UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
___X___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
_______ 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 0-22290
CENTURY CASINOS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1271317
(State of incorporation) (IRS Employer ID No.)
50 South Steele Street, Suite 755, Denver, CO 80209
(Address of principal executive offices)
(303) 388-5848
(Phone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 X No
Number of shares of common stock, $.01 par value, outstanding as of August 2,
1996:
15,861,885
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CENTURY CASINOS, INC.
FORM 10-QSB
INDEX
Page Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet as of June 30, 1996 3
Consolidated Statements of Operations for the Three Months Ended 4
June 30, 1996 and 1995
Consolidated Statements of Operations for the Six Months Ended June 5
30, 1996 and 1995
Consolidated Condensed Statements of Cash Flows for the Six Months 6
Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 9
PART II OTHER INFORMATION 12
SIGNATURES
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
- ---------------------------------------------------------------------------------------------------------------
June 30, 1996
-------------
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,753,412
Prepaid expenses and other 729,138
-----------------
Total current assets 8,482,550
PROPERTY AND EQUIPMENT, net 4,651,135
GOODWILL, net 5,749,700
DEFERRED COSTS, terminated management agreement 1,341,794
OTHER ASSETS 2,750,991
-----------------
TOTAL $ 22,976,170
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 805,025
Accounts payable and accrued expenses 1,143,905
-----------------
Total current liabilities 1,948,930
LONG-TERM DEBT, less current portion 2,094,345
SHAREHOLDERS' EQUITY:
Preferred stock; $.01 par value; 20,000,000 shares
authorized; no shares issued or outstanding
Common stock; $.01 par value; 50,000,000 shares
authorized; 15,861,885 shares issued and outstanding 158,619
Additional paid-in capital 23,056,784
Foreign currency translation adjustment (10,514)
Accumulated deficit (4,271,994)
-----------------
-----------------
Total shareholders' equity 18,932,895
-----------------
TOTAL $ 22,976,170
=================
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
For the Three Months Ended June 30,
-----------------------------------
1996 1995
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OPERATING REVENUE:
Casino $ 1,209,387 $ 853,411
Food and beverage 52,624 90,103
Other 20,878 22,439
---------------- ----------------
1,282,889 965,953
Less promotional allowances (49,644) (45,617)
---------------- ----------------
Net operating revenue 1,233,245 920,336
---------------- ----------------
OPERATING COSTS AND EXPENSES:
Casino 448,954 505,121
Food and beverage 4,839 81,976
General and administrative 705,400 854,282
Depreciation and amortization 325,592 313,610
---------------- ----------------
Total operating costs and expenses 1,484,785 1,754,989
---------------- ----------------
LOSS FROM OPERATIONS (251,540) (834,653)
OTHER EXPENSE, net (468,160) (44,525)
---------------- ----------------
LOSS BEFORE INCOME TAXES (719,700) (879,178)
PROVISION FOR INCOME TAXES
================ ================
NET LOSS $ (719,700) $ (879,178)
================ ================
LOSS PER SHARE $ (0.06) $ (0.08)
================ ================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,281,992 10,789,652
================ ================
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30,
---------------------------------
1996 1995
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OPERATING REVENUE:
Casino $ 2,310,199 $ 1,631,269
Food and beverage 109,805 163,235
Other 39,441 40,974
---------------- ----------------
2,459,445 1,835,478
Less promotional allowances (92,339) (82,159)
---------------- ----------------
Net operating revenue 2,367,106 1,753,319
---------------- ----------------
OPERATING COSTS AND EXPENSES:
Casino 927,596 960,494
Food and beverage 25,259 161,864
General and administrative 1,416,081 1,731,907
Depreciation and amortization 640,706 613,625
---------------- ----------------
Total operating costs and expenses 3,009,642 3,467,890
---------------- ----------------
LOSS FROM OPERATIONS (642,536) (1,714,571)
OTHER INCOME (EXPENSE), net (457,459) 3,842,157
---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES (1,099,995) 2,127,586
PROVISION FOR INCOME TAXES 337,000
================ ================
NET INCOME (LOSS) $ (1,099,995) $ 1,790,586
================ ================
INCOME (LOSS) PER SHARE $ (0.09) $ 0.18
================ ================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 11,942,415 10,152,452
================ ================
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30,
---------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATIONS $ (91,545) $ (1,117,385)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES (604,795) 2,594,717
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES 6,416,281 1,895,380
----------------- ----------------
INCREASE IN CASH AND CASH EQUIVALENTS 5,719,941 3,372,712
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,033,471 950,024
----------------- ----------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 7,753,412 $ 4,322,736
================= ================
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid by the Company was $76,613 and $64,421 for the six months ended
June 30, 1996 and 1995.
