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, 1997.
_______ 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.)
26 South Tejon Street, Suite 203, Colorado Springs, Colorado 80903
(Address of principal executive offices)
(719) 473-7770
(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 1, 1997:
15,861,885
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<PAGE>
CENTURY CASINOS, INC.
FORM 10-QSB
INDEX
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet as of June 30, 1997 3
Consolidated Statements of Operations for 4
the Three Months Ended June 30, 1997 and 1996
Consolidated Statements of Operations for 5
the Six Months Ended June 30, 1997 and 1996
Consolidated Condensed Statements of Cash Flows 6
for the Six Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 9
PART II OTHER INFORMATION 13
SIGNATURES
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<PAGE>
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
June 30, 1997
-------------
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 2,160,087
Short-term investments 1,550,772
Prepaid expenses and other 616,465
-----------------
Total current assets 4,327,324
Property and Equipment, net 14,169,303
Goodwill, net 13,269,386
Other Assets 998,063
-----------------
Total $ 32,764,076
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 478,770
Accounts payable and accrued expenses 1,990,803
-----------------
Total current liabilities 2,469,573
Long-Term Debt, less current portion 10,346,641
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 24,883,213
Foreign currency translation (22,384)
Accumulated deficit (5,071,586)
-----------------
Total shareholders' equity 19,947,862
-----------------
Total $ 32,764,076
=================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
Operating Revenue:
Casino $ 4,919,156 $ 1,209,387
Food and beverage 234,474 52,624
Hotel 11,263
Other 89,822 20,878
------------------- ------------------
5,254,715 1,282,889
Less promotional allowances (196,870) (49,644)
------------------- ------------------
Net operating revenue 5,057,845 1,233,245
------------------- ------------------
Operating Costs and Expenses:
Casino 2,784,790 448,955
Food and beverage 109,152 11,718
Hotel 3,512
General and administrative 1,284,358 698,520
Depreciation and amortization 722,638 325,592
------------------- ------------------
Total operating costs and expenses 4,904,450 1,484,785
------------------- ------------------
Income (Loss) from Operations 153,395 (251,540)
Other expense, net (342,019) (468,160)
------------------- ------------------
Loss Before Income Taxes and Extraordinary Item (188,624) (719,700)
Provision for income taxes 20,000
------------------- ------------------
Loss Before Extraordinary Item (208,624) (719,700)
Extraordinary item - debt prepayment penalty, net of
income tax benefit of $40,000 (171,860)
=================== ==================
Net Loss $ (380,484) $ (719,700)
=================== ==================
Loss Per Share:
Before extraordinary item $ (0.01) $ (0.06)
Extraordinary item (0.01)
=================== ==================
Net loss $ (0.02) $ (0.06)
=================== ==================
Weighted Average Common Shares Outstanding 15,861,885 12,281,992
=================== ==================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
Operating Revenue:
Casino $ 9,277,773 $ 2,310,199
Food and beverage 443,744 109,805
Hotel 21,371
Other 156,795 39,441
------------------- ------------------
9,899,683 2,459,445
Less promotional allowances (373,694) (92,339)
------------------- ------------------
Net operating revenue 9,525,989 2,367,106
------------------- ------------------
Operating Costs and Expenses:
Casino 5,334,957 927,596
Food and beverage 200,771 25,259
Hotel 6,735
General and administrative 2,594,479 1,416,081
Depreciation and amortization 1,408,139 640,706
------------------- ------------------
Total operating costs and expenses 9,545,081 3,009,642
------------------- ------------------
Loss from Operations (19,092) (642,536)
Other expense, net (515,493) (457,459)
------------------- ------------------
Loss Before Income Taxes and Extraordinary Item (534,585) (1,099,995)
Income tax benefit (102,000)
------------------- ------------------
Loss Before Extraordinary Item (432,585) (1,099,995)
Extraordinary item - debt prepayment penalty, net of
income tax benefit of $40,000 (171,860)
=================== ==================
Net Loss $ (604,445) $ (1,099,995)
=================== ==================
