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, 1999.
_______ 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
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CENTURY CASINOS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 84-1271317
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(State of incorporation) (IRS Employer ID No.)
200-220 E. Bennett Ave., Cripple Creek, Colorado 80813
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(Address of principal executive offices)
(719) 689-9100
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(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 5,
1999:
14,659,785
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CENTURY CASINOS, INC.
FORM 10-QSB
INDEX
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Page Number
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PART I. . FINANCIAL INFORMATION
Item 1. . . Financial Statements (unaudited)
Consolidated Balance Sheet as of June 30, 1999 . . . 3
Consolidated Statements of Operations for the Three
Months Ended June 30, 1999 and 1998 . . . . . . . . . 4
Consolidated Statements of Operations for the Six
Months Ended June 30, 1999 and 1998 . . . . . . . . . 5
Consolidated Statements of Comprehensive Income for
the Three and Six Months Ended June 30, 1999 and 1998 6
Consolidated Condensed Statements of Cash Flows for
the Six Months Ended June 30, 1999 and 1998 . . . . . 7
Notes to Consolidated Financial Statements. . . . . . 8
Item 2. . Management's Discussion and Analysis 12
PART II . . OTHER INFORMATION 16
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . 16
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -----------------------------------------
<S> <C>
June 30, 1999
---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . $ 2,011,348
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 909,618
---------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 2,920,966
PROPERTY AND EQUIPMENT, NET. . . . . . . . . . . . . . . . . . . . . 18,216,459
GOODWILL, NET. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,586,378
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,684,559
---------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,408,362
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . . . . . . . . $ 291,401
Accounts payable and accrued expenses . . . . . . . . . . . . . . . 1,932,680
---------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 2,224,081
LONG-TERM DEBT, LESS CURRENT PORTION . . . . . . . . . . . . . . . . 11,639,755
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; 14,659,785 shares outstanding . . . . 158,619
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 23,326,020
Accumulated other comprehensive loss - foreign currency translation (45,108)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . (2,620,685)
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20,818,846
Treasury stock - 1,202,100 shares, at cost . . . . . . . . . . . . . (1,274,320)
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Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . 19,544,526
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TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,408,362
===============
<FN>
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,
-----------------------------------
1999 1998
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OPERATING REVENUE:
Casino. . . . . . . . . . . . . . . . $5,412,492 $4,774,000
Food and beverage . . . . . . . . . . 209,143 220,483
Hotel . . . . . . . . . . . . . . . . 39,625 12,808
Other . . . . . . . . . . . . . . . . 37,189 18,747
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5,698,449 5,026,038
Less promotional allowances . . . . . (146,413) (174,862)
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Net operating revenue. . . 5,552,036 4,851,176
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OPERATING COSTS AND EXPENSES:
Casino. . . . . . . . . . . . . . . . 2,260,753 1,858,926
Food and beverage . . . . . . . . . . 124,071 81,151
Hotel 53,068 6,585
General and administrative . . . . . . . . . . . 1,495,976 1,336,405
Depreciation and amortization . . . . 796,614 750,906
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Total operating costs and expenses 4,730,482 4,033,973
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INCOME FROM OPERATIONS. . . . . . . . 821,554 817,203
Other expense, net. . . . . . . . . . (305,902) (232,116)
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INCOME BEFORE INCOME TAXES. . . . . . 515,652 585,087
Provision for income taxes. . . . . . 244,000 304,000
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NET INCOME. . . . . . . . . . . . . . $ 271,652 $ 281,087
============ ===========
EARNINGS PER SHARE:
Basic . . . . . . . . . . . . . . . . $ 0.02 $ 0.02
============ ===========
Diluted . . . . . . . . . . . . . . . $ 0.02 $ 0.02
============ ===========
<FN>
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,
