XWBO:CNTY Century Casinos, Inc. Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2012

 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 or organization)
(I.R.S. Employer Identification No.)

2860 South Circle Drive, Suite 350, Colorado Springs, Colorado 80906
(Address of principal executive offices, including zip code)

(719) 527-8300
(Registrant’s telephone number, including area code)

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 þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes þ  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
             
Large accelerated filer ¨
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Smaller reporting company þ
       
(Do not check if a smaller reporting company)
   

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:
24,233,174 shares of common stock, $0.01 par value per share, were outstanding as of July 27, 2012.

 
1

 
 
 
CENTURY CASINOS, INC.
 
 
FORM 10-Q INDEX
 
       
     
Page
PART I
 
FINANCIAL INFORMATION
Number
       
Item 1.
 
Condensed Consolidated Financial Statements (unaudited)
 
   
 
Condensed Consolidated Balance Sheets as of
June 30, 2012 and December 31, 2011
   
 
Condensed Consolidated Statements of Earnings for the
Three and Six Months ended June 30, 2012 and 2011
   
 
Condensed Consolidated Statements of Comprehensive (Loss) Earnings for the Three and Six Months ended June 30, 2012 and 2011
   
 
Condensed Consolidated Statements of Cash Flows for
the Six Months ended June 30, 2012 and 2011
 
   
 
Notes to Condensed Consolidated Financial Statements
 
Item 2.
 
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
 
 
Quantitative and Qualitative Disclosures About Market Risk
 
 
Item 4.
 
 
Controls and Procedures
 
       
PART II
 
OTHER INFORMATION
 
       
Item 1A.
 
Risk Factors
       
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6.
 
 
Exhibits
 
   
 
SIGNATURES
 

 
 
2

 

PART I – FINANCIAL INFORMATION
Item 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
             
   
June 30,
   
December 31,
 
Amounts in thousands, except for share and per share information
 
2012
   
2011
 
ASSETS
 
(unaudited)
       
Current Assets:
           
  Cash and cash equivalents
  $ 19,744     $ 25,192  
  Receivables, net
    1,082       1,108  
  Prepaid expenses
    560       510  
  Inventories
    334       273  
  Other current assets
    1       113  
  Deferred income taxes
    235       90  
Total Current Assets
    21,956       27,286  
Property and equipment, net
    98,748       99,605  
Goodwill
    4,823       4,833  
Equity investment
    3,209       2,756  
Deferred income taxes
    1,993       2,054  
Other assets
    655       193  
Total Assets
  $ 131,384     $ 136,727  
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
  Current portion of long-term debt
  $ 333     $ 9,100  
  Accounts payable and accrued liabilities
    5,424       6,666  
  Accrued payroll
    2,365       2,373  
  Taxes payable
    2,139       3,100  
  Deferred income taxes
    120       120  
Total Current Liabilities
    10,381       21,359  
Long-term debt, less current portion
    3,298       -  
Taxes payable
    227       203  
Deferred income taxes
    2,709       2,625  
Total Liabilities
    16,615       24,187  
Commitments and Contingencies
               
Shareholders’ Equity:
               
  Preferred stock; $0.01 par value; 20,000,000 shares authorized;
               
      no shares issued or outstanding
    -       -  
Common stock; $0.01 par value; 50,000,000 shares authorized; 24,233,174 and 23,993,174 shares issued; 24,117,362 and 23,877,362 shares outstanding
    242       240  
  Additional paid-in capital
    75,380       75,144  
  Accumulated other comprehensive earnings
    3,001       3,291  
  Retained earnings
    36,428       34,147  
      115,051       112,822  
  Treasury stock – 115,812 shares at cost
    (282 )     (282 )
  Total Shareholders’ Equity
    114,769       112,540  
Total Liabilities and Shareholders’ Equity
  $ 131,384     $ 136,727  
See notes to condensed consolidated financial statements.
               
 

 
3

 


CENTURY CASINOS, INC. AND SUBSIDIARIES

                         
                         
   
For the three months 
ended June 30,
   
For the six months 
ended June 30,
 
Amounts in thousands, except for per share information
 
2012
   
2011
   
2012
   
2011
 
Operating revenue:
                       
  Gaming
  $ 15,709     $ 15,928     $ 30,968     $ 30,753  
  Hotel, bowling, food and beverage
    3,135       3,141       6,456       6,384  
  Other
    1,103       1,004       2,046       1,939  
           Gross revenue
    19,947       20,073       39,470       39,076  
Less: Promotional allowances
    (2,156 )     (2,071 )     (4,110 )     (3,959 )
Net operating revenue
    17,791       18,002       35,360       35,117  
Operating costs and expenses:
                               
  Gaming
    7,459       7,341       14,692       14,272  
  Hotel, bowling, food and beverage
    2,420       2,553       4,857       5,064  
  General and administrative
    5,320       5,848       10,624       11,216  
  Depreciation
    1,180       1,665       2,358       3,306  
Total operating costs and expenses
    16,379       17,407       32,531       33,858  
Earnings from equity investment
    283       382       438       474  
Earnings from operations
    1,695       977       3,267       1,733  
Non-operating income (expense):
                               
  Interest income
    23       5       29       7  
  Interest expense
    (395 )     (197 )     (543 )     (443 )
  Gains on foreign currency transactions and other
    22       114       17       189  
Non-operating income (expense), net
    (350 )     (78 )     (497 )     (247 )
Earnings before income taxes
    1,345       899       2,770       1,486  
Income tax provision
    197       255       489       478  
Net earnings
  $ 1,148     $ 644     $ 2,281     $ 1,008  
                                 
Earnings per share:
                               
  Basic
  $ 0.05     $ 0.03     $ 0.10     $ 0.04  
  Diluted
  $ 0.05     $ 0.03     $ 0.09     $ 0.04  
                                 
See notes to condensed consolidated financial statements.
                               

