisure district adjoining the Komedia Club and opposite the Theatre Royal. In addition to the casino, the leisure district includes a new 4-star boutique hotel with 147 rooms and two ground floor restaurants. The closest competition is three casinos located in Bristol, 13 miles away. We believe that changes in the regulatory environment requiring enhanced due diligence of customers and concerns about Brexit have adversely affected our results of operations at this casino.  



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Seasonality

United States  – Our casinos in Colorado attract more customers during the warmer months from May through September. We expect to attract fewer customers from October through April because weather conditions during this period are variable and can have a significant impact on daily business levels. In West Virginia, we attract more customers from March to August during the racing season. Our casinos in Missouri attract customers throughout the year with the highest business volumes in February and March.



CanadaOur Edmonton and Calgary casinos in Alberta, Canada attract more customers from September through April. During the remainder of the year, the casinos attract fewer customers because we compete with outdoor activities. Century Downs and Century Mile also attract additional customers during the racing season from March through November. Our off-track betting parlors attract more customers during the peak racing season from May through August.



PolandCPL generally attracts more customers from October through March because domestic customers generally vacation during the summer months.



Corporate and Other

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Cruise Ships – Our business onboard cruise ships typically is not impacted by seasonality because the cruise ships generally operate year round. Our revenue from these operations fluctuates significantly with the volume and quality of the players onboard the ships. In addition, the cruise ships on which we conduct operations may be out of service from time to time for maintenance or based on the operating schedule of the cruise line, which may impact revenue from our cruise ship casinos.



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Argentina – The Mendoza market has a slight seasonal increase from January through March due to increased tourism.



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Bath, England – Bath attracts tourists year-round with more visitors in the summer months as well as in late November through early December due to its Christmas market.



Governmental Regulation and Licensing

The ownership and operation of casino gaming facilities are subject to extensive state, local, foreign, provincial or federal regulations. We are required to obtain and maintain gaming licenses in each of the jurisdictions in which we conduct gaming operations. The limitation, conditioning, suspension, revocation or non-renewal of gaming licenses, or the failure to reauthorize gaming in certain jurisdictions, would materially adversely affect our gaming operations in that jurisdiction. In addition, changes in law that restrict or prohibit gaming operations in any jurisdiction could have a material adverse effect on our financial position, results of operations and cash flows.



Statutes and regulations can require us to meet various standards relating to, among other matters, business licenses, registration of employees, floor plans, background investigations of licensees and employees, historic preservation, building, fire and accessibility requirements, payment of gaming taxes, and regulations concerning equipment, machines, chips, gaming participants, and ownership interests. Civil and criminal penalties, including shutdowns or the loss of our ability to operate gaming facilities in a particular jurisdiction, can be assessed against us and/or our officers to the extent of their individual participation in, or association with, a violation of any of the state or local gaming statutes or regulations. Such laws and regulations apply in all jurisdictions in which we may do business. Management believes that we are in compliance with all applicable gaming and non-gaming regulations as described below.



United States

ColoradoThe ownership and operation of gaming facilities in Colorado are subject to extensive state and local regulations. Licenses must be obtained from the Colorado Limited Gaming Control Commission (the “Gaming Commission”) prior to offering limited gaming to the public in the State of Colorado. In addition, the Division of Gaming (the “DOG”) within the Colorado Department of Revenue, licenses, implements, regulates, and supervises the conduct of limited stakes gaming. The Director of the DOG, under the supervision of the Gaming Commission, has been granted broad powers to ensure compliance with the laws and regulations. The Gaming Commission, DOG and DOG Director are collectively referred to as the “Colorado Gaming Authorities.”



The laws, regulations, and internal control minimum procedures of the Colorado Gaming Authorities seek to maintain public confidence and trust that licensed limited gaming is conducted honestly and competitively, that the rights of the creditors of licensees are protected, and that gaming is free from criminal and corruptive elements. The Colorado Gaming Authorities’ stated policy is that public confidence and trust can be maintained only by strict regulation of all persons, locations, practices, associations, and activities related to the operation of the licensed gaming establishments and the manufacture and distribution of gaming devices and equipment.



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The Gaming Commission is empowered to issue six types of licenses. In order to operate a casino, an operator is required to obtain a retail gaming license. Further, under Colorado gaming regulations, no person or entity can have an ownership interest in more than three retail licenses. We currently operate under the maximum of three retail gaming licenses in Colorado (Century Casino & Hotel in Cripple Creek operates under two gaming licenses). Licenses must be renewed every two years, with the next renewals scheduled for 2021 for our casinos in Central City and Cripple Creek. In addition, the Gaming Commission has broad discretion to revoke, suspend, condition, limit or restrict the licensee at any time.



Our Colorado casinos must meet specified architectural requirements and must not exceed specified gaming square footage limits as a total of each floor and the full building. Colorado casinos may operate 24-hours a day, and may permit only individuals 21 or older to gamble in the casino. Colorado law permits slot machines, blackjack, poker, craps and roulette with a maximum single bet of $100. Colorado casinos may not provide credit to gaming patrons.



The Colorado constitution permits a gaming tax of up to 40% on adjusted gross proceeds (“AGP”), and voter approval is required for any increase to this gaming tax rate. The current gaming tax in Colorado established by the Gaming Commission is a graduated rate of 0.25% to 20% on AGP, where casinos pay a higher percentage as their AGP increase.



Colorado law requires that every officer, director or stockholder holding a 5% or greater interest or controlling interest of a publicly traded corporation, or owner of an applicant or licensee, shall be a person of good moral character and submit to and pay the cost of a full background investigation conducted by the Gaming Commission. Persons found unsuitable by the Gaming Commission may be required to immediately terminate any interest in, association or agreement with, or relationship to, a gaming licensee. A finding of unsuitability with respect to any officer, director, employee, associate, lender or beneficial owner of a licensee or applicant may also jeopardize the licensee’s retail license or applicant’s license application. Licenses may, however, be conditioned upon termination of any relationship with unsuitable persons.



We may not issue any voting securities except in accordance with the provisions of the Colorado Limited Gaming Act (the “CLGA”) and the regulations promulgated thereunder. The issuance of any voting securities in violation of the CLGA will be void, and the voting securities will be deemed not to be issued and outstanding. No voting securities may be transferred, except in accordance with the provisions of the CLGA and the regulations promulgated thereunder. Any transfer in violation of these provisions will be void. If the Gaming Commission at any time determines that a holder of our voting securities is unsuitable to hold the securities, then we may, within sixty (60) days after the finding of unsuitability, purchase the voting securities of the unsuitable person at the lesser of (a) the cash equivalent of such person’s investment, or (b) the current market price as of the date of the finding of unsuitability, unless such voting securities are transferred to a suitable person within sixty (60) days after the finding of unsuitability. Until our voting securities are owned by persons found by the Gaming Commission to be suitable to own them, (a) we are not permitted to pay any dividends or interest with regard to the voting securities, (b) the holder of such voting securities will not be entitled to vote, and the voting securities will not for any purposes be included in the voting securities entitled to vote, and (c) we may not pay any remuneration in any form to the holder of the voting securities, except in exchange for the voting securities.



In November 2019, Colorado voters passed Proposition DD legalizing sports betting in Colorado. Only a limited number of master licenses to conduct sports betting are available, and only persons or entities such as our Company currently licensed to conduct limited gaming are eligible to hold the licenses. A master license entitles the licensee to contract with a licensed sports betting operator or internet sports betting operator, or both, for the operation of sports betting. The law allows licensees to offer mobile and online sports betting within the state borders. There will be no bet limit on sports betting, and it will be up to the operator to set bet amounts for each sporting event. We hold three retail gaming licenses and, as a result, we can hold three master licenses for sports betting in Colorado. We are currently negotiating agreements with potential partners to offer sports betting in our Colorado casinos and through an online/mobile platform and have signed an agreement for one of our licenses. The tax will be 10% of the net proceeds of sports betting activity, which will fund implementation of the state water plan and other public purposes. Sports betting is currently expected to begin in May 2020.



MissouriOperating a riverboat gaming facility and conducting gambling activities in Missouri are subject to extensive regulation under the Missouri Riverboat Gambling Act (“MRGA”). The Missouri Gaming Commission (the “MGC”) is charged, under the MRGA, with regulatory authority over riverboat gaming operations in Missouri, including the issuance of gaming licenses to owners, operators, suppliers and certain affiliates of riverboat gaming facilities.



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The MGC is empowered to issue six types of licenses: (i) Class A, (ii) Class B, (iii) supplier or temporary supplier, (iv) key business entity, (v) key person, and (vi) occupational. Our Missouri properties each hold a Class B license and Century Casinos, Inc. holds a Class A license. To be licensed, companies and key persons are required to complete an application comprised of comprehensive questions regarding the nature and suitability of the applicant. Applicants submitting a Riverboat Gaming Application requesting a Class A license, issued to the parent organization or controlling entity, or Class B license, issued to conduct gambling activities at a specific riverboat gaming operation, undergo an extensive background investigation by the MGC. In addition, each key person associated with, and certain key business entities closely related to, the applicant (including directors, officers, managers and owners of a significant direct or indirect interest in the Class A or Class B licensee) must also be licensed and undergo a substantial background investigation. An applicant for a Class A or Class B license will not receive a license if the applicant and its key persons, including key business entities, have not established good repute and moral character, and no licensee may either employ or contract with any person who has pled guilty to, or been convicted of, a felony, to perform any duties directly connected with the licensee’s privileges under a license granted by the MGC. Every employee participating in a riverboat gaming operation must hold an occupational license. In addition, the MGC issues supplier's licenses, which authorize the supplier licensee to sell or lease gaming equipment and supplies to any licensee involved in the operation of gaming activities. Class A and Class B licensees may not be licensed as suppliers.



In determining whether to grant and allow the continued possession of a gaming license, the MGC considers the following factors, among others: (i) the integrity of the applicant; (ii) the types and variety of games the applicant may offer; (iii) the quality of the physical facility, together with improvements and equipment; (iv) the financial ability of the applicant to develop and operate the facility successfully; (v) the status of governmental actions required by the facility; (vi) the management ability of the applicant; (vii) compliance with applicable statutes, rules, charters and ordinances; (viii) the economic, ecological and social impact of the facility as well as the cost of public improvements; (ix) the extent of public support or opposition; (x) the plan adopted by the home dock city or county; and (xi) effects on competition.



Class A and Class B licenses must be renewed each year for the first two years followed by four-year terms. In conjunction with each renewal, the MGC may conduct an additional investigation of the licensee. The MGC also possesses the right to periodically conduct a comprehensive investigation on any licensee at any time following the date on which the last comprehensive investigation was conducted. The MGC also licenses the serving of alcoholic beverages on riverboats and related facilities operated by the Class A or Class B licensees.



A licensee is subject to the imposition of penalties, suspension or revocation of its license for any act that is injurious to the public health, safety, morals, good order and general welfare of the people of the State of Missouri, or that would discredit or tend to discredit the Missouri gaming industry or the State of Missouri, including without limitation: (i) failing to comply with or make provision for compliance with the MRGA, the rules promulgated thereunder or any related federal, state or local law or regulation; (ii) failing to comply with any rules, order or ruling of the MGC or its agents pertaining to gaming; (iii) receiving goods or services from a person or business entity who does not hold a supplier's license but who is required to hold such license by the MRGA or the rules; (iv) being suspended or ruled ineligible or having a license revoked or suspended in any state or gaming jurisdiction; (v) associating with, either socially or in business affairs, or employing persons of notorious or unsavory reputation or who have extensive police records, or who have failed to cooperate with any officially constituted investigatory or administrative body and would adversely affect public confidence and trust in gaming; (vi) employing in any Missouri gaming operation any person known to have been found guilty of cheating or using any improper device in connection with any gambling game; (vii) use of fraud, deception, misrepresentation or bribery in securing any license or permit issued pursuant to the MRGA; (viii) obtaining any fee, charge or other compensation by fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross negligence, fraud, misrepresentation or dishonesty in the performance of the functions or duties regulated by the MRGA.