Loss Per Share:
Before extraordinary item $ (0.03) $ (0.09)
Extraordinary item (0.01)
=================== ==================
Net loss $ (0.04) (0.09)
=================== ==================
Weighted Average Common Shares Outstanding 15,861,885 11,942,415
=================== ==================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used in) operations $ 1,144,767 $ (91,545)
--------------------- -------------------
Cash used in investing activities (3,563,756) (604,795)
--------------------- -------------------
Cash provided by financing activities 22,536 6,416,281
--------------------- -------------------
Increase (decrease) in cash and cash equivalents (2,396,453) 5,719,941
Cash and cash equivalents at beginning of period 4,556,540 2,033,471
--------------------- -------------------
Cash and cash equivalents at end of period $ 2,160,087 $ 7,753,412
===================== ===================
Supplemental Disclosure of Noncash Investing and Financing Activities:
Equipment acquired through long-term financing $ 62,512
</TABLE>
Supplemental Disclosure of Cash Flow Information:
Interest paid by the Company was $317,007 and $76,613 for the six months
ended June 30, 1997 and 1996.
Income taxes paid by the Company were $14,080 and $9,800 for the six months
ended June 30, 1997 and 1996.
See notes to consolidated financial statements.
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<PAGE>
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Century Casinos, Inc. and subsidiaries (the "Company") own and operate a
limited-stakes gaming casino in Cripple Creek, Colorado; act as
concessionaire of a small casino on a luxury cruise ship; and are pursuing
a number of additional gaming opportunities in the United States and
internationally. Prior to July 1, 1996, the Company's operations in Cripple
Creek, Colorado, consisted of Legends Casino, which the Company acquired on
March 31, 1994, through a merger with Alpine Gaming, Inc. ("Alpine"). On
July 1, 1996, the Company acquired the net assets of Gold Creek Associates,
L.P. ("Gold Creek"), the owner of Womack's Saloon & Gaming Parlor
("Womacks"), which is immediately adjacent to Legends Casino. Following the
Company's acquisition of Womacks, interior renovations were undertaken on
both properties to facilitate the operation and marketing of the combined
properties as one casino under the name Womacks Casino. The accompanying
financial statements include the results of operations acquired from Gold
Creek for the period subsequent to June 30, 1996.
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, 1996.
2. INCOME TAXES
The income tax provision (benefit) for the three-month and six-month
periods ended June 30, 1997, was $20,000 and $(102,000), respectively,
exclusive of the estimated tax benefit associated with an extraordinary
charge. The provision (benefit) is based on estimated full-year income for
financial reporting purposes adjusted for permanent differences, which
comprise primarily nondeductible goodwill resulting from the Alpine
acquisition, and utilization of available net operating loss carryforwards
("NOLs"). The Company did not record an income tax benefit for the three
months or six months ended June 30, 1996, because the estimated annual
effective income tax rate was immaterial.
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<PAGE>
3. LOSS PER SHARE
Loss per share for the Company for the three-month and six-month periods
ended June 30, 1997 and 1996, 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 all periods presented. Shares which the Company is
obligated to issue on July 1, 1998, in connection with the Gold Creek
acquisition, are considered common stock equivalents but have not been
included in the calculation of weighted average number of shares for the
three months and six months ended June 30, 1997, as their effect would be
antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
("SFAS") No. 128, "Earnings per Share," which supersedes Accounting
Principles Board Opinion No. 15 and establishes new guidelines for the
computation and presentation of earnings per share. A measurement
designated "basic earnings per share" replaces "primary earnings per
share." Basic earnings per share considers only outstanding common stock in
the computation. A measurement designated "diluted earnings per share"
replaces "fully diluted earnings per share," although the computations are
similar in that both give effect to all potentially dilutive securities.