 
 
4

 


CENTURY CASINOS, INC. AND SUBSIDIARIES
                         
                         
   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
                         
Amounts in thousands
 
2012
   
2011
   
2012
   
2011
 
                         
Net earnings
  $ 1,148     $ 644     $ 2,281     $ 1,008  
Foreign currency translation adjustments
    (1,357 )     80       (290 )     1,374  
Comprehensive (loss) earnings
  $ (209 )   $ 724     $ 1,991     $ 2,382  
                                 
See notes to condensed consolidated financial statements.
                               

 
 
5

 

CENTURY CASINOS, INC. AND SUBSIDIARIES


             
             
   
For the six months 
ended June 30,
 
Amounts in thousands
 
2012
   
2011
 
             
Cash Flows from Operating Activities:
     
             
Net earnings
  $ 2,281     $ 1,008  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation
    2,358       3,306  
Loss on disposition of fixed assets
    22       53  
Amortization of stock-based compensation
    (2 )     192  
Amortization of deferred financing costs
    110       45  
Deferred tax expense
    1       119  
Earnings from equity investment
    (438 )     (474 )
                 
Changes in Operating Assets and Liabilities:
               
Receivables
    29       384  
Prepaid expenses and other assets
    (43 )     (288 )
Accounts payable and accrued liabilities
    (1,217 )     (114 )
Inventories
    (60 )     (2 )
Other operating assets
    (77 )     (50 )
Accrued payroll
    5       (479 )
Taxes payable
    (923 )     (1,093 )
Net cash provided by operating activities
    2,046       2,607  
                 
Cash Flows from Investing Activities:
               
Purchases of property and equipment
    (1,620 )     (1,683 )
Proceeds from disposition of assets
    2       16  
Net cash used in investing activities
    (1,618 )     (1,667 )
                 
Cash Flows from Financing Activities:
               
Proceeds from borrowings
    3,626       0  
Payment of deferred financing costs
    (394 )     0  
Principal repayments
    (9,092 )     (3,103 )
Proceeds from equity investment dividend
    0       163  
Proceeds from exercise of options
    240       15  
Net cash used in financing activities
  $ (5,620 )   $ (2,925 )
 
 
-
Continued -


 
6

 

CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

             
             
   
For the six months ended June 30,
 
Amounts in thousands
 
2012
   
2011
 
             
Effect of Exchange Rate Changes on Cash
  $ (256 )   $ 281  
                 
Decrease in Cash and Cash Equivalents
    (5,448 )     (1,704 )
                 
Cash and Cash Equivalents at Beginning of Period
    25,192       21,461  
Cash and Cash Equivalents at End of Period
  $ 19,744     $ 19,757  
Supplemental Disclosure of Cash Flow Information:
               
Interest paid
  $ 486     $ 429  
Income taxes paid
  $ 88     $ 149  
                 
See notes to condensed consolidated financial statements.
 

 
 
7

 

CENTURY CASINOS, INC. AND SUBSIDIARIES

1.           DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
Century Casinos, Inc. (“CCI” or the “Company”) is an international casino entertainment company. As of June 30, 2012, the Company owned casino operations in North America; managed cruise ship-based casinos on international waters; and owned a management contract to manage the casino in the Radisson Aruba Resort, Casino & Spa. The Company also owns a 33.3% ownership interest in Casinos Poland Ltd (“CPL”), the owner and operator of eight casinos in Poland. The Company continues to pursue other projects in various stages of development.
 
The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial reporting, the rules and regulations of the Securities and Exchange Commission which apply to interim financial statements and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated.
 
In the opinion of management, all adjustments considered necessary for fair presentation of financial position, results of operations and cash flows of the Company have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K and 10-K/A for the year ended December 31, 2011. The results of operations for the period ended June 30, 2012 are not necessarily indicative of the operating results for the full year.
 
Presentation of Foreign Currency Amounts
 
Dollar amounts reported in this quarterly report are in U.S. dollars (“USD”) unless otherwise indicated. Transactions that are denominated in a foreign currency, which include the Canadian dollar (“CAD”), Euro (“€”) and Polish zloty (“PLN”) are translated and recorded at the exchange rate in effect on the date of the transaction. Commitments that are denominated in a foreign currency and all balance sheet accounts other than shareholders’ equity are translated and presented based on the exchange rate between such foreign currency and the U.S. dollar at the end of the reported periods.  Current period transactions affecting the profit and loss of operations conducted in foreign currencies are valued at the average exchange rate between such foreign currency and the U.S. dollar for the period in which they are incurred.
 
The exchange rates to the U.S. dollar used to translate balances at the end of the reported periods are as follows:
 
             
   
June 30,
   
December 31,
 
Ending Rates
 
2012
   
2011
 
Canadian dollar (CAD)
    1.0191       1.0170  
Euros (€)
    0.7894       0.7709  
Polish zloty (PLN)
    3.3885       3.4174  
Source: Pacific Exchange Rate Service
               
 
 
8

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

   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
Average Rates
 
2012
   
2011
   
% Change
   
2012
   
2011
   
% Change
 
Canadian dollar (CAD)
    1.0104       0.9678       (4.4 %)     1.0060       0.9769       (3.0 %)
Euros (€)
    0.7796       0.6947       (12.2 %)     0.7712       0.7130       (8.2 %)
Polish zloty (PLN)
    3.3181       2.7495       (20.7 %)     3.2724       2.8180       (16.1 %)
Source: Pacific Exchange Rate Service
                                               


2.           EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
 
Following is the summarized financial information of CPL as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:

             
Amounts in thousands (in USD):
 
June 30, 2012
   
December 31, 2011
 
Balance Sheet:
           
    Current assets
  $ 4,631     $ 4,061  
    Noncurrent assets
  $ 13,114     $ 9,523  
    Current liabilities
  $ 8,140     $ 4,393  
    Noncurrent liabilities
  $ 2,057     $ 3,230  

                         
   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Operating Results
                       
Net operating revenue
  $ 10,911     $ 13,663     $ 21,357     $ 25,199  
Net earnings
  $ 849     $ 1,147     $ 1,313     $ 1,422  
 
The Company’s maximum exposure to losses at June 30, 2012 was $3.2 million, the value of its equity investment in CPL.
 