Any transfer or issuance of ownership interests in a publicly held gaming licensee or its holding company that results in an entity or group of entities acting in concert owning, directly or indirectly, an aggregate ownership interest of 5% or more in the gaming licensee must be reported to the MGC within seven days. Further, any pledge or hypothecation of, or grant of a security interest in, 5% or more of the ownership interest in a publicly held gaming licensee or its holding company must be reported to the MGC within seven days. The MGC will impose certain licensing requirements upon a holder of an aggregate ownership interest of 5% or more in a publicly-traded Missouri Class A or Class B licensee, unless exemptions or waivers are obtained. No investor may increase holdings above 25% without triggering a change in control that requires prior approval by the MGC. In addition, any sale, transfer or lease of a Class B licensee's real estate (outside of the normal course of business) shall trigger a change in control that requires prior approval by the MGC.  



Riverboat gaming activities may only be conducted on, or within 1,000 feet of the main channel of, the Missouri River or Mississippi River. Minimum and maximum wagers on games are set by the licensee, and wagering may be conducted only with a cashless wagering system. No person under the age of 21 is permitted to wager, and wagers may only be taken from a person present on a licensed excursion gambling boat.



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The MRGA imposes a 21% wagering tax on adjusted gross receipts (generally defined as gross receipts less winnings paid) from gambling games. The tax imposed is to be paid by the licensee to the MGC within two days after the day when the wagers were made. Of the proceeds of the wagering tax, 10% of such proceeds go to the local government where the home dock is located, and the remainder goes to the State of Missouri. The MRGA also requires that licensees pay a two dollar admission tax to the MGC for each person admitted to a gaming cruise. One dollar of the admission fee goes to the State of Missouri, and one dollar goes to the home dock city in which the licensee operates.



In addition to all other regulations generally applicable to the gaming industry, our riverboat casino is also subject to regulations applicable to vessels operating on navigable waterways, including regulations of the U.S. Coast Guard, or alternative inspection requirements. These requirements set limits on the operation of the vessel, mandate that it must be operated by a minimum complement of licensed personnel, establish periodic inspections, including the physical inspection of the outside hull, and establish other mechanical and operations rules. In addition, the riverboat casinos may be subject to future U.S. Coast Guard regulations, or alternative security procedures, designed to increase homeland security which could affect our property and require significant expenditures to bring our property into compliance.



West Virginia  –The operation and management of casinos and racetracks are subject to extensive regulation by the West Virginia Racing Commission (the "WVRC") and the West Virginia Lottery Commission (the "WVLC"). The racing and pari-mutuel wagering activities are licensed and regulated by the WVRC. Racetrack video lottery games and lottery racetrack table games are licensed and regulated by the WVLC. Holding a valid racing license is required in order to be issued and hold a racetrack video lottery license and a lottery racetrack table games license cannot be issued unless the applicant for the license holds a racetrack video lottery license.



Horse Racing and Pari-Mutuel Wagering

The WVRC is comprised of three members appointed by the Governor of West Virginia who regulate live racing, simulcast racing, televised racing and pari-mutuel wagering. Racing and pari-mutuel wagering are governed by the applicable West Virginia statutes and legislative rules promulgated by the WVRC.  Licenses are renewed annually unless the WVRC rejects the application for renewal for good cause. As part of its application for renewal of its license, the licensee must disclose substantial information to the WVRC and notify the WVRC of changes in material information during the license year. The licensee pays an annual license tax as well as daily license taxes and pari-mutuel wagering taxes to the WVRC. Licenses are not transferable. The WVRC approves live racing days as well as simulcast and televised racing. The WVRC has broad powers to investigate, monitor and oversee all aspects of racing and pari-mutuel wagering.



Employees engaged in racing and/or pari-mutuel wagering must have permits issued by the WVRC before they engage in employment in a racing or pari-mutuel wagering occupation. The WVRC may suspend, revoke or not renew licenses and permits in the event the licensee or permit holder violates the racing statutes or rules promulgated by the WVRC. The WVRC may require fingerprints and background checks from all applicants for a permit as well as from officers, board members and key employees of the licensee. 



Regulations governing our horse racing operations are generally administered separately from the regulations governing gaming operations, with separate licenses and license fee structures. The racing authorities responsible for regulating our racing operations have broad oversight authority, which may include: annually reviewing and granting racing licenses and racing dates; approving the opening and operation of off-track wagering facilities; approving simulcasting activities; licensing all officers, directors, racing officials and certain other employees of a racing licensee; and approving certain contracts entered into by a racing licensee affecting racing, pari-mutuel wagering, account wagering and off-track wagering operations.



We are subject to various federal, state and local environmental, health and safety laws and regulations that govern activities that may have adverse environmental effects.  These laws and regulations are complex and frequently subject to change. Our horse racing facility is subject to laws and regulations that address the impacts of manure and wastewater generated by Concentrated Animal Feeding Operations (“CAFO”) on water quality, including, but not limited to, storm water discharges. CAFO regulations include permit requirements and water quality discharge standards. Enforcement of CAFO regulations has been receiving increased governmental attention. Compliance with these and other environmental laws can, in some circumstances, require significant capital expenditures. We may be required to manage, abate, remove or contain manure and wastewater generated by concentrated animal feeding operations due to our racetrack operations. Moreover, violations can result in significant fines or penalties and, in some instances, interruption or cessation of operations. 



Racetrack Video Lottery

Racetrack video lottery is regulated by the WVLC, which is comprised of seven members appointed by the Governor of West Virginia, including the executive director of the WVLC (the "WV Executive Director"). The WVLC has promulgated rules approved by the West Virginia legislature under which racetrack video lottery games are played and conducted.



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Under West Virginia law, a company’s racetrack video lottery license is not transferrable. Additionally, the transfer of more than five percent of the equity interest, or voting interest, in the licensee must be approved by the WVLC before the transfer is finalized.



In order to lawfully conduct racetrack video lottery games,  the licensee must maintain its racing license issued by the WVRC as well as its racetrack video lottery license. Only the holder of a racing license is authorized to hold a racetrack video lottery license. In applying for a video lottery license, the licensee must present WVLC evidence of agreements regarding the proceeds from video lottery terminals, between the licensee and the representative of a majority of the horse owners and trainers, the representative of a majority of the pari-mutuel clerks, and the representative of a majority of the breeders at the racetrack. The  racetrack video lottery license is renewed annually and the licensee must disclose substantial information to the WVLC and notify the WVLC of changes in material information during the license year. Employees involved with racetrack video lottery gaming are also required to obtain and maintain a license from the WVLC prior to being involved in racetrack video lottery gaming. An application for a racetrack video lottery gaming employee license may be denied if the applicant has been convicted of certain offenses involving moral turpitude, illegal gambling, fraud or misrepresentation or if the person is not qualified for the position for which the application for a license is submitted.



The WVLC and the WV Executive Director have discretion to suspend, revoke or reconsider the application for the licensee’s racetrack video lottery license. The racetrack video lottery license is subject to suspension, revocation or nonrenewal as provided for in the racetrack video lottery statutes and rules of the WVLC. Civil money penalties and criminal penalties may be imposed for certain violations of the lottery statutes and rules of the WVLC.



The WVLC and the WV Executive Director have broad powers under the racetrack video lottery statutes to investigate and monitor racetrack video lottery operations. All racetrack video lottery terminals in operation for play must be connected to the WVLC's computer system. The WV Executive Director and employees of the WVLC may at any time examine, inspect, test or access for any purposes all records, files, equipment, other documents, video lottery terminals, and hardware and software used in connection with video lottery. The WVLC also has the power and authority, for good cause and without notice or a warrant, at any time, to perform a wide range of inspections of the licensee.



Pursuant to the racetrack video lottery statutes, Mountaineer receives a commission equal to 46.5% of the net terminal income from the play of racetrack video lottery games. "Net terminal income" is generally defined as credits played less video lottery prize winnings, less an amount deducted by the WVLC to reimburse the WVLC for its actual costs for administering racetrack video lottery at the licensed racetrack.



Additionally, the West Virginia legislature has established a fund for modernization of racetrack video lottery terminals into which the WVLC annually deposits a portion of the amount it retains for administration of racetrack video lottery games.  A licensee may draw annually from its account matching dollars to help pay the expense of upgrading and modernizing its racetrack video lottery terminals. For every two dollars a licensee spends on certain equipment, it is authorized to receive one dollar in recoupment from the fund. In the event there remains a balance unspent by a licensee at the end of the year, that amount may be carried forward for one year, after which such amount reverts to the West Virginia State Lottery Fund. The West Virginia Licensed Racetrack Modernization Fund is currently authorized to be funded through the fiscal year ending June 30, 2020.



Lottery Racetrack Table Games

Lottery racetrack table games are regulated by the WVLC.  The WVLC has promulgated rules approved by the West Virginia legislature under which lottery racetrack table games are played. Under West Virginia law, a licensee’s lottery racetrack table games license is not transferrable. Additionally, the transfer of more than five percent of the equity interest or voting interest in a licensee or any parent corporation or holding company must be approved by the WVLC before the transfer is finalized.



In order to lawfully conduct lottery racetrack table games, a licensee must maintain its racing license issued by the WVRC and its racetrack video lottery license issued by the WVLC as well as its lottery table games license. Only the holder of a racing license and a racetrack video lottery license is authorized to hold a lottery racetrack table games license. The lottery racetrack table games license is renewed annually and the licensee must disclose substantial information to the WVLC and notify the WVLC of changes in material information during the license year. Employees involved with lottery racetrack table games are also required to obtain and maintain a license from the WVLC prior to being involved in racetrack table gaming activity. An application for a racetrack video lottery gaming employee license may be denied if the applicant has been convicted of certain offenses involving moral turpitude, illegal gambling, fraud or misrepresentation or if the person is not qualified for the position for which the application for a license is submitted.



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The WVLC and the WV Executive Director have the discretion to suspend, revoke or reconsider a licensee’s lottery racetrack table games license. The license is subject to suspension, revocation or nonrenewal as provided for in the lottery racetrack table games statutes and rules of the WVLC. Civil money penalties and criminal penalties may be imposed for certain violations of the lottery statutes and rules of the WVLC. The license may also be revoked if any officer or director or any employee engaged in gaming activity, or any officer or director or key employee of any parent corporation or holding company is convicted of criminal violations that may negatively impact the integrity of the West Virginia Lottery, or if any of them have experience, character or general fitness that the WV Executive Director believes would be inconsistent with the public interest, convenience or trust.



The WVLC and the WV Executive Director have broad powers under the lottery racetrack table game statutes to investigate and monitor racetrack table game operations. The WV Executive Director and employees of the WVLC may at any time examine, inspect, test or access for any purposes all records, files, equipment, and other documents used in connection with lottery racetrack tables games operation and play.



Pursuant to the lottery racetrack table games statute, a licensee must annually pay to the WVLC a lottery racetrack table games license fee of $2.5 million that is due when the application for renewal is filed with the WVLC. Additionally,  a licensee pays  a weekly tax equal to 35% of the adjusted gross receipts from table game activity during the preceding week.



Canada

AGLC - Gaming in Alberta is governed by the provincial government. The AGLC administers and regulates the gaming industry in Alberta. The AGLC operates in accordance with the Gaming and Liquor Act, the Gaming and Liquor Regulation and the Criminal Code of Canada.