Income taxes paid by the Company were $9,800 and $0 for the six months ended
June 30, 1996 and 1995.
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Century Casinos, Inc. and subsidiaries (the "Company") own and operate
a limited-stakes gaming casino in Cripple Creek, Colorado ("Legends
Casino"), act as concessionaire of two small casinos on cruise ships,
and are pursuing a number of additional gaming opportunities
throughout the United States and internationally. On July 1, 1996, the
Company acquired the net assets of Gold Creek Associates, L.P., the
operator of Womack's Saloon & Gaming Parlor in Cripple Creek, Colorado
(see Note 5).
The accompanying consolidated financial statements and related notes
have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and the instructions to
Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of
management, all adjustments (consisting of only normal recurring
accruals) considered necessary for fair presentation of financial
position, results of operations and cash flows have been included.
These consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the Year Ended December 31,
1995.
2. INCOME TAXES
The Company has not recorded an income tax benefit for the three-month
and six-month periods ended June 30, 1996, or for the three-month
period ended June 30, 1995 because of limitations on recognizing the
benefits of available net operating loss ("NOL") carryforwards. The
provision for income taxes of $337,000 for the six-month period ended
June 30, 1995, consists of estimated alternative minimum tax ("AMT")
of $70,000, due to limitations on the utilization of NOLs for AMT
purposes, a provision and corresponding reduction in the deferred tax
valuation allowance of $167,000 related to the anticipated utilization
of NOLs not acquired in the Alpine business combination, and a
provision of $267,000 for the anticipated utilization of a portion of
the NOLs acquired in the Alpine business combination. The reversal of
that portion of the valuation allowance corresponding to the acquired
NOLs is required to be recorded as a reduction to the carrying amount
of goodwill.
3. INCOME (LOSS) PER SHARE
Income (loss) per share for the Company for the three-month and
six-month periods ended June 30, 1996 and 1995, is based upon the
weighted average number of common shares outstanding during the
period. Outstanding warrants and options have not been considered in
the calculation as their effect would be antidilutive for both
periods.
4. PRIVATE PLACEMENT
In the first quarter of 1996 the Company completed a private placement
of 1,000,000 shares of its common stock at $1.50 per share. Net
proceeds of the private placement to the Company, after commissions
and direct expenses, were $1,383,165. The Company completed additional
private placements of its common stock in the second quarter of 1996
(see Note 5).
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5. ACQUISITION OF CASINO AND RELATED FINANCING
On July 1, 1996, the Company purchased substantially all of the
assets, and assumed substantially all of the liabilities, of Gold
Creek Associates, LP ("Gold Creek"), the operator of Womack's Saloon &
Gaming Parlor ("Womack's") in Cripple Creek, Colorado. The total
purchase price was approximately $13.5 million, consisting of a base
cash payment of $5 million plus $320,000 for the amount of estimated
working capital as of the closing date, a promissory note of $5.2
million issued to Gold Creek and the assumption of existing debt of
Gold Creek of approximately $3 million. The working capital portion of
the purchase price is subject to final determination 60 days after the
closing date. Additionally, the agreement provides that two years
after the closing of the transaction, the Company will issue 1,060,000
shares of its common stock, valued at approximately $2 million based
on recent trading prices, to two principals of the seller who have
entered into consulting contracts with the Company at closing. The
number of shares to be issued is subject to upward adjustment,
determined by a formula, to the extent that the trading price of the
Company's stock is less than $1.58 at the time of issuance, and
subject to downward adjustment to the extent that the trading price
exceeds $4.00.