Changes in the carrying amount of the investment in CPL during the six months ended June 30, 2012 are as follows:

       
Amounts in thousands (in USD)
 
Total
 
Balance – January 1, 2012
  $ 2,756  
Equity earnings
    438  
Effect of foreign currency translation
    15  
Balance – June 30, 2012
  $ 3,209  
         
 
 
9

 
 
3.           GOODWILL
 
Changes in the carrying amount of goodwill related to the Company’s Edmonton property for the six months ended June 30, 2012 are as follows:

 
       
Amounts in thousands
     
Balance – January 1, 2012
  $ 4,833  
Effect of foreign currency translation
    (10 )
Balance – June 30, 2012
  $ 4,823  

 
4.           LONG-TERM DEBT
 
Long-term debt at June 30, 2012 and December 31, 2011 consisted of the following:
 
             
   
June 30,
   
December 31,
 
Amounts in thousands
 
2012
   
2011
 
Credit Agreement - Bank of Montreal
  $ 3,631     $ 0  
Mortgage - Edmonton
    0       9,100  
                 
Total long-term debt
  $ 3,631     $ 9,100  
Less current portion
    (333 )     (9,100 )
Long-term portion
  $ 3,298     $ 0  
 

Credit Agreement- Bank of Montreal
 
On May 23, 2012, the Company, through its subsidiaries Century Resorts Alberta, Inc. (“CRA”) and Century Casino Calgary Inc. (“CAL”) entered into a CAD 28.0 million ($27.5 million) credit agreement with the Bank of Montreal (the “BMO Credit Agreement”). Proceeds from the BMO Credit Agreement were used to repay the Company’s mortgage debt related to the Edmonton property (the “Edmonton Mortgage”) and will also be used to pursue the development or acquisition of new gaming opportunities and for general corporate purposes. The BMO Credit Agreement has a term of five years and is guaranteed by the Company.
 
The BMO Credit Agreement consists of three credit facilities to be utilized as follows:
 
1.  
Credit Facility A is a CAD 1.0 million ($1.0 million) revolving credit facility to be used for the costs of the financing, ongoing working capital requirements and operating regulatory requirements.
 
2.  
Credit Facility B is a CAD 25.0 million ($24.5 million) committed, non-revolving, reducing standby facility. Up to CAD 11 million ($10.8 million) of the Credit Facility B may be used to repay all or part of the Edmonton Mortgage with the remainder available for working capital requirements and general corporate purposes. As described below, CAD 3.7 million ($3.6 million) was drawn down under Credit Facility B and was used, with cash on hand, to repay in full the Edmonton Mortgage.
 
Once the principal balance of the advance under Credit Facility B has been repaid, it cannot be re-borrowed.
 

 
10

 
 
3.  
Credit Facility C is a CAD 2.0 million ($2.0 million) treasury management risk facility as defined by the BMO Credit Agreement.  
 
As of June 30, 2012, the Company had approximately CAD 24.3 million ($23.8 million) available for borrowing under the BMO Credit Agreement.
 
The BMO Credit Agreement bears interest based on credit facilities as follows:
 
1.  
Advances under Credit Facility A may be in the form of :
 
i.  
Advances denominated in CAD and bearing interest at the lender’s floating rate for loans made in CAD plus a margin as defined by the BMO Credit Agreement, and/or
 
ii.  
Advances denominated in USD and bearing interest at the lender’s floating rate for loan made in USD plus a margin as defined by the BMO Credit Agreement, and/or
 
iii.  
Issuances of a CAD Letter of Credit (maximum face value CAD 100,000), bearing interest at a floating margin rate as defined by the BMO Credit Agreement.
 
2.  
Advances under Credit Facility B may be in the form of:
 
i.  
Advances denominated in CAD and bearing interest at the lender’s floating rate for loans made in CAD plus a margin as defined by the BMO Credit Agreement (CAD 500,000 minimum and CAD 100,000 increments thereafter);
 
ii.  
Advances denominated in USD and bearing interest at the lender’s floating rate for loans made in USD plus a margin as defined by the BMO Credit Agreement ($500,000 minimum and $100,000 increments thereafter);
 
iii.  
Advances denominated in USD and bearing interest at the LIBOR rate fixed for 1-6 months ($1 million minimum and $500,000 increments thereafter); and/or
 
iv.  
A Bankers Acceptance denominated in CAD and bearing interest at a fixed rate as defined by the BMO Credit Agreement for 1-6 months (CAD 1 million minimum and CAD 500,000 increments thereafter).
 
3.  
Longer term fixed rates of interest, up to and including the full five year term of the BMO Credit Agreement, can be achieved through the use of interest rate swaps with a deemed risk up to the maximum amount of Credit Facility C. As of June 30, 2012, no interest rate swaps were in use by the Company.
 
4.  
Any funds that are not drawn down under either Credit Facility A or B are classified as a CAD Standby Facility.
 
 
 
11

 
 
Mortgage - Edmonton
 
On May 23, 2012, the Company repaid the outstanding balance of approximately $6.3 million on the Edmonton Mortgage. The repayment consisted of $6.1 million in principal and interest due on the Edmonton Mortgage and $0.2 million in prepayment penalties and unamortized deferred financing charges. This loan payoff was funded with a $3.6 million borrowing under the BMO Credit Agreement and $2.7 million of cash on hand. The repayment by the Company terminated the Edmonton Mortgage.
 
Deferred financing charges, which are reported as a component of other assets, are summarized as follows:
 

Credit Agreement - Bank of Montreal
 
June 30,
   
December 31,
 
Amounts in thousands
 
2012
   
2011
 
Deferred financing charges - current
  $ 79     $ 0  
Deferred financing charges - long-term
  $ 308     $ 0  
Total
  $ 387     $ 0  
                 
Mortgage - Edmonton
 
June 30,
   
December 31,
 
Amounts in thousands
    2012       2011  
Deferred financing charges - current
  $ 0     $ 101  
Deferred financing charges - long-term
  $ 0     $ 0  
Total
  $ 0     $ 101  
 
Amortization expense relating to deferred financing charges was $0.1 million for both the six months ended June 30, 2012 and June 30, 2011, and is included in interest expense in the accompanying condensed consolidated statements of earnings.
 