The AGLC requires all gaming operations to be licensed but only allows a certain number of licenses to be granted. All available licenses have currently been granted and the AGLC has an indefinite moratorium on new casinos and RECs. If the AGLC increases the number of licenses available in the future, applicants for a gaming license must submit an application and run through a detailed approval process. Following the approval of the board of the AGLC, the applicant may operate the casino applied for in accordance with federal and provincial legislation, regulation, and policies as well as the municipal requirements, permits, licenses and authorization relating to the casino. Our licenses at all AGLC-regulated properties are renewable every five years with the next renewals scheduled in 2025. The AGLC monitors the casino operator and its compliance with all requirements. In the event of a violation of such requirements, civil and criminal charges can be assessed. The failure or inability of our casinos, or the failure or inability of others associated with these casinos, to maintain necessary gaming licenses or approvals for our casinos would have a material adverse effect on our operations.



The AGLC allows casinos to operate slot machines and table games a daily maximum of 17 consecutive hours commencing at 10:00 a.m. and ending no later than 3:00 a.m. and to operate casino poker rooms 24 hours a day. Casinos and RECs may permit only individuals 18 or older to gamble in the casino. The AGLC permits slot machines, video lottery terminals, baccarat, blackjack, poker, craps and roulette. There is a maximum single bet of $2,000 on table games and a maximum table aggregate bet of $12,000 on baccarat. There is also a maximum denomination bet of $5 for slot machines with a maximum single bet of $125.  



The AGLC provides casinos with slot machines, slot technicians and personnel to administer table game counts. In return, casino licensees provide the AGLC with a place to operate slot machines, market the casinos, and provide table game dealers, slot attendants, security and surveillance. Casino licensees do not incur lease expenditures to the AGLC. In lieu of these lease expenses and other expenses associated with operating slot machines (i.e. equipment and personnel), casino licensees retain only a portion of net sales. Net sales, as defined by the AGLC, are calculated as cash played, less cash won, less the cost to lease the equipment, if applicable. At our Edmonton, St. Albert and Calgary casinos, the AGLC retains 85% of slot machine net sales, of which it allocates 15% to charities designated by the AGLC and 70% to the Alberta Lottery Fund. At Century Downs and Century Mile, the AGLC retains 45% of slot machine net sales, which are allocated to the Alberta Lottery Fund. For all table games, excluding poker and craps, we are required to allocate 50% of our net win to a charity designated by the AGLC, with the exception of St. Albert, from which we allocate 35% of our net win to a charity designated by the AGLC. For poker and craps, we are required to allocate 25% of our net win to the charity. We record our revenue net of the amounts retained by the AGLC or allocated to the AGLC-designated charity or the Alberta Lottery Fund.



HRA - HRA was formed in June 2002 to facilitate long term industry renewal for horse racing. The objectives of HRA are to govern, direct, control, regulate, manage, market and promote horse racing in any or all of its forms; to protect the health, safety and welfare of racehorses and, with respect to horse racing, the safety and welfare of racing participants and racing officials; and to safeguard the interest of the general public in horse racing.



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HRA requires all horse racing operators to be licensed. A licensed operator is responsible for the general supervision of horse races at its facilities but must not interfere with the proper performance of the functions and responsibilities of racing officials. Only individuals 18 or older may place a bet on horse races. HRA also prohibits racing officials, HRA employees, jockeys, drivers of horses and any employee of any of them from betting on a race, encouraging others to bet on a race on their behalf or owning a pari-mutuel ticket. A licensed owner of a horse, its trainer and any authorized agent or employee of such owner or trainer may not bet or encourage others to place a bet on their behalf on a horse other than the horse owned or trained by such licensed owner or trainer.



A licensed operator must also provide and maintain a suitable racetrack, file with HRA a certificate of measurement of the track and provide services at race meetings, including first aid and ambulance facilities. HRA must approve the equipment, facility and any services the operator will provide. HRA also requires a licensed operator to establish and maintain complete records of each horse race conducted by the operator.



The HRA’s portion of slot machine net sales retained from Century Downs and Century Mile, which is currently 11.25%, is used to fund animal welfare programs, purses, breed improvement programs, marketing, administration and backstretch programs. For off-track betting and live racing wagers, CBS, CMR and CDR retain approximately 21.5% of each bet, from which they will distribute 5.4% to the HRA, 0.8% to the Canadian Pari-Mutuel Agency and use the remainder to pay expenses related to the conduct of pari-mutuel wagering.



Poland

Gaming in Poland is governed by the Minister of Finance, who operates in accordance with Polish gaming law and has the authority to grant casino licenses. Polish gaming law was enacted in 1992. Key items included in Polish gaming law include the following requirements:



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Slot arcades and online gaming are operated through a state-run company;

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A maximum of 70 slot machines are allowed per casino;

·

Licenses are not renewable, and licensees must reapply for a license once their current six-year license has expired;

·

The gaming tax rate assessed on gross gaming revenue is 50%; and

·

Poker cash games are prohibited in Poland, except for authorized poker tournaments.



Casino licenses in Poland are currently limited to 52 and are subject to regional limitations. The number of casino licenses can be increased or decreased due to population increases or changes to the voivodships in Poland. Before a casino license expires, the Minister of Finance notifies the public of its availability, and those interested can submit an application for the casino license. Applicants for a gaming license must complete a detailed approval process. Following approval from the Minister of Finance, there is a period in which applicants can appeal the decision. Once the license is awarded, the applicant may operate the casino for six years. The Minister of Finance monitors the casino operator and its compliance with all requirements. In the event of a violation, the Minister of Finance can assess charges and, in certain cases, withdraw casino licenses. 



Corporate and Other

·

Cruise Ships --  The casinos onboard the cruise ships operate in international waters and are not regulated by any national or local regulatory body. However, we follow standardized rules and practices in the daily operation of the casinos.



·

Argentina – The Casino de Mendoza is owned and operated by the Province of Mendoza. To retain the exclusive agreement with the IPJC, MCE must remain in good standing and operate ethically and without fault. In addition, any changes to the slot machines leased by MCE to Casino de Mendoza require approval from the IPJC.



·

Bath, England – Gaming in England is governed by the Gambling Commission, operating in accordance with the Gambling Act of 2005.



The laws and regulations of the Gambling Commission seek to keep gambling crime free, ensure that gambling is conducted in a fair and open way, and protect children and other vulnerable people from being harmed or exploited by gambling. Casino operators must create corporate policies and procedures in compliance with the Gambling Commission’s License Conditions and Codes of Practice and other industry guidance. Operators must commit to conducting their licensing activities with integrity, maintaining a responsible gaming provision, providing regular training to advise and guide staff as well as ensuring that a healthy, responsible and informed environment is maintained.



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In order to operate a casino, an operator is required to obtain an operating license and personal licenses for those operating gambling facilities, both from the Gambling Commission and a premises license from the designated local authority. The operator must pay an annual fee to maintain an operating license, and the license may be suspended or revoked. Personal licenses are granted to individuals responsible for activities at licensed gambling operators and are renewed every five years. A premises license is granted to operate a casino on certain premises. Currently, no additional premise licenses can be awarded under the Gambling Act of 2005.



The Gambling Act of 2005 sets the gambling duty rate based on the type of gambling and gross gaming yield of the casino premises. The gaming duty rate is scaled from 15% to 50% based on the gross gaming yield in a three-month period.



The Gambling Act of 2005 requires that a personal declaration be completed by any stockholder holding a 10% or greater interest in a company that owns a casino. In addition, the Gambling Commission also requires that the company list all stockholders with a 3% or greater interest in the company.



Other Regulation

We are subject to certain foreign, federal, state, provincial and local safety and health, employment and environmental laws, regulations and ordinances that apply to our non-gaming operations. We have not made, and do not anticipate making, material expenditures with respect to these laws, regulations and ordinances. However, the coverage of, and attendant compliance costs associated with, such laws, regulations and ordinances may result in future additional costs to our operations.



Rules and regulations regarding the service of alcoholic beverages are strict. The loss or suspension of a liquor license could significantly impair our operations. Local building, parking and fire codes and similar regulations also could impact our operations and any proposed development of our properties.



We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering laws and regulations. Any violations of anti-money laundering laws or regulations by any of our properties could have an adverse effect on our business.



Employees

As of December 31, 2019, we had approximately 2,786 full-time employees and 729 part-time employees. During busier months, a casino may supplement its permanent staff with seasonal employees. Approximately 231 employees at our CPL casinos in Poland and 58 employees at Mountaineer belong to trade unions. The trade unions in Poland do not currently have any collective bargaining agreements with CPL, but changes in pay of union employees at CPL require approval of the unions. The trade unions in Mountaineer have collective bargaining agreements with Mountaineer.





Information about our Executive Officers



 

 

Name

Age

Position Held

Erwin Haitzmann

66

Chairman of the Board and Co-Chief Executive Officer

Peter Hoetzinger

57

Vice Chairman of the Board, Co-Chief Executive Officer and President

Margaret Stapleton

58

Chief Financial Officer and Corporate Secretary

Timothy Wright

49

Chief Accounting Officer and Corporate Controller

Andreas Terler

50

Managing Director of Century Resorts Management GmbH,
Senior Vice President, Operations – Missouri and West Virginia and

Chief Information Officer

Nikolaus Strohriegel

50

Managing Director of Century Resorts Management GmbH and

Senior Vice President, Operations - Europe

Geoff Smith

48

Senior Vice President, Operations - Alberta



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Erwin Haitzmann holds a Doctorate and a Masters degree in Social and Economic Sciences from the University of Linz, Austria (1980), and has extensive casino gaming experience ranging from dealer through various casino management positions. Dr. Haitzmann has been employed full-time by us since 1993 and has been employed as either Chief Executive Officer or Co-Chief Executive Officer since March 1994. Dr. Haitzmann oversees our operations in the United States.



Peter Hoetzinger received a Masters degree from the University of Linz, Austria (1986). He thereafter was employed in several managerial positions in the gaming industry with Austrian casino companies. Mr. Hoetzinger has been employed full-time by us since 1993 and has been Co-Chief Executive Officer since March 2005.



Margaret Stapleton was appointed Chief Financial Officer, effective October 2019, and Corporate Secretary, effective May 2010. She holds a Bachelor of Science degree in Accounting from Regis University, Denver, Colorado (2004) and has over 30 years of experience in corporate accounting and internal audit. Mrs. Stapleton previously served as our Director of Internal Audit and Compliance from 2005 until May 2010 and as our Executive Vice President, Principal Financial/Accounting Officer from May 2010 to October 2019.



Timothy Wright was appointed Chief Accounting Officer effective October 2019 and Corporate Controller effective May 2010. Mr. Wright holds a Bachelor of Science degree in Accounting from the University of Colorado, Colorado Springs, Colorado (1995) and has over 30 years of experience in corporate accounting and finance. Mr. Wright has been employed by us since 2007, including previously serving as our Vice President of Accounting from May 2010 to October 2019.



Andreas Terler is a Graduate Engineer in Applied Mathematics from the University of Graz, Austria (1994). Mr. Terler has been employed by us since 2006. He has served as Chief Information Officer since February 2006, Managing Director of CRM since February 2007, and Senior Vice President, Operations – Missouri and West Virginia since October 2019. Mr. Terler previously served as Vice President of Operations from May 2011 to October 2019.



Nikolaus Strohriegel received a Masters degree from the University of Vienna, Austria (1996). Mr. Strohriegel has been employed by us since 2007. He has served as Managing Director of CRM since January 2009 and Senior Vice President, Operations – Europe since October 2019. Mr. Strohriegel previously served as Vice President of Operations from March 2017 to October 2019.



Geoff Smith holds an Honours Bachelor of Commerce degree from the University of Windsor, Ontario, Canada (1994). Mr. Smith has over 25 years of direct casino management experience across a variety of regulated gaming jurisdictions and operating models, including commercial casinos, charity casinos and horse racetrack casino establishments. Mr. Smith has been employed by us since 2006. He was appointed Senior Vice President, Operations – Canada in October 2019 and has served as Managing Director of Century Casino & Hotel in Edmonton since 2008. He previously served as the General Manager of Century Casino & Hotel in Edmonton from 2006 to 2008.