-----------------------------------
1999 1998
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OPERATING REVENUE:
Casino . . . . . . . . . . . . . . . . $10,498,866 $9,053,897
Food and beverage. . . . . . . . . . . 419,966 396,961
Hotel. . . . . . . . . . . . . . . . . 77,736 24,685
Other. . . . . . . . . . . . . . . . . 55,039 44,177
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11,051,607 9,519,720
Less promotional allowances. . . . . . (306,333) (323,461)
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Net operating revenue . . . 10,745,274 9,196,259
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OPERATING COSTS AND EXPENSES:
Casino . . . . . . . . . . . . . . . . 4,384,025 3,587,299
Food and beverage. . . . . . . . . . . 237,648 154,534
Hotel. . . . . . . . . . . . . . . . . 103,315 14,013
General and administrative . . . . . . 2,956,009 2,672,129
Depreciation and amortization. . . . . 1,599,066 1,517,245
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Total operating costs and expenses. 9,280,063 7,945,220
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INCOME FROM OPERATIONS . . . . . . . . 1,465,211 1,251,039
Other expense, net . . . . . . . . . . (577,020) (139,628)
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INCOME BEFORE INCOME TAXES . . . . . . 888,191 1,111,411
Provision for income taxes (benefit) 427,000 (293,000)
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NET INCOME . . . . . . . . . . . . . . $ 461,191 $ 1,404,411
========== ===========
EARNINGS PER SHARE:
Basic. . . . . . . . . . . . . . . . . $ 0.03 $ 0.09
========== ===========
Diluted. . . . . . . . . . . . . . . . $ 0.03 $ 0.09
========== ===========
<FN>
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
- ----------------------------------------------------------------
For the Three Months Ended June 30,
-----------------------------------
1999 1998
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NET INCOME . . . . . . . . . . . . . . . $ 271,652 $ 281,087
Foreign currency translation adjustments (19,125) 2,179
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COMPREHENSIVE INCOME . . . . . . . . . . $ 252,527 $ 283,266
============== ===========
For the Six Months Ended June 30,
-----------------------------------
1999 1998
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NET INCOME . . . . . . . . . . . . . . . $ 461,191 $1,404,411
Foreign currency translation adjustments (29,800) (10,888)
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COMPREHENSIVE INCOME . . . . . . . . . . $ 431,391 $1,393,523
============= ===========
<FN>
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,
-----------------------------------
1999 1998
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Cash provided by operations. . . . . . . . . . . $ 1,364,277 $ 2,003,573
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Cash used in investing activities. . . . . . . . (372,096) (5,375,250)
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Cash provided by (used in) financing activities. (1,156,437) 1,857,347
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Decrease in cash and cash equivalents
(164,256) (1,514,330)
Cash and cash equivalents at beginning of period 2,175,604 4,227,978
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Cash and cash equivalents at end of period . . . $ 2,011,348 $ 2,713,648
============= ============
<FN>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid by the Company was $359,611 and $474,411 for the six months ended June 30, 1999 and
1998.
Income taxes paid by the Company were $492,000 and $324,489 for the six months ended June 30, 1999
and 1998.
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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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, and are pursuing a
number of additional gaming opportunities internationally and in the United
States. Prior to July 1, 1996, the Company's operations in Cripple Creek,
Colorado, consisted of Legends Casino ("Legends"), 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. 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/Legends Casino.
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, 1998.
2. INCOME TAXES
The income tax provisions for the three and six months ended June 30, 1999,
and for the three months ended June 30, 1998, are based on estimated full-year
income for financial reporting purposes adjusted for permanent book-tax
differences, comprising primarily nondeductible goodwill amortization resulting
from the Alpine acquisition. The income tax benefit of $293,000 for the six
months ended June 30, 1998, consists of (a) a nonrecurring benefit of $815,000
resulting from the reversal of the valuation allowance previously provided
against the Company's net deferred tax assets; and (b) a provision of $522,000,
based on estimated full-year income for financial reporting purposes adjusted
for nondeductible goodwill amortization.