As of June 30, 2012, the Company was in compliance with all covenants related to its borrowings. Covenants of the BMO Credit Agreement include the following:
 
a)  
Senior Funded Debt to EBITDA Ratio as defined by the BMO Credit Agreement may not be greater than 3.00:1.00;
b)  
Fixed Charge Coverage Ratio as defined by the BMO Credit Agreement may not be less than 1.20:1.00;
c)  
CRA and CAL combined shareholder’s equity may not be less than CAD 20 million; and
d)  
Capital expenditures in any fiscal year may not exceed CAD 4.0 million in aggregate, without the lender’s consent.

The consolidated weighted average interest rate on all borrowings for the Company was 17.2% for the six months ended June 30, 2012. The Company currently pays a floating interest rate on its borrowings under the BMO Credit Agreement. The current interest rate is approximately 4.0%. The weighted average interest rate is higher than the 7.0% interest rate of the Edmonton Mortgage and the 4.0% interest rate under on the BMO Credit Agreement because the Company wrote off a total of $0.1 million in deferred financing costs and paid $0.2 million in prepayment penalties in May  2012 in connection with the repayment of the Edmonton Mortgage.
 

 
12

 
 
As of June 30, 2012, scheduled maturities of the long-term debt is as follows:
 
Amounts in thousands
 
CAD
   
USD
 
2012
  $ 154     $ 151  
2013
    370       363  
2014
    370       363  
2015
    370       363  
2016
    370       363  
Thereafter
    2,066       2,028  
Total
  $ 3,700     $ 3,631  
 
5.           PROMOTIONAL ALLOWANCES
 
Hotel accommodations, bowling and food and beverage furnished without charge to customers are included in gross revenue at a value which approximates retail and are then deducted as complimentary services to arrive at net operating revenue.
 
The Company issues coupons for the purpose of generating future revenue. The cost of the coupons redeemed is applied against the revenue generated on the day of the redemption. In addition, members of the Company’s casinos’ player clubs earn points based on, among other things, their volume of play at the Company’s casinos. Players can accumulate points over time that they may redeem at their discretion under the terms of the program. Points can be redeemed for cash and/or various amenities at the casino, such as meals, hotel stays and gift shop items. The cost of the points is offset against the revenue in the period in which the points were earned. The value of unused or unredeemed points is included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. The expiration of unused points results in a reduction of the liability. As of June 30, 2012, the outstanding balance of this liability was $1.0 million.
 
Promotional allowances presented in the condensed consolidated statements of earnings include the following:
 

                         
   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Amounts in thousands
                       
Hotel, bowling, food and beverage
  $ 984     $ 909     $ 1,898     $ 1,741  
Coupons
    487       502       941       947  
Player points
    685       660       1,271       1,271  
Total promotional allowances
  $ 2,156     $ 2,071     $ 4,110     $ 3,959  


 
13

 
 
6.           INCOME TAXES

The Company records deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted statutory tax rate in effect for the year these differences are expected to be taxable or reversed. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for impairment on a quarterly basis by reviewing the Company’s internal estimates for future taxable income.
 
As of June 30, 2012, the Company has established a valuation allowance for its U.S. deferred tax assets of $5.2 million, a $0.9 million valuation allowance on its Calgary property and a $1.3 million valuation allowance on the Century Casinos Europe subsidiary deferred tax assets due to the uncertainty of future taxable income. The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. The ultimate realization of deferred income tax assets depends on generation of future taxable income in the jurisdictions where the assets are located during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax expense after considering the following factors:
 
 
·  
The level of historical taxable income and projections for future taxable income in the jurisdictions where the assets are located over periods in which the deferred tax assets would be deductible;
 
·  
Accumulation of net income before tax utilizing a look-back period of three years, and
 
·  
Tax planning strategies.
 
The income tax provisions are based on estimated full-year earnings for financial reporting purposes adjusted for permanent differences. The Company’s provision for income taxes from operations consists of the following:
 
       
   
For the six months
 
Amounts in thousands
 
ended June 30,
 
   
2012
   
2011
 
U.S. Federal - Current
  $ 122     $ 52  
U.S. Federal - Deferred
    0       0  
Provision for U.S. federal income taxes
    122       52  
                 
Foreign - Current
  $ 366     $ 307  
Foreign - Deferred
    1       119  
Provision for foreign income taxes
    367       426  
Total provision for income taxes
  $ 489     $ 478  
                 

 
 
14

 
 
The Company’s income tax expense by jurisdiction is summarized in the table below:


   
For the six months
   
For the six months
 
Amounts in thousands
 
ended June 30, 2012
   
ended June 30, 2011
 
   
Pre-tax income
   
Income tax
   
Effective tax rate
   
Pre-tax income (loss)
   
Income tax
   
Effective tax rate
 
Canada
  $ 1,563     $ 361       23.1 %   $ 1,258     $ 403       32.0 %
United States
    144       122       85.1 %     (1,056 )     52       -4.9 %
Mauritius
    147       4       3.0 %     1,133       22       1.9 %
Austria
    539       1       0.2 %     (222 )     1       -0.5 %
Poland
    377       -       0.0 %     373       -       0.0 %
Total
  $ 2,770     $ 489       17.7 %   $ 1,486     $ 478       32.2 %

The US income tax rate has increased significantly due to a one-time withholding tax payment of $0.1 million related to a Canadian intercompany payable.
 