The promissory note issued to Gold Creek bears interest at 9% and
provides for monthly payments of only interest for 18 months;
thereafter, monthly principal payments of $43,121, plus interest on
the unpaid principal, are required, with a final balloon principal
payment of $2,328,000 due July 2003. The note is secured by
substantially all of the tangible assets purchased, subject to
existing encumbrances, and the Company is required to meet certain
financial covenants. The Company is also restricted from paying
dividends until the note has been paid in full.
In addition to the financing provided by Gold Creek, additional funds
required to complete the acquisition were raised through private sales
of 4,072,233 shares of the Company's common stock at an average price
of $1.43 per share, with proceeds, net of selling commissions, of
approximately $4,552,000. In connection with sales of common stock by
a placement agent, the Company issued warrants to the placement agent
to purchase 150,000 shares of its common stock at $2.36 per share. The
warrants have a term of 5 years.
The Company also issued on May 30, 1996, a convertible debenture in
the principal amount of $500,000 to a private investor. The debenture
bears interest at 10.5%, payable quarterly. The holder has the option
to convert, in one or more transactions, all or a portion of the
outstanding principal into the Company's common stock at $1.84 per
share, subject to a minimum per conversion transaction of $50,000. The
Company has the option to prepay the debenture, in whole or in part,
after the first anniversary date at 132% of the outstanding principal.
The prepayment amount declines to 127% after the second anniversary
date, 122% after the third anniversary date and 116% after the fourth
anniversary date. The entire unpaid principal is due on May 30, 2001.
In anticipation of completing the Gold Creek acquisition, the Company
purchased in May 1996, from an unaffiliated third party, a 9% first
mortgage note on the Womack's casino property for $1,337,500. The
principal amount of the note, which is included in debt assumed by the
Company in the Gold Creek acquisition, was $1,248,000 at the date of
purchase by the Company. The premium of $89,500 paid by the Company to
purchase the note is being amortized to expense ratably over the
remaining term of the note, which matures in July 1999.
The Company will account for the Gold Creek acquisition using the
purchase method of accounting, whereby the total purchase price,
including direct out-of-pocket costs of the acquisition, will be
allocated to the assets purchased and liabilities assumed based on
their estimated fair values. The excess of the the purchase price over
the identifiable net assets, which excess the Company preliminarily
estimates will approximate $9 million, will be amortized to expense
ratably over 15 years.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended June 30, 1996 vs. 1995
Net operating revenue for the three months ended June 30, 1996, was
$1,233,245 compared with $920,336 for the 1995 period, an increase of 34%.
Casino revenue increased 42% to $1,209,387, and comprised a 38% increase in
casino revenue from the Company's Legends casino in Cripple Creek and an 81%
increase in casino revenue from cruise ship activities. The increase for Legends
is primarily a result of the net addition of approximately 40 new slot machines
and ongoing efforts to upgrade and replace the casino's existing gaming devices.
The revenue increase for the cruise ships is attributable to increased passenger
counts on the Silver Cloud and Silver Wind, as they have become solidly
established in their markets, partially offset by a revenue decrease related to
two cruise ships for which the Company has terminated its concessionaire
contracts. Gross operating margin from casino activities improved from 41% to
63%. The overall reduction in casino costs results from tighter control over
promotional and marketing expenditures, as well as lower cost of promotional
allowances. The significant margin improvement in percentage terms also reflects
the operating leverage inherent in the Company's casino operations, which
provides for revenue growth at relatively little incremental cost.
Food and beverage revenue, net of promotional allowances, decreased by 93%
as Legends closed its restaurant in the second quarter of 1996 in anticipation
of the acquisition of Womack's, which was completed on July 1, 1996. The
combined properties will utilize the restaurant formerly operated by Womack's.
The restaurant and bar operations are considered to be primarily an
accommodation to casino players and are not expected to generate profits. Food
and beverage costs exclude the estimated cost of promotional allowances provided
to customers; such cost is included in casino costs.