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3. EARNINGS PER SHARE
Basic and diluted earnings per share for the three months ended June 30,
1999 and 1998 were computed as follows:
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For the Three Months Ended June 30,
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1999 1998
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Basic Earnings Per Share:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 271,652 $ 281,087
=========== ==========
Weighted average common shares. . . . . . . . . . . . . . . . . 14,659,785 15,343,583
=========== ==========
Basic earnings per share. . . . . . . . . . . . . . . . . . . . $ 0.02 $ 0.02
=========== ==========
Diluted Earnings Per Share:
Net income, as reported . . . . . . . . . . . . . . . . . . . . $ 271,652 $ 281,087
Interest expense, net of income taxes, on convertible debenture 8,412
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Net income available to common shareholders . . . . . . . . . . $ 271,652 $ 289,499
=========== ==========
Weighted average common shares. . . . . . . . . . . . . . . . . 14,659,785 15,343,583
Effect of dilutive securities:
Convertible debenture
271,739
Stock options and warrants. . . . . . . . . . . . . . . . . . . 276,504 80,583
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Dilutive potential common shares. . . . . . . . . . . . . . . . 14,936,289 15,695,905
=========== ==========
Diluted earnings per share. . . . . . . . . . . . . . . . . . . $ 0.02 $ 0.02
=========== ==========
Excluded from computation of diluted earnings per share
due to antidilutive effect:
Options and warrants to purchase common shares. . . . . . . . . 3,977,400 5,607,281
Weighted average exercise price . . . . . . . . . . . . . . . . $ 1.90 $ 2.03
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Basic and diluted earnings per share for the six months ended June 30, 1999 and
1998 were computed as follows:
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For the Six Months Ended June 30,
----------------------------------
1999 1998
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Basic Earnings Per Share:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461,191 $ 1,404,411
=========== ==========
Weighted average common shares. . . . . . . . . . . . . . . . . 14,663,535 15,566,798
=========== ==========
Basic earnings per share. . . . . . . . . . . . . . . . . . . . $ 0.03 $ 0.09
=========== ==========
Diluted Earnings Per Share:
Net income, as reported . . . . . . . . . . . . . . . . . . . . $ 461,191 $ 1,404,411
Interest expense, net of income taxes, on convertible debenture 16,824
----------- -----------
Net income available to common shareholders . . . . . . . . . . $ 461,191 $ 1,421,235
=========== ==========
Weighted average common shares. . . . . . . . . . . . . . . . . 14,663,535 15,566,798
Effect of dilutive securities:
Convertible debenture
271,739
Stock options and warrants. . . . . . . . . . . . . . . . . . . 219,909 75,526
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Dilutive potential common shares. . . . . . . . . . . . . . . . 14,883,444 15,914,063
=========== ==========
Diluted earnings per share. . . . . . . . . . . . . . . . . . . $ 0.03 $ 0.09
=========== ==========
Excluded from computation of diluted earnings per share
due to antidilutive effect:
Options and warrants to purchase common shares. . . . . . . . . 4,048,828 5,607,281
Weighted average exercise price . . . . . . . . . . . . . . . . $ 1.89 $ 2.03
</TABLE>
The convertible debenture would have had an antidilutive effect for the three
months and six months ended June 30, 1999 and therefore was excluded from the
calculation.
4. PRAGUE, CZECH REPUBLIC
On July 7, 1999, Casino Millennium a.s. opened its casino in the five-star
Marriott Hotel in Prague, Czech Republic. The Company has a 20-year agreement
with Casino Millennium a.s. to provide casino management services for 10% of
the casino's gross revenue and to provide certain gaming equipment for 45% of
the casino's net profit. Through June 30, 1999, the Company had made deposits
towards the purchase of gaming equipment totaling $1,140,000, with approximately
$360,000 remaining to be funded.
<PAGE>
5. NOTE PAYABLE TO FOUNDING SHAREHOLDER
In April 1999, the terms of an unsecured note payable to a founding shareholder
were amended. The previously existing principal balance of $420,360, plus
accrued interest of approximately $60,000, were combined into a new principal
amount of $480,000. The Company concurrently made a principal repayment of
$100,000. The remaining principal of $380,000 bears interest at 6%, payable
quarterly. The noteholder, at his option, may elect to receive any or all of
the unpaid principal by notifying the Company on or before April 1 of any year.
Payment of the principal amount so specified would be required by the Company on
or before January 1 of the following year. The entire outstanding principal is
otherwise due and payable on April 1, 2004.