7.           EARNINGS PER SHARE

 
The calculation of basic earnings per share considers only weighted average outstanding common shares in the computation. The calculation of diluted earnings per share gives effect to all potentially dilutive securities. The calculation of diluted earnings per share is based upon the weighted average number of common shares outstanding during the period, plus, if dilutive, the assumed exercise of stock options using the treasury stock method and the assumed conversion of other convertible securities (using the “if converted” method) at the beginning of the year, or for the period outstanding during the year for current year issuances. Weighted average shares outstanding for the three and six months ended June 30, 2012 and 2011 were as follows:
 

   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Weighted average common shares, basic
    23,890,405       23,717,165       23,883,919       23,714,215  
Dilutive effect of stock options
    169,917       308,930       170,985       301,732  
Weighted average common shares, diluted
    24,060,322       24,026,095       24,054,904       24,015,947  

 
 
15

 
The following shares of restricted stock and stock options are anti-dilutive and have not been included in the weighted average shares outstanding calculation:
 
   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Unvested restricted stock
    -       160,000       -       160,000  
Stock options
    886,710       886,710       886,710       886,710  

8.           SEGMENT INFORMATION
 
The following summary provides information concerning amounts attributable to the Company’s principal geographic areas:
   
Long Lived Assets
 
   
At June 30,
   
At December 31,
 
Amounts in thousands
 
2012
   
2011
 
             
United States
  $ 55,661     $ 56,294  
International:
               
   Canada
  $ 48,771     $ 48,423  
Europe
    3,647       3,228  
   International waters
    1,349       1,496  
Total international
    53,767       53,147  
Total
  $ 109,428     $ 109,441  


 
   
Net Operating Revenue
   
Net Operating Revenue
 
   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
Amounts in thousands
 
2012
   
2011
   
2012
   
2011
 
United States
  $ 7,731     $ 7,731     $ 15,119     $ 14,969  
International:
                               
   Canada
  $ 8,404     $ 8,652     $ 16,947     $ 16,994  
   International waters
    1,578       1,509       3,138       2,931  
   Aruba
    78       110       156       223  
Total international
    10,060       10,271       20,241       20,148  
Total
  $ 17,791     $ 18,002     $ 35,360     $ 35,117  
                                 

 
 
16

 
 
 
Forward-Looking Statements, Business Environment and Risk Factors
 
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. In addition, Century Casinos, Inc. (together with its subsidiaries, the “Company”) may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements as to industry trends and future expectations of the Company and other matters that do not relate strictly to historical facts and are based on certain assumptions by management at the time such statements are made.  These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled “Risk Factors” under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2011. We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
 
References in this item to “we,” “our,” or “us” are to the Company and its subsidiaries on a consolidated basis unless the context otherwise requires. The term “CAD” refers to Canadian dollars.

Amounts presented in this Item 2 are rounded. As such, rounding differences could occur in period over period changes and percentages reported throughout this Item 2.
 
OVERVIEW
 
Since our inception in 1992, we have been primarily engaged in developing and operating gaming establishments and related lodging, restaurant and entertainment facilities. Our primary source of revenue is from the net proceeds of our gaming machines and tables, with ancillary revenue generated from the hotel, restaurant, bowling and entertainment facilities that are a part of the casinos.
 
We currently own, operate and manage the following casinos through wholly-owned subsidiaries:
 
-  
The Century Casino & Hotel in Edmonton, Alberta, Canada;
-  
The Century Casino Calgary, Alberta, Canada;
-
The Century Casino & Hotel in Central City, Colorado; and
-
The Century Casino & Hotel in Cripple Creek, Colorado.
 
 
 
17

 

We also operate 12 ship-based casinos onboard four cruise lines; Oceania Cruises, TUI Cruises, Windstar Cruises and Regent Seven Seas Cruises.
 
The following table summarizes the cruise lines for which we have entered into agreements and the associated ships on which we operate ship-based casinos.
 
   
 
Cruise Line
Ship
Oceania Cruises
Regatta
Oceania Cruises
Nautica
Oceania Cruises
Insignia*
Oceania Cruises
Marina
Oceania Cruises
Riviera**
TUI Cruises
Mein Schiff 1
TUI Cruises
Mein Schiff 2
Windstar Cruises
Wind Surf
Windstar Cruises
Wind Star
Windstar Cruises
Wind Spirit
Regent Seven Seas Cruises
Seven Seas Voyager
Regent Seven Seas Cruises
Seven Seas Mariner
Regent Seven Seas Cruises
Seven Seas Navigator
 
* The casino operation on board Insignia was suspended on April 5, 2012, as the vessel was leased to a different cruise line by Oceania Cruises. We will not operate the ship-based casino as long as it is leased to a different cruise line.
** The Riviera ship-based casino began operations on May 3, 2012.
 
We also hold a 33.3% ownership interest in and actively participate in the management of Casinos Poland Ltd (“CPL”), the owner and operator of eight casinos in Warsaw, Katowice, Gydnia, Wroclaw, Lodz (opened February 16, 2012) Krakow (opened March 29, 2012), Sosnowiec (opened April 18, 2012) and Posnan (opened June 28, 2012) in Poland. We account for this investment under the equity method.
 
The Lodz casino is undergoing a full refurbishment and will have a grand re-opening during the fourth quarter of 2012. CPL has obtained an additional gaming license in the city of Plock, which is scheduled to open in the second half of 2012. In addition, CPL is participating in other license applications, including Warsaw. Decisions from the Polish Minister of Finance on these applications are pending.
 
We have a long-term management agreement to direct the operation of the casino at the Radisson Aruba Resort, Casino & Spa. We receive a management fee consisting of a fixed fee, plus a percentage of earnings before interest, taxes, depreciation and amortization.
 
 
18

 
Presentation of Foreign Currency Amounts - The average exchange rates to the U.S. dollar used to translate balances during each reported period are as follows:

   
For the three months 
ended June 30,
   
For the six months 
ended June 30,
 
Average Rates
 
2012
   
2011
   
% Change
   
2012
   
2011
   
% Change
 
Canadian dollar (CAD)
    1.0104       0.9678       (4.4 %)     1.0060       0.9769       (3.0 %)
Euros (€)
    0.7796       0.6947       (12.2 %)     0.7712       0.7130       (8.2 %)
Polish zloty (PLN)
    3.3181       2.7495       (20.7 %)     3.2724       2.8180       (16.1 %)
Source: Pacific Exchange Rate Service
                                         

 
RECENT DEVELOPMENTS
 
Developments that we believe have impacted or will impact our results of operations are discussed below.
 