General and administrative expense decreased by $148,882, or 17%, from the
1995 period to the 1996 period as a result of lower payroll costs at the
corporate level and due to the absence in the current year of costs associated
with an Indiana riverboat development project and the entertainment joint
venture in the People's Republic of China. The Company sold its interest in the
Indiana riverboat development project and terminated its participation in the
China joint venture in December 1995. Depreciation and amortization expense
increased slightly as higher depreciation from the addition of new gaming
machines in Legends Casino were partially offset by the absence of amortization
of deferred costs related to the Company's management of a casino for the Soboba
Band of Mission Indians in California. The Company effectively assigned its
rights under the Soboba agreement to an unaffiliated third party in August 1995
and is recovering the remaining capitalized costs through monthly payments from
the third party.
Other expense, net, for the second quarter of 1996 included interest
expense of $53,262; interest income of $66,260; loss on disposal of property and
equipment of $175,507; and the writeoff of previously deferred costs of $306,692
related to debt financing efforts which did not result in the consummation of
financing. The loss on disposal of property and equipment was primarily
associated with the closing of the restaurant and general interior remodeling at
Legends, and the termination of the concessionaire contract for the cruise ship
Calypso. For the comparable period in 1995, other expense, net, included
interest expense of $46,385; interest income of $79,005; and equity in the loss
of the China joint venture of $77,860.
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Six Months Ended June 30, 1996 vs. 1995
Casino revenue improved 42% in 1996 versus 1995, comprising an almost
identical percentage increase from both Legends Casino and from the cruise
ships. The increase at Legends results from a net increase of approximately 40
slot machines over the prior year and more effective marketing efforts. Casino
costs decreased slightly in absolute terms from $960,494 to $927,596, primarily
as the result of lower promotion and marketing expenses, partially offset by
higher device fees and gaming taxes associated with the revenue increase. The
decrease in food and beverage revenue, as well as the narrowing of the loss from
these operations, reflects the scaling back of the restaurant concept in late
1995 and closing of the restaurant in the second quarter of 1996.
Lower payroll costs at the corporate level, and the absence of costs
associated with development projects in Indiana, Louisiana and China, accounted
for the substantial reduction in general and administrative expense from 1995 to
1996. Higher depreciation expense associated with the addition of new slot
machines was partially offset by the absence of amortization of deferred costs
related to the Soboba casino management agreement.
Other expense, net, for the six months ended June 30, 1996, included interest
expense of $96,791; interest income of $100,267; loss on disposal of property
and equipment of $175,507; and writeoff of previously deferred debt offering
costs of $306,692. Other income, net, for the year-earlier period included
interest expense of $81,469; interest income of $92,702; gain on the termination
of a riverboat management contract of $3,928,479; and equity in the loss of the
China joint venture of $77,860.
Liquidity and Capital Resources
At June 30, 1996, the Company had cash and cash equivalents of $7,753,412,
of which approximately $4,800,000 was paid on July 1, 1996 to close the Gold
Creek acquisition. The net increase in cash for the six months ended June 30,
1996 is primarily attributable to the private placement of 1,000,000 common
shares of the Company's stock at $1.50 per share in January 1996 and the private
placement of 4,072,233 common shares in June 1996, at an average price of $1.43
per share, which netted $4,552,330 after commissions. The Company made escrow
deposits and paid costs of approximately $215,000 in connection with the
acquisition of Gold Creek. The Company also purchased the first mortgage note on
the Womack's casino property from a third party for $1,337,500 and spent
approximately $200,000 to refurbish Legends Casino in anticipation of completing
the Gold Creek acquisition and combining the two properties. The Company
received cash payments from a third party of $452,000 for the six months ended
June 30, 1996, in connection with the previous assignment of the Company's
Soboba casino management contract.
On July 1, 1996, the Company purchased substantially all of the assets, and
assumed substantially all of the liabilities, of Gold Creek. The total purchase
price was approximately $13.5 million, consisting of a base cash payment of $5
million plus $320,000 for the amount of estimated working capital as of the
closing date, a promissory note of $5.2 million issued to Gold Creek and the
assumption of existing debt of Gold Creek of approximately $3 million. The
working capital portion of the purchase price is subject to final determination
60 days after the closing date. Additionally, the agreement provides that two
years after the closing of the transaction, the Company will issue 1,060,000
shares of its common stock, valued at approximately $2 million based on recent
trading prices, to two principals of the seller who have entered into consulting
contracts with the Company at closing. The number of shares to be issued is
subject to upward adjustment, determined by a formula, to the extent that the
trading price of the Company's stock is less than $1.58 at the time of issuance,
and subject to downward adjustment to the extent that the trading price exceeds
$4.00.