The Company will be required to apply the provisions of SFAS No. 128 in the
fourth quarter of 1997, and earnings per share presented for earlier
periods will be required to be restated; earlier application of the new
standard is not permitted. The pro forma effect on loss per share for the
three months and six months ended June 30, 1997 and 1996, had adoption of
SFAS No. 128 been required in the second quarter of 1997, is not material.
4. DEBT REFINANCING
On March 31, 1997, the Company entered into a four-year, $13 million
revolving line of credit facility (the "RCF") with Wells Fargo Bank ("Wells
Fargo"). The initial borrowing drawdown under the RCF of $12.2 million on
April 3, 1997, was used to retire approximately $9.2 million of secured
debt relating to Womacks Casino. The Company also exercised a purchase
option and acquired a portion of Womacks Casino, previously subject to a
long-term operating lease, for $1.85 million. Bank fees and other costs
paid at closing were approximately $200,000 and the remaining proceeds are
available for general operating purposes. The RCF is secured by
substantially all of the real and personal property of Womacks Casino.
Borrowings bear interest at Wells Fargo's prime rate plus one percent,
payable quarterly, and an annual commitment fee of one-half percent,
payable quarterly, is charged on the unused portion of the RCF. The Company
also maintains an operating account with Wells Fargo, the balance of which
is offset against the outstanding borrowings for purposes of calculating
interest. The borrowing capacity under the RCF is reduced by $375,000
quarterly, beginning July 1, 1997. Quarterly repayments of principal are
required to the extent that outstanding borrowings exceed borrowing
capacity at the beginning of any quarter. Based upon the balance of
outstanding borrowings at June 30, 1997, and the scheduled reductions in
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<PAGE>
borrowing capacity over the next 12 months, the entire balance of
outstanding borrowings has been classified as long-term in the accompanying
balance sheet. Under the RCF, the Company is required to comply with
certain financial covenants, and Womacks Casino is subject to certain
capital expenditure requirements and restrictions on investments. In
connection with securing the RCF, the Company incurred and capitalized
approximately $350,000 of out-of-pocket costs, comprising principally
nonrefundable bank commitment fees and attorneys' fees, and including costs
incurred prior to closing. These deferred costs will be charged to
operations on a straight-line basis over the term of the RCF. An
extraordinary charge, net of income taxes, of $171,860, representing a
prepayment premium on one of the retired borrowings, was recognized in the
second quarter of 1997.
At June 30, 1997, the Company's outstanding borrowings under the RCF were
approximately $3.2 million less than available borrowing capacity.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-Looking Statements, Business Environment and Risk Factors
Information contained in the following discussion of results of operations and
financial condition of the Company contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, which can
be identified by the use of words such as "may," "will," "expect," "anticipate,"
"estimate," or "continue," or variations thereon or comparable terminology. In
addition, all statements other than statements of historical facts that address
activities, events or developments that the Company expects, believes or
anticipates, will or may occur in the future, and other such matters, are
forward-looking statements.
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere herein.
The Company's future operating results may be affected by various trends and
factors which are beyond the Company's control. These include, among other
factors, the competitive environment in which the Company operates, the
Company's present dependence upon the Cripple Creek, Colorado gaming market,
changes in the rates of gaming-specific taxes, shifting public attitudes toward
the socioeconomic costs and benefits of gaming, actions of regulatory bodies,
dependence upon key personnel, the speculative nature of gaming projects the
Company may pursue, risks associated with expansion, and other uncertain
business conditions that may affect the Company's business.
The Company cautions the reader that a number of important factors discussed
herein, and in other reports filed with the Securities and Exchange Commission,
could affect the Company's actual results and cause actual results to differ
materially from those discussed in forward-looking statements.