6. EVENT SUBSEQUENT TO JUNE 30, 1999
On July 14, 1999, the Company received a payment from Hollywood Park, Inc. in
the amount of $1,040,000, which will be recognized as income in the third
quarter of 1999. The payment was received in accordance with the terms of the
Company's sale in 1995 of its interest in Pinnacle Gaming Development
Corporation, an applicant for an Indiana riverboat gaming license. The payment
was triggered by Hollywood Park's formal groundbreaking on the project. Upon
opening of the project, the Company is entitled to payments of $32,000 per month
for the first 60 months of the casino's operation; alternatively, the Company
may elect to receive (or Hollywood Park may elect to prepay) the monthly
installment payments in the aggregate discounted amount of $1,453,000. Opening
of the riverboat casino is expected in the second half of 2000.
<PAGE>
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.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 VS. 1998
- ----------------------------------------------
Net operating revenue for the first half of 1999 was $10,745,274 compared with
$9,196,259 for the same period in 1998, an increase of 16.8%. Casino revenue
for Womacks/Legends Casino increased from $9,053,897 in 1998 to $10,498,866 in
1999, or 16.0%. The increase was due to continuing efforts to optimize all
operational aspects of the casino. The casino's share of the Cripple Creek
market was 18.4% for the first half of 1999 compared with 16.7% a year earlier,
as the casino's revenue has grown at a faster rate than the Cripple Creek
market. Womacks/Legends Casino operated 14.7% of the slot machines in the
Cripple Creek market and achieved an average daily win per machine of $95 versus
the Cripple Creek average of $76. Gross margin for the Company's casino
activities decreased slightly to 58.2% from 60.4% a year earlier, due
principally to a higher effective gaming tax rate. The difference in the
effective gaming tax rate, year over year, resulted from a higher revenue base
in 1999, the graduated gaming tax rate structure, and a change in the taxing
authority's fiscal year which provided a one-time benefit in 1998.
<PAGE>
In June 1999, the Colorado Limited Gaming Control Commission (the "Commission")
approved changes to the tax rates applicable to gross gaming revenue for the
fiscal year ending June 30, 2000. The new rate structure will reduce the gaming
tax burden for casinos. For the gaming tax fiscal year ended June 30, 1999, the
Company incurred gaming taxes of approximately $2,450,000. Had the new gaming
tax rates been in effect during the same period, gaming taxes would have been
approximately $1,400,000. The Commission also rescinded the annual device fee
of $75 per gaming machine, which the Company expects to result in a savings of
over $40,000 on an annual basis. The tax relief afforded by these changes will
enable the Company, at its discretion, to make additional investments and other
improvements to Womacks/Legends Casino that could contribute to improving the
infrastructure of the market, creating new employment, solidifying existing
employment, and further strengthening Womacks/Legends Casino's position in the
Cripple Creek market.
Food and beverage revenue increased by 5.8% to $419,966 in the first half of
1999. The increase is principally due to improvement in operations that started
to take effect in the second quarter of 1999. The cost of food and beverage
promotional allowances, which is included in casino costs, decreased to $421,280
compared with $449,187 in the prior year as a result in a decrease in the level
of promotional allowances given to customers. The increase in hotel revenue and
associated costs is a result of the casino's marketing arrangement with a local
hotel that commenced in late 1998.
General and administrative expense as a percentage of net operating revenue was
27.5% for the first half of 1999 compared with 29.1% in 1998. This decrease was
mostly due to lower travel costs.
Depreciation expense increased to $928,314 in the 1999 period from $846,493 in
1998, primarily due to the addition of new machines and ongoing improvements to
Womacks/Legends Casino, while amortization of goodwill remained unchanged at
$670,752 for both periods.
Other expense, net, for the first half of 1999 comprised $20,258 of interest
income, $530,086 of interest expense, a loss of $2,937 from the disposal of
fixed assets, and amortization of deferred financing costs of $64,255. Other
income, net, for the second quarter of 1998 comprised $60,789 of interest
income, $454,236 of interest expense, a gain of $46,842 from the disposal of
fixed assets, a gain of $550,000 from a terminated management agreement, an
impairment loss of $196,022 for an investment in South Africa, amortization of
deferred financing costs of $49,151, and a writeoff of $97,850 of expired
supplier trade credits.