Available Information

Our internet address is www.cnty.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our website at www.cnty.com/investor/financials/sec-filings as soon as reasonably practicable after such report has been filed with, or furnished to, the SEC. None of the information posted to our website is incorporated by reference into this report.



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Item 1A. Risk Factors.

Our short and long-term success is subject to many factors beyond our control. If any of the following risks, or any risks described elsewhere in or incorporated by reference in this report, actually occur, our business, financial condition or results of operations could suffer. Additional risks not presently known to us or which we currently consider immaterial may also adversely affect our business, financial condition or results of operations.



Risks Related to our Business and Operations



We face significant competition, and if we are not able to compete successfully, our results of operations will be harmed.



We face intense competition from other casinos in jurisdictions in which we operate as well as from neighboring jurisdictions. Many of our competitors are larger and have substantially greater name recognition and financial and marketing resources than we do. We seek to compete through promotion of our players’ clubs and other marketing efforts. For example, for CRA, we emphasize the casino’s showroom, complimentary heated parking, players’ club program, and superior service. These marketing efforts may not be successful, which could hurt our competitive position.



The markets in which we operate are generally not destination resort areas and rely on a local customer base as well as tourists during peak seasons. The number of casinos in our markets may exceed demand, which could make it difficult for us to sustain profitability. New or expanded operations by other entities in any of the markets in which we operate will increase competition for our gaming operations and could have a material adverse impact on us. We are particularly vulnerable to competition in our markets in the United States and Poland due to the large number of competitors in those markets. For example, a potential casino in south Illinois could increase competition at our Cape Girardeau casino. In addition, gaming facilities in Ohio that have commenced operations in recent years present significant competition for Mountaineer.



Changes to gaming laws in countries or states in which we have operations and in states near our operations could increase competition and could adversely affect our operations. Any such expansion of legalized gaming could adversely impact our properties. Changes to the Polish gaming law that went into effect in April 2017 legalized online gaming and reintroduced slot arcades through a state-run company. Slot arcades began operating in June 2018 and online gaming began in December 2018. 



Other potential changes in gaming laws in jurisdictions in which we have operations include:

·

In Missouri, a sports betting bill would allow Class B gaming licensees and daily fantasy sports licensees to conduct sports wagering including on mobile devices so long as such devices are located within the state of Missouri. This bill is in the early stages of the law-making process and subject to significant changes in proposed statutory language prior to enactment.

·

In Missouri, a video lottery terminal bill would allow the state lottery to operate video gaming terminals, similar to slot machines, at various locations distributed across the state including bars, restaurants, veterans and fraternal organizations and convenience stores throughout the state.  This bill is in the early stages of the law-making process and subject to significant changes in proposed statutory language prior to enactment.

·

In Canada, the AGLC plans to operate an online gaming network in Alberta that is anticipated to begin in 2021.



Capital expenditures, such as those for new gaming equipment, room refurbishments and amenity upgrades may be necessary from time to time to preserve the competitiveness of our properties. If we are not successful in making these improvements, our facilities may be less attractive to our visitors than those of our competitors, which could have a negative impact on our business.



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We face extensive regulation from gaming and other regulatory authorities, which involve considerable expense and could harm our business.



As owners and operators of gaming facilities, we are subject to extensive state, local, and international provincial regulation. State, local and provincial authorities require us and our subsidiaries to demonstrate suitability to obtain and retain various licenses and require that we have registrations, permits and approvals to conduct gaming operations. Various regulatory authorities may, for any reason set forth in applicable legislation, rules and regulations, limit, condition, suspend or revoke a license or registration to conduct gaming operations or prevent us from owning the securities of any of our gaming subsidiaries. Like all gaming operators in the jurisdictions in which we operate or plan to operate, we must periodically apply to renew our gaming licenses or registrations and have the suitability of certain of our directors, officers and employees approved.   Our current renewal schedules are listed below:



·

Colorado – every two years, with the next renewals scheduled for 2021 at both properties;

·

West Virginia – every year;

·

Missouri – each year for the next two years, and every four years thereafter;

·

Canada – every five years, with the next renewals scheduled for 2025 at all properties; and

·

Poland – every six years.



In Poland, gaming licenses are granted for six-year periods and are not renewable. When a gaming license in Poland expires, any gaming company can apply for the license and there can be no guarantee that we will be granted a new license at our existing casinos. We may not be able to obtain license renewals or approvals of new licenses. Regulatory authorities may also levy substantial fines against us or seize our assets or the assets of our subsidiaries or the people involved in violating gaming laws or regulations. Any of these events could force us to terminate operations at an existing gaming facility, either on a temporary or permanent basis, could result in us being fined or could prohibit us from successfully completing a project in which we invest. Closing facilities or an inability to expand may have a material adverse effect on our business, financial condition and results of operations.



In addition to gaming regulations, we are also subject to various federal, state, provincial, local and foreign laws and regulations affecting businesses in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Rules and regulations regarding the service of alcoholic beverages are strict. The loss or suspension of a liquor license could significantly impair our operations.



We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violations of anti-money laundering laws or regulations by any of our properties could have an adverse effect on our financial condition, results of operations or cash flows. Regulations adopted by the Financial Crimes Enforcement Network require us to report currency transactions at our US locations in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number. US Treasury Department regulations also require us to report certain suspicious activity, including any transaction that exceeds $5,000, if we know, suspect or have reason to believe that the transaction involves funds from illegal activity or is designed to evade federal regulations or reporting requirements. Substantial penalties can be imposed if we fail to comply with these regulations. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted.



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Our obligations under our indebtedness and our Master Lease are significant. We may not be able to generate sufficient cash to service all of our indebtedness and pay rent under the Master Lease and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.



On December 6, 2019, we entered into a new Credit Agreement (the “Macquarie Credit Agreement”) with Macquarie Capital Funding LLC, Macquarie Capital (USA) Inc. and the lenders party thereto.  The Macquarie Credit Agreement replaced our credit agreement with the Bank of Montreal (the “BMO Credit Agreement”).  We drew $170.0 million under the term loan on December 6, 2019 and used the proceeds to fund the Acquisition of the casino operations of Mountaineer, Cape Girardeau and Caruthersville, for the repayment of approximately $52.0 million outstanding under the BMO Credit Agreement and for general working capital and corporate purposes.  As of December 31, 2019, we had $170.0 million outstanding under our term loan facility due 2026. All of our $189.0 million face value debt outstanding as of December 31, 2019 is variable rate debt. Each one percentage point change associated with the variable rate debt would result in a $1.5 million change to our annual cash interest expenses. In connection with the Acquisition, we entered into the Master Lease with VICI PropCo subsidiaries to lease the real estate assets of Mountaineer, Cape Girardeau and Caruthersville.  Our annual rent payment under the Master Lease is approximately $25.0 million and is subject to annual escalation. These financial obligations could:



·

limit our ability to satisfy our obligations; 

·

limit our ability to obtain additional indebtedness or financing to fund working capital requirements, capital expenditures, debt service, acquisitions, general corporate or other obligations;

·

limit our ability to use operating cash flow in other areas of our business because we must dedicate a significant portion of these funds to make principal and/or interest payments on our outstanding debt;

·

expose us to interest rate risk due to the variable interest rate on borrowings under our credit agreements;

·

place us at a competitive disadvantage compared to competitors that have less debt;

·

subject us to restrictive covenants that, among other things, limit our ability to pay dividends and distributions, make acquisitions and dispositions, borrow additional funds, and make capital expenditures and other investments;

·

cause our failure to comply with financial and restrictive covenants contained in our current or future indebtedness, which could cause a default under such indebtedness and which, if not cured or waived, could have a material adverse effect on us;

·

increase our vulnerability to general adverse economic and industry changes;

·

limit our flexibility in planning for, or reacting to, changes in our businesses, changing market conditions, changes in our industry and economic downturns; and

·

affect our ability to renew gaming and other licenses necessary to conduct our business.



In addition, the Master Lease requires us to make specific minimum investments in capital expenditures and, subject to certain caps, the rent escalations under the Master Lease will continue to apply regardless of the cash flows generated by the properties subject to the Master Lease and the obligations guaranteed by us. We cannot assure that we will maintain a level of cash flows from operating activities sufficient to permit us to pay rent under the Master Lease and the principal, premium, if any, and interest on our indebtedness.



If our cash flows and capital resources are insufficient to fund our debt service and rent obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service or rent obligations. If we are not able to meet our scheduled obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due. Additionally, the agreements governing our existing debt restrict sale of assets and limit the use of the proceeds from any disposition and our Master Lease limits our ability to dispose of leased properties; as a result, we may not be allowed, under these documents, to dispose of certain of our properties and use proceeds from such dispositions to satisfy all current debt service obligations. 



We incurred significant costs in connection with the Acquisition.



We incurred significant transaction costs relating to the Acquisition. Additionally, we may incur significant costs in connection with integrating the operations of the Acquired Casinos into our business. We cannot identify the timing, nature and amount of all such costs. These integration costs could materially affect our results of operations in the period in which such charges are recorded.



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We have risks associated with the integration of Mountaineer, Cape Girardeau and Caruthersville into our business.



Although we only intend to engage in acquisitions that, if consummated, will be accretive to us and our stockholders, we cannot be sure that we will experience the return on investment that we expect. In particular, while we currently anticipate that the Acquisition will be accretive to our earnings per share in the future, this expectation is based on estimates and assumes certain synergies expected to be realized over a 12-month period following the completion of the Acquisition.  Such estimates and assumptions could materially change due to factors beyond our control and could delay, decrease or eliminate the expected accretive effect of the Acquisition and cause resulting dilution to our earnings per share or negatively impact the price of our common stock. 



Potential difficulties that we may encounter as part of the integration process include:

·

the use of significant management attention and Company resources to integrate the Acquired Casinos into our business and operations;

·

the inability to successfully incorporate the Acquired Casinos in a manner that permits us to achieve the full revenue and other benefits anticipated to result from the Acquired Casinos;

·

complexities associated with managing the combined business, including difficulties addressing possible differences in cultures and management philosophies and the challenge of integrating complex systems, technology, networks and other assets of the Acquired Casinos in a seamless manner that minimizes any adverse impact on customers, suppliers and employees; and

·

potential unknown liabilities and unforeseen increased expenses associated with the Acquired Casinos.



In addition, it is possible that the integration process could result in (i) the diversion of the attention of our management; (ii) the disruption of our ongoing business; and (iii) inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits, or could reduce our earnings or otherwise adversely affect our business and financial results.



We have made certain assumptions relating to the Acquisition and the Acquired Casinos that may prove to be materially inaccurate, and insufficient or lower-than-expected results generated from the Acquired Casinos or new developments may negatively affect our operating results and financial condition.



We have made certain assumptions relating to the Acquisition that may prove to be inaccurate, including the failure to realize the expected benefits of the Acquisition, failure to realize expected revenue growth rates, higher than expected operating, transaction and integration costs, as well as general economic and business conditions that may adversely affect us following the Acquisition. These assumptions relate to numerous matters, including:

·

projections of future revenue and revenue growth rates;

·

the amount of goodwill and intangibles resulting from the Acquisition;

·

certain other adjustments that are being recorded in our financial statements in connection with the Acquisition; and

·

other financial and strategic risks of the Acquisition.



Our acquisitions, including the recent Acquisition of the Acquired Casinos, and new developments may not generate revenue that will be sufficient to pay related expenses, or, even if such revenue is sufficient to pay related expenses, the acquisitions and new developments may not yield an adequate return or any return on our significant investments. In addition, generating returns on acquisitions, including the Acquisition, and new investments may take significantly longer than we expect and may negatively impact our operating results and financial condition. New facilities also may compete with existing facilities that we own and operate.