Century Casino & Hotel (Edmonton, Alberta, Canada)
 
On July 13, 2012, the Alberta Gaming and Liquor Commission approved the addition of 30 slot machines to the gaming floor. The additional slot machines are expected to be added gradually during the third quarter of 2012. Once added, the 30 additional machines will bring the total slot machine count to 750 at our property in Edmonton.
 
In June 2012, construction began on Fort Road immediately in front of the casino entrance. Construction is expected to last through September 2012. This may adversely affect traffic to our casino during the third quarter of 2012.
 
Century Casino & Hotel (Cripple Creek, Colorado, United States)
 
The Waldo Canyon Wildfire, which occurred in and near Colorado Springs, Colorado in late June and early July 2012, had a significant negative impact on our business in Cripple Creek during the second quarter of 2012. Several thousand people in Colorado Springs, the metropolitan population which the casino primarily serves, were evacuated and the main highway to the casino, Highway 24, was closed for eight days from June 24, 2012 through July 1, 2012. We estimate that this event adversely affected our revenues for the second quarter by $0.2 million.
 
In August 2012, new owners of the Gold Rush Casino in Cripple Creek are planning to open the casino with approximately 300 slot machines and 3 table games. This casino is directly across the street from our property in Cripple Creek, and management believes the new casino will add additional competition to the already very competitive Cripple Creek market.
 

 
19

 

DISCUSSION OF RESULTS

 
Century Casinos, Inc. and Subsidiaries
 
   
For the three months 
ended June 30,
         
For the six months 
ended June 30,
       
Amounts in thousands
 
2012
   
2011
   
Change
   
% Change
   
2012
   
2011
   
Change
   
% Change
 
Gaming Revenue
  $ 15,709     $ 15,928     $ (219 )     (1.4 %)   $ 30,968     $ 30,753     $ 215       0.7 %
Hotel, Bowling, Food and Beverage Revenue
    3,135       3,141       (6 )     (0.2 %)     6,456       6,384       72       1.1 %
Other Revenue
    1,103       1,004       99       9.9 %     2,046       1,939       107       5.5 %
Gross Revenue
    19,947       20,073       (126 )     (0.6 %)     39,470       39,076       394       1.0 %
Less Promotional Allowances
    (2,156 )     (2,071 )     85       4.1 %     (4,110 )     (3,959 )     151       3.8 %
Net Operating Revenue
    17,791       18,002       (211 )     (1.2 %)     35,360       35,117       243       0.7 %
Gaming Expenses
    (7,459 )     (7,341 )     118       1.6 %     (14,692 )     (14,272 )     420       2.9 %
Hotel, Bowling, Food and Beverage Expenses
    (2,420 )     (2,553 )     (133 )     (5.2 %)     (4,857 )     (5,064 )     (207 )     (4.1 %)
General and Administrative Expenses
    (5,320 )     (5,848 )     (528 )     (9.0 %)     (10,624 )     (11,216 )     (592 )     (5.3 %)
Total Operating Costs and Expenses
    (16,379 )     (17,407 )     (1,028 )     (5.9 %)     (32,531 )     (33,858 )     (1,327 )     (3.9 %)
Earnings from Equity Investment
    283       382       (99 )     (25.9 %)     438       474       (36 )     (7.6 %)
Earnings from Operations
    1,695       977       718       73.5 %     3,267       1,733       1,534       88.5 %
Net Earnings
  $ 1,148     $ 644     $ 504       78.3 %   $ 2,281     $ 1,008     $ 1,273       126.3 %
                                                                 
Earnings Per Share
                                                               
    Basic
  $ 0.05     $ 0.03     $ 0.02       66.7 %   $ 0.10     $ 0.04     $ 0.06       150.0 %
    Diluted
  $ 0.05     $ 0.03     $ 0.02       66.7 %   $ 0.09     $ 0.04     $ 0.05       125.0 %
 

Net operating revenue decreased by $0.2 million, or 1.2%, and increased by $0.2 million, or 0.7%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of net operating revenue by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:
 
 
     Net operating revenue at our property in Edmonton decreased by $0.2 million, or 2.9%, and increased by less than $0.1 million, or 0.1%;
     Net operating revenue at our property in Calgary decreased by $0.1 million, or 2.8%, and decreased by $0.1 million, or 1.1%;
     Net operating revenue at our property in Central City increased by $0.1 million, or 1.3%, and increased by $0.2 million, or 1.9%;
     Net operating revenue at our property in Cripple Creek decreased by $0.1 million, or 1.9%, and decreased by less than $0.1 million, or 0.3%; and
     Net operating revenue from our ship-based casinos and other increased by less than $0.1 million, or 2.3%, and increased by $0.1 million, or 4.4%.
 
 
 
20

 
 
Total operating costs and expenses decreased by $1.0 million, or 5.9%, and $1.3 million, or 3.9%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of total operating costs and expenses by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:
 
·  
Total operating costs and expenses at our property in Edmonton decreased by $0.1 million, or 2.7%, and decreased by $0.1 million, or 1.2%;
·  
Total operating costs and expenses at our property in Calgary increased by less than $0.1 million, or 1.4%, and decreased by $0.1 million, or 1.7%;
·  
Total operating costs and expenses at our property in Central City decreased by $0.3 million, or 7.2%, and decreased by $0.5 million, or 6.1%;
·  
Total operating costs and expenses at our property in Cripple Creek decreased by $0.1 million, or 4.0%, and decreased by less than $0.1 million, or 1.3%;
·  
Total operating costs and expenses for our ship-based casinos and other increased by $0.1 million, or 6.5%, and increased by $0.2 million, or 6.2%; and
·  
Total operating costs and expenses for corporate other decreased by $0.6 million, or 31.4%, and decreased by $0.7 million, or 21.6%.
 