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<PAGE>
Results of Operations
On July 1, 1996, the Company acquired the assets of Gold Creek, the owner of
Womacks in Cripple Creek, Colorado. The accompanying financial statements
include the results of operations of Womacks only for the period subsequent to
June 30, 1996. Accordingly, results for the three months and six months ended
June 30, 1997, cannot be readily compared with results for the respective
periods in 1996.
Three Months Ended June 30, 1997 vs. 1996
Net operating revenue for the second quarter of 1997 was $5,057,845 compared
with $1,233,245 in the year-earlier period, an increase of 310%, principally as
a result of the Gold Creek acquisition. Casino revenue from the Company's
Cripple Creek operations increased to $4,919,156 from $1,209,387. On a pro forma
basis, Womacks' casino revenue increased 11.7% year over year in the second
quarter. The other component of casino revenue relates to the Company's cruise
ship concessions, which decreased from $125,569 to $89,578, primarily as a
result of the expiration of the casino concession contract for the Silver Cloud
in May 1997. The concession contract for the Silver Wind is up for renewal in
January 1998, and management believes it is likely that the contract will not be
renewed. Operating margin for the concession operations was $(9,669) for the
second quarter of 1997 and $18,235 for the year-earlier period. Gross margin
from all the Company's casino activities was 43.4% in 1997 and 62.9% in 1996.
The decrease in margin is primarily due to a higher effective gaming tax rate
resulting from the increased revenue base, as well as increased promotion and
marketing costs in the current-year period. Additionally, management believes
that ongoing construction undertaken on a property adjacent to Womacks Casino in
the first quarter of 1997 continues to have a negative effect on customer
walk-in traffic. Construction is expected to continue into the third quarter of
1997 and could have a further adverse impact on the operating margin of Womacks
Casino in the near term.
Food and beverage revenue increased 346% to $234,474. Womacks operates a
full-service restaurant and five bars, whereas in 1996 the Legends restaurant
operation was closed during the second quarter. The cost of food and beverage
promotional allowances, which are included in casino costs, increased to
$260,506 in the second three months of 1997 as compared with $35,760 in the
prior year. The increase in other revenue resulted principally from parking
facilities that Womacks began operating in the second half of 1996.
Although general and administrative expense increased from $698,520 to
$1,284,358, it represents a decrease as a percentage of net operating revenue
from 56.6% to 25.4%. Contributing to the percentage improvement were relatively
lower payroll costs, professional fees and travel expenses.
Depreciation expense increased to $387,262 from $139,590 and amortization of
goodwill increased to $335,376 from $186,002. Both increases were due mainly to
the Gold Creek acquisition.
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<PAGE>
Other expense, net, for the second quarter of 1997 comprised $315,861 of
interest expense, $40,956 of interest income, a loss of $45,373 from the
writedown of gaming equipment associated principally with the Silver Cloud
operations, and amortization of deferred costs of $21,741 related to the Wells
Fargo refinancing. Other expense, net, for the prior year period consisted of
$53,262 of interest expense, $66,260 of interest income, a loss of $174,466
principally related to the closing of the Legends restaurant and interior
remodeling of Legends in anticipation of the Gold Creek acquisition, and the
writeoff of previously deferred costs, totaling $306,692, related to debt
financing efforts which did not result in the consummation of financing. The
increase in interest expense from 1996 to 1997, is mainly attributable to the
overall increase in long-term debt which resulted from the Gold Creek
acquisition.
In connection with the Wells Fargo refinancing in April 1997, the Company
recognized an extraordinary charge of $171,860, net of tax benefit, which
resulted from a prepayment penalty applicable to one of the debt obligations
refinanced.