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Some of our casinos are located on leased property. If we default on one or more leases or if we are unable to secure renewals of those leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected casino.



Our RECs and racetracks in Calgary and Edmonton are located on leased parcels of land. Our casinos in Poland and Bath, England are located within leased building spaces. If we were to default on any one or more of the leases or if we are unable to secure renewal terms for these locations, the lessors could terminate the affected leases and we could lose possession of the land or building and any improvements on the land and buildings, including the RECs that we have built in Canada. This would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate the affected facilities.



We lease the land and buildings for our casinos in Missouri and West Virginia under a “triple-net” Master Lease. Accordingly, in addition to rent, we are required to pay, among other things, the following: (1) facility maintenance costs; (2) all insurance premiums for insurance with respect to the leased properties and the business conducted on the leased properties; (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. We are responsible for incurring these costs notwithstanding the fact that many of the benefits received in exchange for such costs shall in part accrue to the lessor as the owner of the associated facilities. In addition, we remain obligated for lease payments and other obligations under the Lease even if one or more of such leased facilities is unprofitable or if we decide to withdraw from those locations. We could incur special charges relating to the closing of such facilities, including lease termination costs, impairment charges and other charges that would reduce our net income and could have a material adverse effect on our business, financial condition and results of operations. 



We face risks associated with growth and acquisitions.



As part of our business strategy, we regularly evaluate opportunities for growth and expansion through development of gaming operations in existing or new markets, through acquiring other gaming entertainment facilities, through redeveloping our existing gaming facilities, and through joint ventures in new markets.  We cannot be sure that we will be able to identify attractive acquisition opportunities or that we will experience the return on investment that we expect. Acquisitions require significant management attention and resources to integrate new properties, businesses and operations. There can be no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations, into our existing operations without substantial costs, delays or other problems. Additionally, there can be no assurance that we will receive gaming or other necessary licenses or approvals for new projects that we may pursue or that gaming will be approved in jurisdictions where it is not currently approved.



We may be unable to obtain the capital necessary to fund our operations or potential acquisitions.



Our industry is capital intensive, and we rely heavily on the ability of our casinos to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development. While we have a significant amount of cash currently on hand, we may not be able to obtain funding when we need it on favorable terms or at all. If we are unable to finance our current or future expansion projects, we will have to adopt one or more alternatives, such as reducing or delaying planned expansion, development and renovation projects and capital expenditures, selling assets, restructuring debt, obtaining additional equity financing or joint venture partners, or modifying our bank credit facility. The amount of capital that we are able to raise often depends on variables that are beyond our control, such as the share price of our stock and its trading volume. The availability of financing may be impacted by local, regional and global economic, credit and stock market conditions, all of which have been volatile. As a result, we may not be able to secure financing on terms attractive to us, in a timely manner or at all. If we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet all of our future needs and, if it involves equity, may be highly dilutive to our stockholders. If we cannot raise adequate funds to satisfy our capital requirements, we may have to reduce, dispose of or eliminate certain operations.



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Our financial condition and results of operations may be adversely affected by the occurrence of severe weather, natural or man-made disasters and other catastrophic events, including war, terrorism and other acts of violence, and disease, such as the current coronavirus pandemic.  



The operations of our facilities are subject to disruptions or reductions in the number of customers who visit our properties because of severe weather conditions. If weather conditions limit access to our casino properties or otherwise adversely impact our ability to operate our casinos at full capacity, our revenue will suffer, which will negatively impact our operating results. High winds, flooding, blizzards and sub-zero temperatures, such as those experienced in Colorado and Alberta from time to time, can limit access to our properties.



Events such as terrorist and war activities in the countries in which we are located and other acts of violence, such as the mass shooting in Las Vegas in 2017, could have a negative impact on travel and leisure expenditures, including gaming, lodging and tourism, especially if these events occur in a region in which we operate. For example, our locations in Poland are in close proximity to Ukraine and Russia. While we have not experienced any material impact from the acts of hostility between the two countries, an increase in those hostilities could adversely affect our casinos in Poland. We cannot predict the extent to which terrorism, security alerts or war, or other acts of violence in the countries that we operate will directly or indirectly affect our business and operating results, but the impact could be material.



An outbreak of a contagious disease, such as the current coronavirus (also known as COVID-19) pandemic or any similar illness, could have a negative impact on travel and leisure expenditures, including gaming, lodging and tourism, especially if an outbreak were to occur in or near the areas in which we operate. Negative impacts on the economy, travel restrictions and other restrictions by local or federal governments in the areas in which we operate could result in consumers reducing travel and leisure expenditures, including visits to our casinos. Our operating costs may increase due to additional health and safety requirements, we may experience disruptions due to employee illness, and we could be forced to close our locations for a period of time. As a result of the actions taken by the US government, our management located in Europe may be unable to travel to the US. While we have not seen a significant impact from the coronavirus in the local areas in which we operate except for a weakening of approximately ten percent in Poland,  the outbreak appears to be spreading to many parts of North America and Europe and we cannot predict the extent to which the coronavirus will directly or indirectly affect our business and operating results. The impact could be material.



We are currently negotiating agreements with potential partners to begin offering sports betting in our Colorado casinos and through an online and mobile platform. There can be no assurance that the market for such gaming activities will develop as expected or that we will be successful in this market.



In November 2019, Colorado voters passed Proposition DD, which legalized sports betting in Colorado. We have completed and are currently negotiating agreements with potential partners to begin offering sports betting in our Colorado casinos and through an online and mobile platform. We also may seek to provide sports betting in additional markets where we operate if regulations permitting sports betting are approved in those jurisdictions.  There can be no assurances when, or if, regulations enabling sports betting will be adopted, or the terms of such regulations, in certain of the jurisdictions in which we operate. 



The market for sports betting is rapidly evolving and highly competitive with an increasing number of competitors. Our success at offering sports betting will depend on a number of factors, including:

·

the timing of adoption of regulations authorizing such betting and gaming activities and the restrictions contained in such regulations;

·

the tax rates and license fees applicable to such activities;

·

the ability of our sports betting partners to gain market share and compete in a newly developing market;

·

the potential that the market does not develop at all or does not develop as we anticipate; and

·

changes in consumer demographics and preferences.



There can be no assurance that we will be able to compete effectively in this new market or that an expansion into this market will be successful and generate sufficient returns on our investment. 



Potential changes in the regulatory environment may adversely affect the results of our operations.



From time to time, legislators and special interest groups have proposed legislation that would expand, restrict or prevent gaming operations or that may otherwise adversely impact our operations in the jurisdictions in which we operate. Any expansion of the gaming industry that results in increased competition and any restriction on or prohibition of our gaming operations could have a material adverse effect on our operating results or cause us to record an impairment of our assets. Any new gaming laws or regulations in the jurisdictions in which we operate could have an adverse impact on our financial position and results of operations.



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The enactment of legislation implementing changes in the US taxation of international business activities or the adoption of other tax reform laws or policies could materially affect our financial position and results of operations. 



We are subject to taxation at the federal, state, provincial and local levels in the US and various other countries and jurisdictions. Our future effective tax rate could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, or changes in determinations regarding the jurisdictions in which we are subject to tax. From time to time, the US federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations.



The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017 and included significant changes to the US Internal Revenue Code, including, among other items, a reduction of the federal corporate tax rate from 35% to 21%, a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, and the creation of new taxes on certain foreign earnings. These changes are complex and will require the Internal Revenue Service (“IRS”) to issue interpretations and regulations that may significantly impact how the Tax Act is applied and ultimately may impact our results of operations.  If there are significant interpretations and regulations issued related to the Tax Act that would increase the tax rates on future US or foreign earnings, these changes could have a material adverse effect on our effective tax rate, financial condition, results of operations and cash flows.



We face extensive taxation from gaming and regulatory authorities. Potential changes to the tax laws in the jurisdictions in which we operate may adversely affect the results of our operations.



We believe that the prospect of significant revenue to a jurisdiction through taxation and fees is one of the primary reasons jurisdictions permit legalized gaming. As a result, gaming companies are typically subject to significant taxes and fees in addition to normal federal, state, provincial and local income taxes, and such taxes and fees are subject to increase at any time. We pay substantial taxes and fees with respect to our operations. For instance, the Colorado constitution permits a gaming tax of up to 40% on adjusted gross gaming proceeds. The current gaming tax in Colorado established by the Colorado Gaming Commission is a graduated rate of 0.25% to 20% on adjusted gross gaming proceeds, where casinos pay a higher percentage as their adjusted gross proceeds increase. In Missouri, the current gaming tax is 21% of adjusted gaming proceeds. In West Virginia, the current gaming tax on tables is 35% of adjusted gaming proceeds and on slot machines is 55.36% of adjusted gaming proceeds.  At our Edmonton, St. Albert and Calgary casinos, the AGLC retains 85% of slot machine net sales, of which the AGLC allocates 15% to licensed charities and 70% to the Alberta Lottery Fund. For all table games in Alberta, Canada, excluding poker and craps, we are required to allocate 50% of our net win to a charity designated by the AGLC, with the exception of our St. Albert casino, for which we are required to allocate 35% of our net win to a charity designated by the AGLC. For poker and craps in Alberta, Canada, we are required to allocate 25% of our net win to the charity. At Century Downs and Century Mile, the AGLC and HRA retain 56.25% of slot machine net sales, which are allocated to and used by the Alberta Lottery Fund and by HRA to fund purses, marketing, administration and animal welfare and other programs. Any change to the agreement between the AGLC and HRA on the division of the slot machine net sales at Century Downs and Century Mile could negatively impact our revenue, as HRA may increase the amount it retains in order to offset increased retention from the AGLC. The Polish Minister of Finance assesses a gaming tax rate on gross gaming revenue of 50%. In England, the gaming duty rate is scaled from 15% to 50% based on a casino’s gross gaming yield in a three-month period. In addition, negative economic conditions could intensify the efforts of federal, state, provincial and local governments to raise revenue through increases in gaming taxes or introduction of additional gaming opportunities. 



25

 


 

Difficulties in managing our worldwide operations may have an adverse impact on our business.



We derive our revenue principally from operations located on two continents. Our management is located in North America and Europe, and our worldwide operations pose risks to our business, especially for a smaller company such as ours. Risks associated with international operations include:



·

different time zones;

·

culture, management and language differences;

·

fluctuations in foreign currency exchange rates;

·

changes in laws and policies that govern our foreign operations;

·

possible failure to comply with anti-bribery laws such as the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;

·

difficulty in establishing staffing and managing non-United States operations;

·

different labor regulations;

·

changes in environmental, health and safety laws;

·

potentially negative consequences from changes in or interpretations of tax laws;

·

political instability and actual or anticipated military or political conflicts;

·

economic instability and inflation, recession or interest rate fluctuations; and

·

uncertainties regarding judicial systems and procedures.



These factors make it more challenging to manage and administer a globally-dispersed business and, as a result, we must devote greater resources to operating under several regulatory and legislative regimes (See “Governmental Regulation and Licensing” in Item 1, “Business”). This business model also increases our costs.



The evolution of the slot machine manufacturing industry could impose additional costs on us.



The majority of our revenue is generated from slot machines operated at our gaming facilities. In order to remain competitive, we seek to offer the most popular and up-to-date slot machine games to our customers. In recent years, slot machine manufacturers have frequently required new slot machines to be leased through participation arrangements instead of selling the machines. Participation arrangements typically require payments based on a percentage of coin‑in or net win. Generally, a participation arrangement is substantially more expensive over the long term than the cost to purchase a new machine. For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease arrangements that are more expensive than costs associated with continuing to operate our existing slot machines. If the newer slot machines do not result in sufficient incremental revenue to offset the increased investment and costs, it may negatively impact our operating results. 