As a result of the foregoing, net earnings increased by $0.5 million, or 78.3%, and $1.3 million, or 126.3%, for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011. Following is a breakout of net earnings by property or category for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011:
 
     Net earnings at our property in Edmonton decreased by $0.1 million, or 9.1%, and increased by $0.1 million, or 3.5%;
     Net earnings at our property in Calgary decreased by less than $0.1 million, or 26.0%, and increased by $0.2 million, or 64.4%;
     Net earnings at our property in Central City increased by $0.2 million, or 123.7%, and increased by $0.4 million, or 108.6%;
     Net earnings at our property in Cripple Creek increased by less than $0.1 million, or 11.9%, and increased by less than $0.1 million, or 7.3%;
     Net earnings from our ship-based casinos and other decreased by $0.1 million, or 43.1%, and decreased by $0.1 million, or 21.5%; and
     Net loss for corporate other decreased by $0.5 million, or 41.8%, and decreased by $0.7 million, or 34.9%.
 
Results by property are discussed in further detail in the following pages.
 
 
21

 

Casinos

Edmonton
   
For the three months 
ended June 30,
         
For the six months 
ended June 30,
       
Amounts in thousands
 
2012
   
2011
   
$ Change
   
% Change
   
2012
   
2011
   
$ Change
   
% Change
 
Gaming Revenue
  $ 4,290     $ 4,452     $ (162 )     (3.6 %)   $ 8,468     $ 8,536     $ (68 )     (0.8 %)
Hotel, Food and Beverage Revenue
    1,433       1,449       (16 )     (1.1 %)     2,911       2,871       40       1.4 %
Other Revenue
    569       533       36       6.8 %     1,097       997       100       10.0 %
Gross Revenue
    6,292       6,434       (142 )     (2.2 %)     12,476       12,404       72       0.6 %
Less Promotional Allowances
    (286 )     (249 )     37       14.9 %     (528 )     (466 )     62       13.3 %
Net Operating Revenue
    6,006       6,185       (179 )     (2.9 %)     11,948       11,938       10       0.1 %
Gaming Expenses
    (1,681 )     (1,681 )     0       0.0 %     (3,390 )     (3,293 )     97       2.9 %
Hotel, Food and Beverage Expenses
    (1,032 )     (959 )     73       7.6 %     (2,024 )     (1,882 )     142       7.5 %
General and Administrative Expenses
    (1,324 )     (1,382 )     (58 )     (4.2 %)     (2,674 )     (2,760 )     (86 )     (3.1 %)
Total Operating Costs and Expenses
    (4,281 )     (4,399 )     (118 )     (2.7 %)     (8,574 )     (8,676 )     (102 )     (1.2 %)
Earnings from Operations
    1,725       1,786       (61 )     (3.4 %)     3,374       3,262       112       3.4 %
Net Earnings
  $ 1,075     $ 1,182     $ (107 )     (9.1 %)   $ 2,153     $ 2,080     $ 73       3.5 %

Three Months Ended June 30, 2012 and 2011
Net operating revenue at our property in Edmonton decreased by $0.2 million, or 2.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net operating revenue is due to a decrease in the average exchange rate between the U.S. dollar and Canadian dollar of 4.4% for the three months ended June 30, 2012 compared to the three months June 30, 2011 (the “4.4% exchange rate decrease”).

In CAD, net operating revenue increased by $0.1 million, or 1.3%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to increases in gaming, hotel, food, beverage and other revenue for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase in gaming revenue is due to 32 additional slot machines added to the floor during the second quarter of 2012. The increase in hotel, food and beverage revenue is due to higher hotel room occupancy. The increase in other revenue is due to increased showroom and Comedy Club ticket sales for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

Total operating costs and expenses decreased by $0.1 million, or 2.7%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in total operating costs and expenses occurred as a result of the 4.4% exchange rate decrease.

In CAD, total operating costs and expense increased by $0.1 million, 1.6%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs of $0.2 million offset by a decrease in depreciation expense of $0.1 million for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

As a result of the foregoing, earnings from operations decreased by $0.1 million, or 3.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, earnings from operations increased by less than $0.1 million, or 0.6%, for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.

 
22

 
Net earnings decreased by $0.1 million, or 9.1%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to foregoing operational items as well as an increase in interest expense and deferred financing charges of $0.2 million resulting from prepayment penalties related to early payoff of the mortgage related to the Edmonton property (“Edmonton Mortgage”) offset by a decrease in income tax expense of $0.1 million. In CAD, net earnings decreased by $0.2 million, or 22.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to an increase in interest expense of $0.2 million from the early payoff of the Edmonton Mortgage and an increase in foreign currency losses of $0.2 million due to the 4.4% exchange rate decrease offset by a decrease in income tax expense of $0.1 million.
 
Six Months Ended June 30, 2012 and 2011
Net operating revenue at our property in Edmonton increased by less than $0.1 million, or 0.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in net operating revenue is due to increases in hotel, food, beverage and other revenue offset by a decrease in gaming revenue for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

The increase in hotel, food and beverage revenue is due to higher hotel room occupancy, increased customer volumes on the gaming floor as well as increased showroom event attendance for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in other revenue is due to increased showroom and Comedy Club ticket sales for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in gaming revenue is due a decrease in the average exchange rate between the U.S. dollar and Canadian dollar of 3.0% for the six months ended June 30, 2012 compared to the three months June 30, 2011 (the “3.0% exchange rate decrease”). In CAD, gaming revenue increased by $0.2 million, or 2.2%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 due to a total of 56 additional slot machines added to the floor during the third quarter of 2011 and first and second quarter of 2012. In CAD, net operating revenue increased by $0.4 million, or 3.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Total operating costs and expenses decreased by $0.1 million, or 1.2%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in total operating costs and expenses is due to the 3.0% exchange rate decrease.