The income tax provision for the six months ended June 30, 1999, is based on
estimated full-year income for financial reporting purposes adjusted for
permanent book-tax differences, comprising primarily nondeductible goodwill
amortization resulting from the Alpine acquisition. The income tax benefit of
$293,000 for the six months ended June 30, 1998, consists of (a) a nonrecurring
benefit of $815,000 resulting from the reversal of the valuation allowance
previously provided against the Company's net deferred tax assets; and (b) a
provision of $522,000, based on estimated full-year income for financial
reporting purposes adjusted for nondeductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $2,011,348 at June 30, 1999, and the Company
had net working capital of $696,885. Additional liquidity may be provided by
the Company's revolving credit facility ("RCF") with Wells Fargo Bank, under
which the Company had unused borrowing capacity of approximately $9.2 million at
June 30, 1999. For the six months ended June 30, 1999, cash provided by
operations was $1,364,277 compared with $2,003,573 in the prior-year period,
with the decrease principally due to a higher current tax provision in the
current year. Cash used in investing activities of $372,096 for the six months
ended June 30, 1999, included fixed asset purchases and equipment deposits of
$1,415,222, partially offset by net redemptions of short-term investments of
$1,038,496. Cash used in financing activities for the first half of 1999
included net repayments of borrowings of $1,120,403.
<PAGE>
On July 7, 1999, Casino Millennium a.s. opened its casino in the five-star
Marriott Hotel in Prague, Czech Republic. The Company has a 20-year agreement
with Casino Millennium a.s. to provide casino management services for 10% of the
casino's gross revenue and to provide certain gaming equipment for 45% of the
casino's net profit. Through June 30, 1999, the Company had made deposits
towards the purchase of gaming equipment totaling $1,140,000, with approximately
$360,000 remaining to be funded. The Company expects to fund the remaining
capital commitment through a combination of operating cash flows and existing
liquidity.
On April 21, 1998, the Gauteng Gambling and Betting Board (the "Board")
announced the award of the remaining two gaming licenses for the province of
Gauteng, South Africa, which includes the major metropolitan areas of
Johannesburg and Pretoria. Silverstar Development Ltd. ("Silverstar"), the
consortium to which the Company is the contracted casino management partner, and
in which the Company holds a minority equity interest, had submitted an
application for a proposed $70 million, 1,700 gaming position hotel/casino
resort development. Silverstar was not awarded one of the licenses. The
Company recorded an impairment allowance against its entire equity investment in
Silverstar in the amount of $196,022, which was included in "other expense, net"
in the accompanying statement of operations for the three months ended June 30,
1998. Silverstar subsequently filed a legal action with the High Court of South
Africa (the "High Court") challenging the decision of the Board and the
provincial government in their failure to award a casino license to Silverstar
on the grounds that the decision-making process was legally deficient. On March
11, 1999, the High Court overturned the previous license award that had been
sought by Silverstar, and remanded the licensing process for the West Rand
region to the provincial government. The competing license applicant appealed
the ruling, but on April 15, 1999, the High Court rejected the request for leave
to appeal its March ruling. This defendant also made no request for leave to
appeal with the Appeals Court, the final court of appeal. On June 9, 1999, the
Executive Council of the provincial government resolved not to concur with the
Board's recommendation of the competing applicant. On July 26, 1999, the
competing applicant instituted action in the High Court seeking to overturn this
decision of the Executive Council. No date has yet been set for a hearing in
the High Court of the competing applicant's complaint. While there can be no
certainty as to the outcome of this action in the High Court or any future
adjudication regarding the award of the license, Silverstar and Century remain
confident as to the merits of their application.
Management believes that the Company's working capital position at June 30,
1999, together with expected cash flow from operations and borrowing capacity
under its revolving credit facility, will be adequate to satisfy its debt
repayment obligations, meet its anticipated capital expenditures and pursue
additional business growth opportunities for the foreseeable future.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is generally referred to as the Year 2000 ("Y2K") compliance
issue. As the year 2000 approaches, such systems may be unable to accurately
process certain date-based or date-sensitive information. The Company is
presently implementing its plan to ensure Y2K compliance. The Company believes
that it has identified all software applications, hardware components, equipment
and third-party vendors that could pose potential Y2K problems.
Computerized Systems and Components
- --------------------------------------
The computerized systems of most significance to the Company's ongoing business
operations are those that involve slot reporting, player tracking and
accounting. Those systems rely primarily on hardware and software obtained from
third-party vendors. The Company has contacted the respective vendors for these
systems and has received written confirmation that the software applications and
related hardware components currently in use for those systems are Y2K
compliant. Certain of these systems and components were upgraded during 1998.