In addition, a substantial majority of the slot machines sold in the US in recent years were manufactured by a few select companies, and there has been extensive consolidation activity within the gaming equipment sector in recent years. A decrease in the competition in the slot machine manufacturing industry could lead to increased costs related to the acquisition or rental of slot machines and other gaming equipment.

   

26

 


 

Our reputation and business may be harmed by cyber security breaches, and we may be subject to legal claims if there is loss, disclosure or misappropriation of or access to our customers', our business partners' or our own information or other breaches of our information security.



We make use of online services and centralized data processing, including through third party service providers. The secure maintenance and transmission of customer information, including credit card numbers and other personally identifiable information for marketing and promotional purposes, is a critical element of our operations. Our collection and use of personal data are governed by state and federal privacy laws as well as the applicable laws in other countries in which we operate. Various federal, state and foreign legislative or regulatory bodies may enact or adopt new or additional laws and regulations concerning privacy, data retention, data transfer, and data protection. For example, the European Union adopted the General Data Protection Regulation, which became effective in May 2018, that changed companies’ operational and compliance requirements and included significant penalties for non-compliance. Compliance with applicable privacy regulations may increase our operating costs or adversely impact our ability to market our products, properties and services to our guests.



Our information technology and other systems that maintain and transmit customer information, or those of service providers, or our employee or business information may be compromised by a malicious third party penetration of our network security, or that of a third party service provider or business partner, or by actions or inactions by our employees. As a result, information of our customers, third party service providers or business partners or our employee or business information may be lost, disclosed, accessed or taken without their or our consent. Non-compliance with applicable privacy regulations by us (or in some circumstances non-compliance by third parties engaged by us) or a breach of security on systems storing our data may result in a loss of customers and subject us to fines, payment of damages, lawsuits or restrictions on our use or transfer of data. Our insurance does not cover cyber security incidents. The loss, disclosure or misappropriation of our business information may adversely affect our businesses, operating results and financial condition. Furthermore, a cyber security breach could have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition.



We may be adversely affected by reductions in discretionary consumer spending as a result of consumer concerns over economic conditions.



Our business may be adversely affected by international, national and local economic and political conditions. From time to time, the volatile global economic environment has had negative effects on our business because our business is largely impacted by discretionary consumer spending. Reductions in discretionary consumer spending or changes in consumer preferences brought about by factors such as increased unemployment, perceived or actual deterioration in general economic conditions, housing market instability, perceived or actual decline in disposable consumer income and wealth, and changes in consumer confidence in the economy could reduce customer demand for the leisure activities we offer and may adversely affect our revenue and operating cash flow. For example, Alberta is Canada’s largest oil and gas producer and a decrease in oil and gas prices could create higher unemployment and reduce discretionary consumer spending at our Canadian casinos, and we believe that concerns about Brexit have reduced discretionary consumer spending in the UK and adversely affected our results of operations at CCB.



Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer, our insurance costs may increase and we may not be able to obtain the same insurance coverage in the future.



We may suffer damage to our property caused by a casualty loss (such as fire, natural disasters, acts of war, terrorism or other acts of violence) that could severely disrupt our business or subject us to claims by third parties who are injured or harmed. Although we maintain insurance customary in our industry, including property, casualty, terrorism, cybersecurity and business interruption insurance, that insurance is subject to deductibles and limits on maximum benefits, including limitations on the coverage period for business interruption. Due to these variables, we may not be able to fully insure such losses, or fully collect, if at all, on claims resulting from severe weather conditions. The lack of sufficient insurance for these types of acts could expose us to heavy losses if any damages occur, directly or indirectly, that could have a significant adverse impact on our operations.



We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage or self-insure. Among other factors, regional political tensions, homeland security concerns, other catastrophic events or any change in government legislation governing insurance coverage for acts of terrorism could materially adversely affect available insurance coverage and result in increased premiums on available coverage (which may cause us to elect to reduce our policy limits), additional exclusions from coverage or higher deductibles. Among other potential future adverse changes, in the future we may elect to not, or may not be able to, obtain any coverage for losses due to acts of terrorism.



27

 


 

The loss of key personnel could have a material adverse effect on us.



We are highly dependent on the services of Erwin Haitzmann and Peter Hoetzinger, our Co-Chief Executive Officers, and other members of our senior management team. The employment agreements with Erwin Haitzmann and Peter Hoetzinger provide that, under some circumstances, the departure of one executive could allow the other to leave for cause. Our ability to retain key personnel is affected by the competitiveness of our compensation packages and the other terms and conditions of employment, our continued ability to compete effectively against other gaming companies and our growth prospects. The loss of the services of any of these individuals could have a material adverse effect on our business, financial condition and results of operations.



Fluctuations in currency exchange rates and currency controls in foreign countries could adversely affect our business.



The revenue generated and expenses incurred at our casinos in Canada and Poland are generally denominated in Canadian dollars and Polish zloty, respectively. Decreases in the value of these currencies in relation to the value of the US dollar have decreased the operating profit from our foreign operations when translated into US dollars, which has adversely affected our consolidated results of operations, and such decreases may occur in the future. In addition, we may expand our operations into other countries and, accordingly, we could face similar exchange rate risk with respect to the costs of doing business in such countries as a result of any increases in the value of the US dollar in relation to the currencies of such countries. We do not currently hedge our exposure to fluctuations of these foreign currencies, and there is no guarantee that we will be able to successfully hedge any future foreign currency exposure.



Our business, financial condition, and results of operations may be harmed by work stoppages and other labor issues.



There are 231 employees at our CPL casinos in Poland who belong to trade unions. The trade unions do not currently have any collective bargaining agreements with CPL but changes in pay for union employees at CPL require approval from the trade unions. In the United States, there are 58 employees at our West Virginia casino who belong to unions. A lengthy strike or other work stoppage at our casino properties with unions could have an adverse effect on our business and results of operations. Our other employees in the US and Canada and in our Corporate and Other segment are not covered by collective bargaining agreements. From time to time, we have experienced attempts to unionize certain of our non-union employees. If a union seeks to organize any of our employees, we could experience disruption in our business and incur significant costs, both of which could have a material adverse effect on our results of operation and financial condition. If a union were successful in organizing any of our employees, we could experience significant increases in our labor costs which could also have a material adverse effect on our business, financial condition, and results of operations. In addition, changes to labor laws or prevailing market conditions could lead to increased labor costs that could have an adverse impact on our profitability.



We intend to develop and operate additional properties in the future and if our development efforts are not successful, our business may be adversely affected.



We regularly review opportunities to develop new properties. We may not be successful in obtaining the rights to develop such properties, and as a result, we may incur significant costs for which we will receive no return. Even if we are successful in obtaining the rights to develop new casino properties, commencing operations at new casino projects may require substantial development capital. Additional risks before commencing operations include the time and expense incurred and unforeseen difficulties in obtaining suitable sites, liquor licenses, building permits, materials, competent and able contractors, supplies, employees, gaming devices and related matters.



We may engage in construction projects as part of our development of additional properties in the future. Construction projects entail significant risks, which can substantially increase costs or delay completion of a project. Most of these factors are beyond our control. The occurrence of any of these development and construction risks could increase the total costs of our construction projects or delay or prevent the construction or opening or otherwise affect the design and features of our construction projects. This could materially adversely affect our plan of operations, financial condition and ability to satisfy our debt obligations.



Development activities involve substantial risks, such as uncertainties regarding our ability to secure various licenses, permits and government authorizations, and expenses related to such activities, as well as the risks of potential cost over-runs, construction delays and market deterioration.



28

 


 

We may pursue gaming opportunities that would require us to obtain a gaming license. While our management believes that we are licensable in any jurisdiction that allows gaming operations, each licensing process is unique and requires a significant amount of funds and management time. The licensing process in any particular jurisdiction can take significant time and expense through licensing fees, background investigation costs, legal fees and other associated preparation costs. Moreover, if we proceed with a licensing approval process with industry partners, such industry partners would be subject to regulatory review as well. We seek to find industry partners that are licensable, but cannot assure that such partners will, in fact, be licensable. Certain licenses include competitive situations where, even if we and our industry partners are licensable, other factors such as the economic impact of gaming, financial and operational capabilities of competitors must be analyzed by regulatory authorities. In addition, political factors may make the licensing process more difficult. If any of our gaming license applications are denied, we may have to write off costs related to our investment in such application processes, which could be significant. In addition, our ability to attract and retain competent management and employees for any new location is critical to our success. One or more of these risks may result in any new gaming opportunity not being successful. If we are not able to successfully commence operations at these properties, our results of operations may be adversely affected.



We may be required in the future to record impairment losses related to assets we currently carry on our balance sheet.



We have $727 million of tangible and intangible assets, including $33 million of goodwill, $43 million in casino licenses, $4 million in trademarks and $541 million in property and equipment as of December 31, 2019. Accounting rules require that we make certain estimates and assumptions related to our determinations as to the future recoverability of these assets. If we were to determine that the values of these assets carried on our balance sheet are impaired due to adverse changes in our business or otherwise, we may be required to record an impairment charge to write down the value of these assets, which would adversely affect our results during the period in which we recorded the impairment charge. In December 2019, we impaired the assets related to Century Casino Bath and wrote-down $16.5 million to impairment – intangible and tangible assets on our consolidated statement of (loss) earnings.



We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition.



From time to time, we are defendants in various lawsuits and gaming regulatory proceedings relating to matters incidental to our business. As with all litigation, no assurance can be provided as to the outcome of these matters and, in general, litigation can be expensive and time consuming. We may not be successful in the defense or prosecution of our current or future legal proceedings, which could result in settlements or damages that could significantly impact our business, financial condition and results of operations.



In Poland, tax laws and other Polish laws and regulations change from time to time, sometimes with no reference to established regulations or cases. The current Polish laws and regulations also have ambiguities that lead to differences in interpretations between authorities and between authorities and companies. Taxes or other payments may frequently be inspected by Polish authorities that are authorized to impose significant fines, extra liabilities and interest for underpayments. As a result, our tax risk is higher in Poland than in countries with better-developed tax systems. Since Polish tax payments may be inspected for up to five years, the amounts included in our financial statements for Polish taxes may change at a later date after the final amounts are determined, and other Polish laws and regulations may lead to additional liabilities. We have open tax audits currently in litigation with the Polish Internal Revenue Service (“Polish IRS”), as described further in Item 3, “Legal Proceedings”. Additional tax obligations as a result of the tax audits by the Polish IRS could adversely affect our financial position.



We are dependent upon technology services and electrical power to operate our business, and if we experience damage or service interruptions, we may have to cease some or all of our operations, resulting in a decrease in revenue.



Our gaming operations rely heavily on technology services and an uninterrupted supply of electrical power. Our security system and all of our slot machines are controlled by computers and reliant on electrical power to operate. A loss of electrical power or a failure of the technology services needed to run the computers would make us unable to run all or parts of our gaming operations. Any unscheduled interruption in our technology services or interruption in the supply of electrical power is likely to result in an immediate, and possibly substantial, loss of revenue due to a shutdown of our gaming operations. Although we have designed our systems around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences, they remain vulnerable to damage or interruption from floods, fires, power loss, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks and similar events. Additionally, substantial increases in the cost of electricity and natural gas could negatively affect our results of operations.



29

 


 

Any violation of the Foreign Corrupt Practices Act or any other similar anti-corruption laws could have a negative impact on us. 



A significant portion of our revenue is derived from operations outside the United States, which exposes us to complex foreign and US regulations inherent in doing cross-border business and in each of the countries in which we transact business. We are subject to compliance with the US Foreign Corrupt Practices Act (FCPA), the United Kingdom (“U.K.”) Bribery Act and other similar anti-corruption laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While our employees and agents are required to comply with these laws, we cannot be sure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. Violations of these laws may result in severe criminal and civil sanctions as well as other penalties, and the SEC and US Department of Justice have increased their enforcement activities with respect to the FCPA. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.