In CAD, total operating costs and expense increased by $0.2 million, or 1.8%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs of $0.4 million offset by a decrease in depreciation expense of $0.2 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

As a result of the foregoing, earnings from operations increased by $0.1 million, or 3.4%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, earnings from operations increased by $0.2, or 6.6%, million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. In addition, net earnings increased by $0.1 million, or 3.5%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, net earnings increased by $0.1 million, or 2.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.


 
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Calgary
   
For the three months 
ended June 30,
         
For the six months 
ended June 30,
       
Amounts in thousands
 
2012
   
2011
   
$ Change
   
% Change
   
2012
   
2011
   
$ Change
   
% Change
 
Gaming Revenue
  $ 1,588     $ 1,646     $ (58 )     (3.5 %)   $ 3,266     $ 3,163     $ 103       3.3 %
Bowling, Food and Beverage Revenue
    683       747       (64 )     (8.6 %)     1,533       1,711       (178 )     (10.4 %)
Other Revenue
    283       211       72       34.1 %     457       436       21       4.8 %
Gross Revenue
    2,554       2,604       (50 )     (1.9 %)     5,256       5,310       (54 )     (1.0 %)
Less Promotional Allowances
    (156 )     (137 )     19       13.9 %     (257 )     (254 )     3       1.2 %
Net Operating Revenue
    2,398       2,467       (69 )     (2.8 %)     4,999       5,056       (57 )     (1.1 %)
Gaming Expenses
    (1,089 )     (912 )     177       19.4 %     (2,052 )     (1,859 )     193       10.4 %
Bowling, Food and Beverage Expenses
    (517 )     (666 )     (149 )     (22.4 %)     (1,106 )     (1,383 )     (277 )     (20.0 %)
General and Administrative Expenses
    (762 )     (769 )     (7 )     (0.9 %)     (1,558 )     (1,595 )     (37 )     (2.3 %)
Total Operating Costs and Expenses
    (2,577 )     (2,541 )     36       1.4 %     (5,129 )     (5,220 )     (91 )     (1.7 %)
(Losses) from Operations
    (179 )     (74 )     (105 )     (141.9 %)     (130 )     (164 )     34       20.7 %
Net (Loss)
  $ (92 )   $ (73 )   $ (19 )     (26.0 %)   $ (84 )   $ (236 )   $ 152       64.4 %

Three Months Ended June 30, 2012 and 2011
Net operating revenue at our property in Calgary decreased by $0.1 million, or 2.8%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net operating revenue is due to the 4.4% exchange rate decrease.

In CAD, net operating revenue increased by less than $0.1 million, or 1.5%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Net operating revenue increased due to increased other revenue of $0.1 million, or 41.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2012 due to higher showroom ticket sales when the casino began self-promoting concert events at the casino and featured a concert by BB King. The increase in other revenue was offset by a less than $0.1 million, or 5.0% decrease in bowling, food and beverage revenue due to a decrease in the participation of bowling leagues for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.
 
Total operating costs and expenses increased by less than $0.1 million, or 1.4%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase is due to higher advertising, promotional, food and payroll costs for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, total operating costs and expenses in Calgary increased by $0.2 million, or 5.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.
 
As a result of the foregoing, earnings from operations decreased by $0.1 million, or 141.9%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. In CAD, earnings from operations decreased by $0.1 million, or 152.8% for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.

 
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Net earnings decreased by less than $0.1 million, or 26.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to the foregoing operational items as well as an increase in income tax benefit of $0.1 million. In CAD, net earnings decreased by $0.2 million, or 700.0%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The decrease in net earnings is due to an increase in foreign currency losses of $0.2 million due to the 4.4% exchange rate decrease partially offset by an increase in the income tax benefit of $0.1 million.
 
Six Months Ended June 30, 2012 and 2011
Net operating revenue at our property in Calgary decreased by $0.1 million, or 1.1%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in net operating revenue is due to the 3.0% exchange rate decrease.

In CAD, net operating revenue increased by $0.1 million, or 1.8%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Net operating revenue increased due to higher gaming revenue of $0.2 million, or 6.3%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in gaming revenue is due to an enhanced slot floor layout and improved slot machine mix for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increased gaming revenue was offset by a $0.1 million, or 8.0%, decrease in bowling, food and beverage revenue. The decrease in bowling, food and beverage revenue is due to a decrease in the participation of bowling leagues for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.
 
Total operating costs and expenses decreased by $0.1 million, or 1.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in total operating costs and expenses is due to the 3.0% exchange rate decrease.
 
In CAD, total operating costs and expenses increased by $0.1 million, or 1.2%, primarily due to increased depreciation costs for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.
 
As a result of the foregoing, earnings from operations increased by less than $0.1 million, or 20.7%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. In CAD, earnings from operations increased by less than $0.1 million, or 18.0%, for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.

Net earnings increased by $0.2 million, or 64.4%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in net earnings is due to foregoing operational items as well as an increase in income tax benefit of $0.1 million and a decrease in foreign currency losses of $0.1 million due to the 3.0% exchange rate decrease. In CAD, net earnings decreased by $0.2 million, or 279.0%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The decrease in net earnings is due an increase in foreign currency losses of $0.2 million due to the 3.0% exchange rate decrease.

 
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Central City
   
For the three months 
ended June 30,
         
For the six months 
ended June 30,
       
Amounts in thousands
 
2012
   
2011
   
$ Change
   
% Change
   
2012
   
2011
   
$ Change
   
% Change
 
Gaming Revenue
  $ 4,947     $ 4,930     $ 17       0.3 %   $ 9,755     $ 9,694     $ 61       0.6 %
Hotel, Food and Beverage Revenue
    637       601       36       6.0 %     1,294       1,159       135       11.6 %
Other Revenue
    48       40       8       20.0 %     99       75       24       32.0 %
Gross Revenue
    5,632       5,571       61       1.1 %     11,148       10,928       220       2.0 %
Less Promotional Allowances
    (1,051 )     (1,051 )     0       0.0 %     (2,058 )     (2,008 )     50       2.5 %
Net Operating Revenue
    4,581       4,520       61       1.3 %     9,090       8,920       170       1.9 %
Gaming Expenses
    (2,119 )     (2,157