The Company did not incur any significant incremental costs in making these
systems Y2K compliant.
<PAGE>
Non-IT-Dependent Systems and Equipment
- -----------------------------------------
The Company uses in its business certain systems and equipment that contain
embedded technology ("non-IT dependent systems") such as electronic gaming
devices, security and surveillance equipment, copiers and fax machines, alarm
systems and voicemail systems, among others. The most significant of these to
the Company's operations are electronic gaming devices, from which the Company
derives in excess of 95% of its net operating revenue. Based on written
responses from its vendors, the Company believes that substantially all of the
electronic gaming devices presently being used in the Company's operations are
Y2K compliant. The Company has tested its security and surveillance systems
internally and determined that they are Y2K compliant. The remaining
non-IT-dependent systems and equipment are not considered critical to the
Company's operations. Through its own evaluation or contact with the
appropriate vendors, the Company has determined that the majority of these
remaining systems and equipment are Y2K compliant. Management believes that
non-IT-dependent systems and equipment that have not yet been fully evaluated
for Y2K compliance would not have a material adverse effect on the Company's
operations in the event of Y2K noncompliance.
Third-Party Service Providers
- -------------------------------
The Company has identified and contacted certain primary service providers,
including its banks and payroll processor, to determine whether their potential
Y2K problems could have a material adverse effect on the Company. The Company
relies on its banks principally to fund expansion of operations, provide working
capital, and to process transactions. The failure of the Company's banks to
provide these services would likely have a material adverse effect on the
Company's day-to-day operations. The Company's banks have indicated that, as of
June 30, 1999, they had substantially completed testing their systems for Y2K
compliance, including testing of contingency plans. The Company's payroll
processor has indicated that it is fully Y2K compliant. Based upon the
information received from these service providers, the Company does not intend
to develop its own contingency plans for these activities.
The ability of the Company to conduct its operations is also dependent on the
provision of certain services such as electricity, water, natural gas,
telecommunications and the like by third parties, where there is limited or no
choice of alternative suppliers. Failures by such third-party suppliers would
have a material adverse effect on the Company's operations. The Company cannot
reasonably estimate the likelihood of Y2K-related failures by these suppliers to
provide their services. The Company does not believe that it is feasible to
develop or test contingency plans to cope with possible Y2K-related failures by
these third parties.
Current Status
- ---------------
With the exception of certain services on which the Company relies as described
in the preceding paragraph, the Company's information at this time does not
indicate that Y2K compliance issues will have a material adverse effect upon the
financial condition or results of operations of the Company. The Company's
incremental cost of its Y2K compliance program to date has not been significant
and incremental costs to be incurred by the Company to complete its Y2K
compliance program are not expected to be significant. There can be no
assurance, however, that the cost of Y2K compliance might not become material as
the Company's study progresses and more information becomes available.
* * * * * * * * * * * * * * * *
<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 exhibits are filed herewith:
10.82 Master Lease Agreement dated January 4, 1999 by and between Casino
Millennium a.s. and Century Management und Beteiligungs GmbH
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 1999.
* * * * * * *
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/ Norbert Teufelberger
___________________________
Norbert Teufelberger
Chief Financial Officer and duly authorized officer
Date: August 10, 1999
MASTER LEASE AGREEMENT
Date of MASTER LEASE: January 4, 1999
---------
<TABLE>
<CAPTION>
<PAGE>
<S> <C>
LESSOR: LESSEE:
CENTURY MANAGEMENT- UND B. GMBH CASINO MILLENNIUM A.S.
An Austrian Corporation ("LESSOR"), at A Czech corporation ("LESSEE"), at
Lerchengasse 2 Na Vaclavce 14
2340 Moedling, Austria Praha 1, Czech Republic
</TABLE>
RECITALS
WHERAS, LESSOR desires to lease certain equipment to LESSEE and LESSEE desires
to lease certain equipment from LESSOR; and
WHEREAS, to facilitate the lease of the equipment, the parties agree to enter
into this MASTER LEASE and to incorporate by reference from time to time lease
schedules for various units of equipment.