Any failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business.



The development of intellectual property is part of our overall business strategy. While our business as a whole is not dependent on either of our trademarks or other intellectual property, we seek to establish and maintain our proprietary rights in our business operation through the use of trademarks. We file applications for, and obtain trademarks in, the United States and in foreign countries where we believe filing for such protection is appropriate. Despite our efforts to protect our proprietary rights, parties may infringe our trademarks and our rights may be invalidated or unenforceable. The laws of some foreign countries do not protect proprietary rights to as great an extent as the laws of the United States. Monitoring the unauthorized use of our intellectual property is difficult. Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources. We cannot assure you that all of the steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized use or reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business.



Risks Related to Our Common Stock



Our stock price has been volatile and may decline significantly and unexpectedly.



Our common stock trades in the US on the Nasdaq Capital Market, which consists of relatively small issuers and a lack of significant trading volumes relative to other US markets. These factors may result in volatility in the price of our common stock. For instance, the trading price of our common stock on the Nasdaq Capital Market in 2018 and 2019 varied from a high of $10.41 to a low of $5.77. 



Certain anti-takeover measures we have adopted may limit our ability to consummate transactions that some of our security holders might otherwise support. 



We have a fair price business combination provision in our certificate of incorporation, which requires approval of certain business combinations and other transactions by holders of 80% of our outstanding shares of voting stock. In addition, our certificate of incorporation allows our board of directors to issue shares of preferred stock without stockholder approval. These provisions generally have the effect of requiring that any party seeking to acquire us negotiate with our board of directors in order to structure a business combination with us. This may have the effect of depressing the price of our common stock due to the possibility that certain transactions that our stockholders might favor could be precluded by these provisions.



30

 


 

Regulation Risk Related to Stockholders



Stockholders may be required to dispose of their shares of our common stock if they are found unsuitable by gaming authorities. 



Gaming authorities in the US, Canada and the United Kingdom generally can require that any beneficial owner of our common stock and other securities file an application for a finding of suitability. If a gaming authority requires a record or beneficial owner of our securities to file a suitability application, the owner must apply for a finding of suitability within 30 days or at an earlier time prescribed by the gaming authority. The gaming authority has the power to investigate an owner's suitability, and the owner must pay all costs of the investigation. If the owner is found unsuitable, then the owner may be required by law to dispose of our securities. Our certificate of incorporation also provides us with the right to repurchase shares of our common stock from certain beneficial owners declared by gaming regulators to be unsuitable holders of our equity securities, and the price we pay to any such beneficial owner may be below the price such beneficial owner would otherwise accept for his or her shares of our common stock.



We have not historically paid dividends and may not pay dividends in the future.



We do not currently expect to pay dividends on our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon, among other factors, our earnings, cash requirements, financial condition, requirements to comply with the covenants under the Macquarie Credit Agreement and our other debt instruments, legal considerations, and other factors that our board of directors deem relevant. The Macquarie Credit Agreement restricts our ability to pay dividends. If we do not pay dividends, then the return on an investment in our common stock will depend entirely upon any future appreciation of our stock price. There is no guarantee that our common stock will appreciate in value or maintain its value.



Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

The following table sets forth the location, applicable reportable segment, size and description of certain types of gaming facilities available at each of our casinos as of December 31, 2019:



Summary of Property Information





 

 

 

 

 

 



 

 

Number of

Segment/Property

Casino Space (1)

Acreage

Slot / Electronic Gaming Machines

Video Lottery Terminals

Tables

Off-Track Betting Parlors

United States

 

 

 

 

 

 

Colorado

 

 

 

 

 

 

Century Casino & Hotel - Central City

22,640  1.3  462 

Century Casino & Hotel - Cripple Creek

19,610  3.5  431 

West Virginia

 

 

 

 

 

 

Mountaineer Casino, Racetrack & Resort (2)

72,380  214.8  1,140 

42 

Missouri

 

 

 

 

 

 

Century Casino Cape Girardeau (2)

41,530  19.1  844 

24 

Century Casino Caruthersville (2)

21,000  38.2  511 

Canada

 

 

 

 

 

 

Edmonton

 

 

 

 

 

 

Century Casino & Hotel - Edmonton

32,960  6.0  800  30  35 

Century Casino St. Albert

12,970  7.1  407  24  11 

Century Mile Racetrack and Casino (3)

19,480  100.0  590  14 

20 

Calgary

 

 

 

 

 

 

Century Casino Calgary

20,000  8.0  504  20  16 

Century Downs Racetrack and Casino (4)

25,500  57.3  663  10 

Century Bets! Inc. (5)

12 

Poland

 

 

 

 

 

 

Casinos Poland (6)

45,360 

523 

118 

Corporate Other

 

 

 

 

 

 

Cruise Ships (total of 5) (7)

11,900 

88 

Century Casino Bath (8)

20,000 

57 

14 

Mendoza Central Entretenimientos S.A. (9)

23,000 

600 





(1)

In square feet.

(2)

The land, buildings and riverboat (as applicable) at these properties are leased under the Master Lease.

(3)

Century Mile Racetrack and Casino opened on April 1, 2019. Century Mile runs the pari-mutuel network in northern Alberta. The off-track betting parlors are located throughout northern Alberta and include the parlors at Century Mile, Century Casino & Hotel – Edmonton and Century Casino St. Albert. The land on which the REC and racetrack are located is leased.  

(4)

The land on which the REC and racetrack are located was sold by CDR to 1685258 Alberta Ltd. (“Rosebridge”) prior to our acquisition of our ownership interest in CDR. CDR leases from Rosebridge the 57.3 acres on which the REC and racetrack are located.

(5)

Century Bets! Inc. runs the pari-mutuel network in southern Alberta. The off-track betting parlors are located throughout southern Alberta, including in Century Casino – Calgary and Century Downs Racetrack and Casino. 

(6)

As of December 31, 2019,  Casinos Poland operated eight separate casinos in leased building spaces, including hotels, throughout Poland. For the locations of these casinos, see “Overview of Operations - Poland” in Item 1, “Business” of this report.

(7)

Operated under concession agreements. We do not own the ships on which our casinos operate. 

(8)

The casino is operated in leased building space.

(9)

Operated under a consulting services agreement. We do not own the building in which the casino operates.



As of December 31, 2019,  our subsidiaries are pledged as collateral for our obligations under the Macquarie Credit Agreement. As of December 31, 2019, a parcel of land in Kolbaskowo, Poland owned by Casinos Poland was used to secure a bank guarantee with mBank. See Note 7 to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of this report.



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Additional Property Information

Century Casino Calgary – In addition to the property described above, we lease approximately 13,049 square feet of land at our property in Calgary for additional parking.



Century Bets – Century Bets leases approximately 250 square feet of office space from Century Casino & Hotel Edmonton and 80 square feet of office space from Century Mile for administrative purposes.



Corporate Offices  We lease approximately 11,100 square feet of office space in Colorado Springs, Colorado and approximately 2,500 square feet of office space in Vienna, Austria for corporate and administrative purposes.

 



Item 3. Legal Proceedings.

We are not a party to any pending litigation that, in management’s opinion, could have a material effect on our financial position or results of operations except as follows.



Since 2011, the Polish IRS has conducted a series of tax audits of CPL to review the calculation and payment of personal income tax by CPL employees for periods ranging from 2007 to 2013. The Polish IRS has asserted that CPL should calculate, collect and remit to the Polish IRS personal income tax on tips received by CPL employees from casino customers and has prevailed in several court challenges by CPL. Through December 31, 2019, CPL has paid PLN 14.3 million ($4.2 million) to the Polish IRS related to these audits.



We adjusted the contingent liability related to the CPL taxes to remove the estimated taxes accrued for the 2014 tax year due to the expiration of the statute of limitations on this time period. The adjustment reduced the contingent liability by PLN 2.2 million ($0.6 million) in December 2019 and was recorded as gain on foreign currency transactions, cost recovery income and other on our consolidated statement of (loss) earnings for the year ended December 31, 2019. 



The balance of the potential contingent liability on our consolidated balance sheet for all open periods as of December 31, 2019 is PLN 1.3 million ($0.3 million based on the exchange rate in effect on December 31, 2019). We have evaluated the contingent liability recorded on our consolidated balance sheet as of December 31, 2019 and have concluded that it is properly accrued in light of our estimated obligation related to personal income tax on tips as of December 31, 2019. Additional court decisions and other proceedings by the Polish IRS may expose us to additional employment tax obligations in the future. Any additional tax obligations are not probable or estimable, and we have not recorded any additional obligation related to such taxes as of December 31, 2019. Additional tax obligations assessed in the future as a result of these matters, if any, may be material to our financial position, results of operations and cash flows. 



In October 2016, we filed a motion for arbitration in Poland against LOT Polish Airlines, which previously owned a 33.3% interest in CPL that it sold to us in 2013. We were seeking to collect amounts owed to us by LOT Polish Airlines in connection with the payments made to the Polish IRS for the tax periods December 1, 2007 to December 31, 2008 and January 1, 2011 to January 31, 2011 pursuant to an agreement with LOT Polish Airlines under which we acquired the additional 33.3% interest in CPL.  We were awarded PLN 1.2 million ($0.3 million) in amounts owed by LOT Polish Airlines related to this claim for the periods indicated. LOT Polish Airlines paid this amount, plus accrued interest, in July 2018.





Item 4. Mine Safety Disclosures.

Not applicable.

 

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PART II



Item 5.  Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded in the United States on the Nasdaq Capital Market under the symbol “CNTY”.



The following graph illustrates the cumulative shareholder return of our common stock during the period beginning December 31, 2014 through December 31, 2019, and compares it to the cumulative total return on the Nasdaq and the Dow Jones US Gambling Index. The comparison assumes a $100 investment on December 31, 2014, in our common stock and in each of the foregoing indices, and assumes reinvestment of dividends, if any. This table is not intended to forecast future performance of our common stock.











 

 

 

 

 

 

 

 

 

 

 

 



 

12/14

 

12/15

 

12/16

 

12/17

 

12/18

 

12/19

CNTY

 

100.00

 

154.06

 

162.97

 

180.79

 

146.34

 

153.86

Nasdaq

 

100.00

 

105.73

 

113.66

 

145.76

 

140.10

 

189.45

Dow Jones US Gambling Index

 

100.00

 

74.08

 

92.01

 

125.22

 

84.34

 

120.90



No dividends have been declared or paid by us. Declaration and payment of dividends, if any, in the future will be at the discretion of the board of directors. At the present time, we intend to use any earnings that may be generated to finance the growth of our business.



At March 3, 2020, we had 139 holders of record of our common stock. 



In March 2000, our board of directors approved and announced a discretionary program to repurchase up to $5.0 million of our outstanding common stock. In November 2009, our board of directors approved an increase of the amount available to be repurchased under the program to $15.0 million. The amount available for repurchase as of December 31, 2019 is $14.7 million. The repurchase program has no set expiration or termination date. No repurchases were made during the year ended December 31, 2019.

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Item 6. Selected Financial Data.