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The promissory note issued to Gold Creek bears interest at 9% and provides
for monthly payments of only interest for 18 months; thereafter, monthly
principal payments of $43,121, plus interest on the unpaid principal, are
required, with a final balloon principal payment of $2,328,000 due July 2003.
The note is secured by substantially all of the tangible assets purchased,
subject to existing encumbrances, and the Company is required to meet certain
financial covenants. The Company is also restricted from paying dividends until
the note has been paid in full.
In connection with sales of common stock in the second quarter of 1996, the
Company issued warrants to a placement agent to purchase 150,000 shares of its
common stock at $2.36 per share. The warrants have a term of five years.
The Company also issued on May 30, 1996, a convertible debenture in the
principal amount of $500,000 to a private investor. The debenture bears interest
at 10.5%, payable quarterly. The holder has the option to convert, in one or
more transactions, all or a portion of the outstanding principal into the
Company's common stock at $1.84 per share, subject to a minimum per conversion
transaction of $50,000. The Company has the option to prepay the debenture, in
whole or in part, after the first anniversary date at 132% of the outstanding
principal. The prepayment amount declines to 127% after the second anniversary
date, 122% after the third anniversary date and 116% after the fourth
anniversary date. The entire unpaid principal is due on May 30, 2001.
Management anticipates that the acquisition of Gold Creek, together with
the operating synergies and cost savings expected to be realized from the
combination of the adjacent Womack's and Legends casino properties, will result
in the Company generating net income in the third quarter of 1996. There can be
no assurance that net income will, in fact, be achieved. Management also expects
cash flow from operations to be sufficient for debt service requirements and
near-term capital expenditures. The Company continues to pursue a number of
gaming opportunities in the U.S. and abroad, which are generally in the early
stages of negotiation with various parties.
* * * * * * * * * * * * * * * *
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PART II
OTHER INFORMATION
Item 1. - Legal Proceedings
The Company is not a party to, nor is it aware of, any pending or
threatened litigation.
Item 5. - Other Information
The following financial statements and financial information are filed
herewith: (i) Gold Creek Associates, L.P. (a Limited Partnership) Unaudited
Balance Sheet as of June 30, 1996, Unaudited Income Statements for the Three
Months Ended June 30, 1996 and 1995, Unaudited Income Statements for the Six
Months Ended June 30, 1996 and 1995, and Unaudited Condensed Statements of Cash
Flows for the Six Months Ended June 30, 1996 and 1995; (ii) Century Casinos,
Inc. Unaudited Pro Forma Combined Balance Sheet as of June 30, 1996, and
Unaudited Pro Forma Combined Income Statement for the Six Months Ended June 30,
1996.
Item 6. - Exhibits and Reports on Form 8-K
On July 16, 1996, the Company filed a Form 8-K, including exhibits, dated
July 1, 1996, pursuant to Item 2 of the Form 8-K requirements, with respect to
the Company's acquisition of the assets of Gold Creek Associates, L.P. The
following financial statements were filed with such Form 8-K: (i) Gold Creek
Associates, L.P. (a Limited Partnership) Financial Statements as of and for the
Two Years in the Period Ended December 31, 1995 and Independent Auditors' Report
thereon; (ii) Gold Creek Associates, L.P. (a Limited Partnership) Unaudited
Balance Sheet as of March 31, 1996, Unaudited Income Statements for the Three
Months Ended March 31, 1996 and 1995, and Unaudited Condensed Statements of Cash
Flows for the Three Months Ended March 31, 1996 and 1995; (iii) Century Casinos,
Inc. Unaudited Pro Forma Combined Balance Sheet as of March 31, 1996, Unaudited
Pro Forma Combined Income Statement for the Three Months Ended March 31, 1996,
and Unaudited Pro Forma Combined Income Statement for the Year Ended December
31, 1995.
* * * * * * *
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SIGNATURES:
Pursuant to the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CENTURY CASINOS, INC.