Six Months Ended June 30, 1997 vs. 1996
Net operating revenue increased by $7,158,883 to $9,525,989 for the six months
ended June 30, 1997 as compared with the 1996 period, principally as a result of
the Gold Creek acquisition. Consolidated casino revenue increased 302% on a
year-to-year basis, mostly attributable to the larger scale of operations in the
Cripple Creek market. On a pro forma basis, casino revenue from the Company's
Cripple Creek operations increased by 11.4%, with Womacks Casino maintaining a
17.2% market share in Cripple Creek for the first half of 1997. At June 30,
1997, Womacks Casino had approximately 11.3% of total gaming positions in
Cripple Creek. Casino revenue from the cruise ship concessions was little
changed from the prior year. The overall casino margin for the 1997 six-month
period was 42.5% as compared with 59.8% in 1996. Accounting for the lower margin
were a higher effective gaming tax rate and higher promotional and marketing
expenses.
Food and beverage revenue increased from $109,805 to $443,744, an increase of
304% from the prior year. The increase results from the more extensive
restaurant and bar facilities in service following the Gold Creek acquisition.
The cost of promotional allowances, included in casino cost, was $523,222 in
1997 and $95,944 in 1996.
General and administrative expense increased from $1,416,081 in the first six
months of 1996 to $2,594,479 in the 1997 period. As a percentage of net
operating revenue, however, this represents a decrease from 59.8% to 27.2%.
Proportionately lower payroll, professional service and travel costs were the
most significant components of the percentage improvement.
Year-to-date depreciation expense for 1997 was $737,387 as compared with
$269,329 for the same period in 1996. Goodwill amortization expense increased to
$670,752 from $371,377 a year earlier. Both increases are principally a result
of the Gold Creek acquisition.
Other expense, net, for the first six months of 1997 consisted of $526,377 of
interest expense, $78,758 of interest income, a loss of $46,133 from the
writedown of gaming equipment associated principally with the Silver Cloud
operations, and amortization of deferred costs of $21,741 related to the Wells
Fargo refinancing. Other expense, net, for the same period in the prior year
consisted of $96,791 of interest expense, $100,267 of interest income, a net
loss from the retirement and disposal of fixed assets of $154,243, principally
related to the closing of the Legends restaurant and interior remodeling of
Legends in anticipation of the Gold Creek acquisition, and the writeoff of
previously deferred costs, totaling $306,692, related to debt financing efforts
which did not result in the consummation of financing.
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<PAGE>
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments totaled $3,710,859 at June 30,
1997, and the Company had net working capital of $1,857,751. For the six months
ended June 30, 1997, cash used in investing activities included the purchase of
a portion of Womacks Casino, previously subject to a long-term operating lease,
for $1.85 million, approximately $500,000 of other fixed asset additions, and
the purchase of $1.5 million of short-term fixed income securities. The net cash
provided by financing activities of $22,536 principally resulted from the Wells
Fargo refinancing. At June 30, 1997, the Company's outstanding borrowings under
the Wells Fargo revolving credit facility were approximately $3.2 million less
than the available borrowing capacity of $13 million, providing the Company with
additional financial flexibility.
In June 1997, the Company filed applications with two consortia for casino
licenses in the province of Gauteng, South Africa. The Company has signed
long-term casino management contracts with both consortia, with one of the
agreements providing that, should a license be granted, the Company would make a
minority equity investment of approximately $2,000,000. The equity contribution,
if required, would likely be funded through the Company's existing cash and
short-term investments. Final decisions by regulatory authorities on the
outcomes of the two license applications are expected in the fourth quarter of
1997.
Management believes that the Company's working capital position at June 30,
1997, together with expected cash flow from operations, will be adequate to
satisfy its debt repayment obligations, meet its potential equity contribution
requirements and pursue additional business growth opportunities for the
foreseeable future.
* * * * * * * * * * * * * * * *
-12-
<PAGE>
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 which, in management's opinion, could have a
material adverse effect on the Company's financial position or results
of operations.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibit is filed herewith:
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
* * * * * * *
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
Vice President - Finance
Chief Accounting Officer and duly authorized officer
Date: August 1, 1997
-13-
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<NAME> Century Casinos Inc.
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<PERIOD-END> JUN-30-1997
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