The selected financial data should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and Part II, Item 8, “Financial Statements and Supplementary Data”, of this Form 10-K. 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the year ended December 31,

Amounts in thousands, except for share information

 

2019 (1)

 

2018 (2)

 

2017 (3)

 

2016 (4)

 

2015 (5)

Results of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

$

218,227 

 

$

168,938 

 

$

154,069 

 

$

139,234 

 

$

133,734 

Impairment - intangible and tangible assets

 

 

16,486 

 

 

 

 

 

 

 

 

(Loss) earnings from operations

 

 

(5,220)

 

 

9,459 

 

 

14,615 

 

 

16,165 

 

 

15,796 

Net earnings attributable to non-controlling interests

 

 

(3,014)

 

 

(612)

 

 

(1,632)

 

 

(4,598)

 

 

(1,471)

Net (loss) earnings attributable to Century Casinos, Inc. shareholders

 

 

(19,155)

 

 

3,394 

 

 

6,259 

 

 

9,215 

 

 

11,520 

Adjusted EBITDA (6)

 

$

30,281 

 

$

23,377 

 

$

26,086 

 

$

25,762 

 

$

22,798 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from operations

 

$

(0.18)

 

$

0.32 

 

$

0.59 

 

$

0.66 

 

$

0.65 

Net (loss) earnings attributable to Century Casinos, Inc. shareholders

 

$

(0.65)

 

$

0.12 

 

$

0.25 

 

$

0.38 

 

$

0.47 

Diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from operations

 

$

(0.18)

 

$

0.32 

 

$

0.57 

 

$

0.66 

 

$

0.65 

Net (loss) earnings attributable to Century Casinos, Inc. shareholders

 

$

(0.65)

 

$

0.11 

 

$

0.24 

 

$

0.37 

 

$

0.47 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,754 

 

$

45,575 

 

$

74,677 

 

$

38,837 

 

$

29,366 

Total assets

 

 

726,900 

 

 

278,825 

 

 

274,876 

 

 

217,838 

 

 

186,424 

Long-term debt

 

 

178,963 

 

 

59,523 

 

 

56,713 

 

 

55,609 

 

 

36,520 

Total liabilities

 

 

554,825 

 

 

95,442 

 

 

87,558 

 

 

79,254 

 

 

59,637 

Non-controlling interests

 

 

8,769 

 

 

7,062 

 

 

7,421 

 

 

6,388 

 

 

4,737 

Total Century Casinos, Inc. shareholders' equity

 

$

163,306 

 

$

183,383 

 

$

187,318 

 

$

132,196 

 

$

122,050 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash payments on Master Lease

 

$

3,831 

 

$

 

$

 

$

 

$



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

In January 2019, we adopted Accounting Standard Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and the subsequent amendments using the alternative modified retrospective method, which did not require the restatement of prior periods. Upon adoption of ASU 2016-02 we recognized leased right-of-use (“ROU”) assets of $38.3 million and operating lease liabilities of $40.4 million in our consolidated balance sheet. In April 2019, we began operation of Century Mile Racetrack and Casino. In December 2019, we began operation of Mountaineer Casino, Racetrack & Resort, Century Casino Cape Girardeau and Century Casino Caruthersville. In December 2019, we impaired the assets related to Century Casino Bath and wrote-down $16.5 million to impairment – intangible and tangible assets on our consolidated statement of (loss) earnings.

(2)

In May 2018, we began operation of Century Casino Bath.

(3)

In November 2017, we completed an underwritten public offering in which we sold 4,887,500 shares of our common stock and received net proceeds from the offering of $34.4 million.

(4)

In October 2016, we began operation of Century Casino St. Albert. We also adopted Accounting Standard Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17) on a prospective basis as of December 31, 2016. As permitted by the standard, no prior periods have been restated in this report. As a result of the adoption of ASU 2015-17, we netted our deferred taxes into a long-term deferred tax asset. As of December 31, 2015, we had deferred tax liabilities of $3.6 million reported on our consolidated balance sheet.

(5)

In April 2015, we began operations of CDR’s casino and racetrack.  In June 2015, we recorded $3.4 million in net operating revenue from the $4.0 million consideration for the early termination of our concession agreements with Oceania Cruises (“Oceania”) and Regent Seven Seas Cruises (“Regent”) net of $0.6 million in assets sold to Norwegian Cruise Line Holdings as part of the termination agreement.

(6)

A reconciliation of Adjusted EBITDA to Net earnings attributable to Century Casinos, Inc. shareholders is presented below.



We have not declared or paid dividends in any of the years presented above.



35

 


 

Non-GAAP Measures – Adjusted EBITDA

We define Adjusted EBITDA as net earnings (loss) attributable to Century Casinos, Inc. shareholders before interest expense (income), net, income taxes (benefit), depreciation and amortization, non-controlling interests net earnings (loss) and transactions, pre-opening expenses, acquisition costs, non-cash stock-based compensation charges, asset impairment costs, (gain) loss on disposition of fixed assets, discontinued operations, (gain) loss on foreign currency transactions, cost recovery income and other, gain on business combination and certain other one-time transactions. Expense related to the Master Lease is included in the interest expense (income), net line item. Intercompany transactions consisting primarily of management and royalty fees and interest, along with their related tax effects, are excluded from the presentation of net earnings (loss) attributable to Century Casinos, Inc. shareholders and Adjusted EBITDA reported for each segment. Not all of the aforementioned items occur in each reporting period, but have been included in the definition based on historical activity. These adjustments have no effect on the consolidated results as reported under US generally accepted accounting principles (“GAAP”). Adjusted EBITDA is not considered a measure of performance recognized under US GAAP.



Management believes that Adjusted EBITDA is a valuable measure of the relative performance of the Company and its properties. The gaming industry commonly uses Adjusted EBITDA as a method of arriving at the economic value of a casino operation. Management uses Adjusted EBITDA to evaluate and forecast the operational performance of the Company and its properties as well as to compare results of current periods to prior periods. Management believes that presenting Adjusted EBITDA to investors provides them with information used by management for financial and operational decision making in order to understand the Company’s operating performance and evaluate the methodology used by management to evaluate and measure such performance. Management believes that using Adjusted EBITDA is a useful way to compare the relative operating performance of separate reporting segments by eliminating the above-mentioned items associated with the varying levels of capital expenditures for infrastructure required to generate revenue, and the often high cost of acquiring existing operations. Our computation of Adjusted EBITDA may be different from, and therefore may not be comparable to, similar measures used by other companies within the gaming industry.



The reconciliation of Adjusted EBITDA to net earnings (loss) attributable to Century Casinos, Inc. shareholders is presented below.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the year ended December 31, 2019

Amounts in thousands

 

United States

 

Canada

 

Poland

 

Corporate and Other

 

Total

Net earnings (loss) attributable to Century Casinos, Inc. shareholders

 

$

5,825 

 

$

6,669 

 

$

3,466 

 

$

(35,115)

 

$

(19,155)

Interest expense (income), net (1)

 

 

1,635 

 

 

5,312 

 

 

197 

 

 

1,085 

 

 

8,229 

Income taxes (benefit)

 

 

2,018 

 

 

3,278 

 

 

1,617 

 

 

(2,739)

 

 

4,174 

Depreciation and amortization

 

 

2,330 

 

 

4,539 

 

 

3,064 

 

 

910 

 

 

10,843 

Net earnings (loss) attributable to non-controlling interests

 

 

 

 

1,295 

 

 

1,731 

 

 

(12)

 

 

3,014 

Non-cash stock-based compensation

 

 

 

 

 

 

 

 

1,303 

 

 

1,303 

(Gain) loss on foreign currency transactions, cost recovery income and other

 

 

 

 

(439)

 

 

(1,096)

 

 

16,709 

 

 

15,174 

Loss on disposition of fixed assets

 

 

17 

 

 

20 

 

 

413 

 

 

345 

 

 

795 

Acquisition costs

 

 

 

 

 

 

 

 

5,366 

 

 

5,366 

Pre-opening expenses

 

 

 

 

538 

 

 

 

 

 

 

538 

Adjusted EBITDA

 

$

11,825 

 

$

21,212 

 

$

9,392 

 

$

(12,148)

 

$

30,281 



(1)

Expense of $1.6 million related to our Master Lease is included in interest expense (income), net in the United States segment. Expense of $2.2 million related to our CDR land lease is included in interest expense (income), net in the Canada segment. Cash payments related to our Master Lease and CDR land lease were $3.8 million and $2.0 million, respectively, for the period presented.

36

 


 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the year ended December 31, 2018

Amounts in thousands

 

United States

 

Canada

 

Poland

 

Corporate and Other

 

Total

Net earnings (loss) attributable to Century Casinos, Inc. shareholders

 

$

4,373 

 

$

7,715 

 

$

(153)

 

$

(8,541)

 

$

3,394 

Interest expense (income), net (1)

 

 

 

 

3,895 

 

 

206 

 

 

12 

 

 

4,114 

Income taxes (benefit)

 

 

1,508 

 

 

2,536 

 

 

595 

 

 

(2,722)

 

 

1,917 

Depreciation and amortization

 

 

2,178 

 

 

3,211 

 

 

3,065 

 

 

945 

 

 

9,399 

Net earnings (loss) attributable to non-controlling interests

 

 

 

 

722 

 

 

(75)

 

 

(35)

 

 

612 

Non-cash stock-based compensation

 

 

 

 

 

 

 

 

868 

 

 

868 

(Gain) loss on foreign currency transactions, cost recovery income and other

 

 

 

 

(235)

 

 

(428)

 

 

 

 

(661)

Loss on disposition of fixed assets

 

 

 

 

10 

 

 

1,054 

 

 

25 

 

 

1,090 

Pre-opening expenses

 

 

 

 

1,668 

 

 

626 

 

 

350 

 

 

2,644 

Adjusted EBITDA

 

$

8,061 

 

$

19,522 

 

$

4,890 

 

$

(9,096)

 

$

23,377 



(1)

Expense of $2.1 million related to our CDR land lease is included in interest expense (income), net in the Canada segment. Cash payments related to our CDR land lease were $2.1 million for the period presented.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the year ended December 31, 2017

Amounts in thousands

 

United States

 

Canada

 

Poland

 

Corporate and Other

 

Total

Net earnings (loss) attributable to Century Casinos, Inc. shareholders

 

$

3,469 

 

$

7,681 

 

$

1,280 

 

$

(6,171)

 

$

6,259 

Interest expense (income), net (1)

 

 

 

 

3,487 

 

 

105 

 

 

(25)

 

 

3,569 

Income taxes (benefit)

 

 

2,128 

 

 

3,008 

 

 

1,388 

 

 

(1,964)

 

 

4,560 

Depreciation and amortization

 

 

2,405 

 

 

3,427 

 

 

2,747 

 

 

366 

 

 

8,945 

Net earnings attributable to non-controlling interests

 

 

 

 

996 

 

 

636 

 

 

 

 

1,632 

Non-cash stock-based compensation

 

 

 

 

 

 

 

 

669 

 

 

669 

(Gain) loss on foreign currency transactions, cost recovery income and other

 

 

 

 

(564)

 

 

(822)

 

 

24 

 

 

(1,362)

Loss on disposition of fixed assets

 

 

 

 

83 

 

 

535 

 

 

 

 

622 

Acquisition costs

 

 

 

 

28 

 

 

 

 

327 

 

 

355 

Pre-opening expenses

 

 

 

 

25 

 

 

537 

 

 

275 

 

 

837 

Adjusted EBITDA

 

$

8,005 

 

$

18,171 

 

$

6,406 

 

$

(6,496)

 

$

26,086 



(1)

Expense of $2.0 million related to our CDR land lease is included in interest expense (income), net in the Canada segment. Cash payments related to our CDR land lease were $1.8 million for the period presented. 



37

 


 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the year ended December 31, 2016

Amounts in thousands

 

United States

 

Canada

 

Poland

 

Corporate and Other

 

Total

Net earnings (loss) attributable to Century Casinos, Inc. shareholders

 

$

2,890 

 

$

8,448 

 

$

2,921 

 

$

(5,044)

 

$

9,215 

Interest expense (income), net (1)

 

 

 

 

3,037 

 

 

71 

 

 

(22)

 

 

3,088 

Income taxes (benefit)

 

 

1,815 

 

 

796 

 

 

1,265 

 

 

(2,089)

 

 

1,787 

Depreciation and amortization

 

 

2,488 

 

 

3,049 

 

 

2,430 

 

 

382 

 

 

8,349 

Net earnings attributable to non-controlling interests

 

 

 

 

3,137 

 

 

1,461