/s/ Brad Dobski
- ---------------------------
Brad Dobski
Chief Accounting Officer and duly authorized officer
Date: August 6, 1996
<PAGE>
PART II, Item 5 - Other Information
<TABLE>
<CAPTION>
GOLD CREEK ASSOCIATES, L.P. (a Limited Partnership)
BALANCE SHEET (Unaudited)
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June 30, 1996
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,137,287
Accounts receivable, prepaid expenses and other 169,617
---------------------
Total current assets 1,306,904
PROPERTY AND EQUIPMENT, net 6,663,816
OTHER ASSETS, net of accumulated amortization of $18,960 78,141
=====================
TOTAL $ 8,048,861
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 858,883
Accounts payable and accrued liabilities 1,225,314
---------------------
Total current liabilities 2,084,197
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,131,940
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General partner 668,634
Limited partners 3,164,090
---------------------
Total partners' capital 3,832,724
---------------------
TOTAL $ 8,048,861
=====================
See notes to financial statements.
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<CAPTION>
GOLD CREEK ASSOCIATES, L.P. (a Limited Partnership)
STATEMENTS OF INCOME (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended June 30,
-----------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING REVENUE:
Casino $ 3,320,913 $ 2,158,299
Food and beverage 166,320 129,436
Other 21,204 7,378
-------------------- ------------------
3,508,437 2,295,113
Less promotional allowances (97,574) (84,812)
-------------------- ------------------
Net operating revenue 3,410,863 2,210,301
-------------------- ------------------
OPERATING COSTS AND EXPENSES:
Casino 1,959,876 1,560,584
Food and beverage 79,125 31,683
General and administrative 360,703 282,925
Depreciation and amortization 126,037 102,704
--------------------
------------------
Total operating costs and expenses 2,525,741 1,977,896
-------------------- ------------------
INCOME FROM OPERATIONS 885,122 232,405
OTHER INCOME (EXPENSE):
Interest expense (87,769) (57,261)
Loss on disposal of assets (48,882)
Interest income and other 48,160 9,166
-------------------- ------------------
NET INCOME $ 845,513 $ 135,928
==================== ==================
See notes to financial statements.
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<CAPTION>
GOLD CREEK ASSOCIATES, L.P. (a Limited Partnership)
STATEMENTS OF INCOME (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING REVENUE:
Casino $ 6,170,960 $ 3,872,080
Food and beverage 299,050 193,128
Other 32,703 15,704
-------------------- ------------------
6,502,713 4,080,912
Less promotional allowances (191,902) (143,581)
-------------------- ------------------
Net operating revenue 6,310,811 3,937,331
-------------------- ------------------
OPERATING COSTS AND EXPENSES:
Casino 3,382,053 2,619,404
Food and beverage 123,960 35,761
General and administrative 688,800 497,569
Depreciation and amortization 253,378 205,407
-------------------- ------------------
Total operating costs and expenses 4,448,191 3,358,141
-------------------- ------------------
INCOME FROM OPERATIONS 1,862,620 579,190
OTHER INCOME (EXPENSE):
Interest expense (216,768) (122,389)
Loss on disposal of assets (44,591) (48,882)
Interest income and other 57,578 16,039
-------------------- ------------------
NET INCOME $ 1,658,839 $ 423,958
==================== ==================
See notes to financial statements.
-16-
<PAGE>
<CAPTION>
GOLD CREEK ASSOCIATES, L.P. (a Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATIONS $ 2,419,390 $ 954,953
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES (20,776) (219,408)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES (2,163,094) (908,045)
------------------ ------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 235,520 (172,500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 901,767 499,737
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,137,287 $ 327,237
================== ==================
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Property and equipment acquired through long-term financing $ 151,986 $ 1,269,612
Property and equipment returned to vendor in satisfaction of remaining
financing obligation $ 533,442
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid by the Partnership was $216,768 in 1996 and $122,389 in 1995.
See notes to financial statements.
-17-
<PAGE>
GOLD CREEK ASSOCIATES, L.P. (a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Gold Creek Associates, L.P. (a limited partnership), doing business as
Womack's Saloon & Gaming Parlor (the "Partnership"), operates a casino located
in Cripple Creek, Colorado. The Partnership was formed on February 15, 1992, and
the casino began doing business on July 19, 1992. The Partnership expanded its
gaming operations in May 1994, when it began operating the neighboring Diamond
Lil's casino. In July 1995 the Partnership began operating its other neighboring
casino, Wild Bill's, which was subsequently renamed Womack's Golden Horseshoe.
The general partner of the Partnership is Chrysore, Inc., which holds an
interest of 31.4%. The remaining 68.6% is held by approximately 30 limited
partners.
The accompanying financial statements and related notes have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
considered necessary for fair presentation of financial position, results of
operations and cash flows have been included. These financial statements should
be read in conjunction with the Partnership's financial statements and notes
thereto for the year ended December 31, 1995.
2. EVENT SUBSEQUENT TO JUNE 30, 1996 - SALE OF ASSETS
On July 1, 1996, the Partnership sold substantially all of its assets to a
wholly-owned subsidiary of Century Casinos, Inc. ("Century"). The total sales
price was approximately $13.5 million, consisting of a base cash payment of $5
million plus $320,000 for the amount of estimated working capital as of the
closing date, a promissory note of $5.2 million issued to the Partnership and
approximately $3 million of existing debt of the Partnership to be assumed by
Century. The working capital portion of the sales price is subject to final
determination sixty days after the closing date. Additionally, the agreement
provides that two years after the closing of the transaction, Century will issue
1,060,000 shares of its common stock, valued at approximately $2 million based
on recent trading prices, to two principals of the Partnership's general
partner, which individuals have entered into consulting contracts with Century
at closing. The number of shares to be issued is subject to upward adjustment,
determined by a formula, to the extent that the trading price of Century's stock
is less than $1.58 at the time of issuance, and subject to downward adjustment
to the extent that the trading price exceeds $4.00.
The promissory note issued to the Partnership bears interest at 9% and
provides for monthly payments of only interest for eighteen months; thereafter,
monthly principal payments of $43,121, plus interest on the unpaid principal,
are required, with a final balloon principal payment of $2,328,000 due July
2003. The note is secured by substantially all of the tangible assets sold,
subject to existing encumbrances, and Century is required to meet certain
financial covenants.
-18-
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION (Unaudited)
INTRODUCTION
The accompanying pro forma combined balance sheet as of June 30, 1996 has
been prepared to reflect, on a pro forma basis, the effects of the acquisition
of assets and assumption of liabilities of Gold Creek Associates, L.P. ("Gold
Creek") by Century Casinos, Inc. ("Century") as if the acquisition had occurred
on June 30, 1996. The acquisition was consummated on July 1, 1996. The
transaction is more fully described in Note 5 to Century's unaudited financial
statements as of and for the three months and six months ended June 30, 1996 and
1995, included under Item 1 of this Form 10-QSB.
The accompanying pro forma combined income statement for the six months
ended June 30, 1996, was prepared as if the acquisition had occurred on January
1, 1996.
The pro forma combined financial information is not necessarily indicative
of the results which actually would have occurred had the acquisition been
consummated on the dates indicated above, nor does it purport to represent the
combined future financial position or results of operations.
The historical financial information presented for Century and Gold Creek
has been derived from their unaudited financial statements for the three months
and six months ended June 30, 1996. The applicable historical Gold Creek
financial statements are included elsewhere herein.
-19-
<PAGE>
<TABLE>
<CAPTION>
CENTURY CASINOS, INC.
PRO FORMA COMBINED BALANCE SHEET (Unaudited)
As of June 30, 1996
-------------------
Historical Historical Pro Forma Pro Forma
Century Gold Creek Adjustments Combined
------- ---------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash, cash equivalents and short-term investment $ 7,753 $ 1,137 $ (4,820)(a) $ 3,233
(837)(a)
Other 729 170 (70)(b) 829
---------- ---------- ---------- ----------
Total current assets 8,482 1,307 (5,727) 4,062
---------- ---------- ---------- ----------
Property and Equipment, net 4,651 6,664 370 (a) 11,685
Goodwill 5,750 8,704 (a) 14,691
237 (c)
Deferred costs 1,342 1,342
Other 2,751 78 (500)(a) 928
(1,164)(b)
(237)(c)
---------- ---------- ---------- ----------
TOTAL ASSETS $ 22,976 $ 8,049 $ 1,683 $ 32,708
=========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 805 $ 859 $ (70)(b) $ 1,594
Accounts payable, accrued liabilities and other 1,144 1,225 (424)(a) 1,945
---------- ---------- ---------- ----------
Total current liabilities 1,949 2,084 (494) 3,539
---------- ---------- ---------- ----------
Long-term debt, net of current portion 2,094 2,132 5,174 (a) 8,236
(1,164)(b)
Shareholders' equity:
Common stock 159 11 (a) 170
Partners' capital 3,833 (3,833)(a)
Additional paid-in-capital 23,057 1,989 (a) 25,046
Foreign currency translation adjustment (11) (11)
Accumulated deficit (4,272) (4,272)
---------- ---------- ---------- ----------
Total shareholders' equity 18,933 3,833 (1,833) 20,933
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,976 $ 8,049 $ 1,683 $ 32,708
=========== ========== ========== ===========
<FN>
Pro Forma Adjustments
(a) To record purchase of Gold Creek assets and assumption of
existing debt for cash of $5,000,000 (less previously paid
escrow deposit of $500,000, plus working capital adjustment
of $320,000), issuance of note to seller in principal amount
of $5,174,000 and assumed issuance of Century stock (valued
at $2,000,000) to two principals of seller two years after
closing date of acquisition.
(b) To eliminate first mortgage note obligation of Gold Creek
which was purchased by Century from a third party in May
1996.
(c) To reclassify out-of-pocket costs of the acquisition.
</FN>
-20-
<PAGE>
<CAPTION>
CENTURY CASINOS, INC.
PRO FORMA COMBINED INCOME STATEMENT (Unaudited)
For the Six Months Ended June 30, 1996
--------------------------------------
Historical Historical Pro Forma Pro Forma
Century Gold Creek Adjustments Combined
------- ---------- ----------- --------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Casino $ 2,310 $ 6,171 $ 8,481
Food and beverage 18 107 125
Other 39 33 72
---------- ---------- ---------- ----------
Net operating revenue 2,367 6,311 8,678
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Casino 928 3,382 4,310
Food and beverage 25 124 149
General and administrative 1,416 689 2,105
Depreciation and amortization 641 253 $ 336 (a) 1,230
---------- ---------- ---------- ----------
Total operating costs and expenses 3,010 4,448 336 7,794
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (643) 1,863 (336) 884
OTHER INCOME (EXPENSE), net (457) (204) (264)(b) (925)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (1,100) 1,659 (600) (41)
PROVISION FOR INCOME TAXES -
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (1,100) $ 1,659 $ (600) $ (41)
=========== ========== ========== ==========
INCOME (LOSS) PER SHARE $ (0.09) $ (0.00)
=========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,942,415 16,828,479
=========== ========== ========== ==========
<FN>
Pro Forma Adjustments
(a) To record goodwill amortization of $298,000 and additional
depreciation of $38,000 on fair value step-up to property
and equipment.
(b) To record interest expense of $30,000 on convertible
debenture and $234,000 on promissory note issued to Gold
Creek.
</FN>
</TABLE>
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911147
<NAME> FDS for Century Casinos, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 7,753,412
<SECURITIES> 0
<RECEIVABLES> 383,671
<ALLOWANCES> 0
<INVENTORY> 9,287
<CURRENT-ASSETS> 8,482,550
<PP&E> 5,511,723
<DEPRECIATION> 860,588
<TOTAL-ASSETS> 22,976,170
<CURRENT-LIABILITIES> 1,948,930
<BONDS> 2,094,345
0
0
<COMMON> 158,619
<OTHER-SE> 18,774,276
<TOTAL-LIABILITY-AND-EQUITY> 22,976,170
<SALES> 2,367,106
<TOTAL-REVENUES> 2,367,106
<CGS> 0
<TOTAL-COSTS> 952,855
<OTHER-EXPENSES> 2,056,787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,791
<INCOME-PRETAX> (1,099,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,099,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,099,995)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