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the parties hereto agree as follows:
TERMS, CONDITIONS AND COVENANTS OF LEASE
1. This MASTER LEASE sets forth the terms and conditions by which LESSOR
agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the equipment
as listed and described in each lease schedule (hereinafter referred to as
"Lease Schedule") executed from time to time pursuant to this MASTER LEASE. Each
Lease Schedule shall be separate and distinct for all purposes and shall
incorporate therein all the Terms and conditions of this MASTER LEASE. If there
is a conflict between the Lease Schedule and this MASTER LEASE, the terms and
conditions of this MASTER LEASE shall govern and control.
2. TERM:
a. The term of this MASTER LEASE shall begin on the date of execution by
both LESSOR and LESSEE and shall continue in effect thereafter until all of
LESSEE'S obligations and liabilities under this MASTER LEASE and every Lease
Schedule have been fully performed or otherwise discharged.
b. The lease term for each Lease Schedule shall commence on the earlier of
the equipment installation, first use, or the Opening Date of the Casino as
defined in the Casino Services Agreement between LESSEE and Century Casinos
Management, Inc. (hereinafter referred to as "Commencement Date"). The lease
term shall continue for the number of months or years set forth in the Lease
Schedule (hereinafter referred to as "Initial Term") and continue for any
extended or renewal term. The first payment date of the Initial Term shall be
the first day of the month immediately following the Commencement Date (or
beginning on the Commencement Date if that date is on the first day of the
month).
c. LESSEE shall deliver to LESSOR a Certificate of Acceptance within five
(5) days of the Commencement Date. If LESSEE fails to deliver the Certificate of
Acceptance, LESSEE shall be deemed to have accepted the equipment as installed
and operational as of the Commencement Date unless LESSEE gives LESSOR written
notice of each defect within five (5) days of the Commencement Date.
<PAGE>
3. RENT AND PAYMENTS: LESSEE'S obligation to pay rent under each Lease
Schedule shall begin on the Commencement Date and continue for the term. The
monthly rent (hereinafter referred to as "Monthly Rent") set forth in the Lease
Schedule shall be due and payable monthly in arrears within five days of each
calendar month for the month before the preceding month during the Initial Term
without notice or demand notwithstanding the fact that LESSOR shall invoice
LESSEE. If the Commencement Date of a Lease Schedule shall be other than the
first day of the month, LESSEE shall make a rental payment (hereinafter referred
to as "Interim Rent") equal to 1/30th of the Monthly Rent set forth in the Lease
Schedule for each day beginning with the Commencement Date to and including the
last day of the month prior to the beginning of the Initial Term. Any amounts
payable by LESSEE under this MASTER LEASE other than the Monthly Rent and
Interim Rent shall be deemed to be additional rent (hereinafter referred to as
"Additional Rent") and shall be paid within twenty (20) days of invoicing by
LESSOR. Rent shall be paid to LESSOR at the address designated herein or at such
other place as LESSOR designates in writing, or if to an assignee of LESSOR, at
such place as such assignee shall designate in writing, by check or wire
transfer so that all funds are immediately available. As used herein, the term
"rents" shall mean all Monthly Rent, Interim Rent and Additional Rent. THIS IS A
-
NONCANCELABLE LEASE. LESSEE shall pay the total rents for the entire term to
LESSOR, or LESSOR'S assignee, and such payment of rents shall be absolute and
unconditional without right to setoff, reduction, abatement, counterclaim,
recoupment, or defense of any kind whatsoever.
a. SERVICE CHARGE: In the event that any rent is not received by LESSOR or
LESSOR'S assignee within five (5) days of the due date thereof, LESSEE shall pay
a penalty in the amount equal to 3% (three percent) per annum above the Czech
interbank base interest rate in respect of the outstanding rent, for every day
that the said rent remains outstanding. The penalty shall be payable at the same
time as the payment of the arrears. In the event of default of payment of the
penalty, the penalty shall continue to be charged at the same rate until it is
paid. By payment of such default interest the LESSOR's right to claim
compensation for damages arisen as a result of the said default is not affected
b. LEASE BASIS COST: The term "Lease Basis Cost" as defined herein means
the cost of acquiring, delivering and installing the equipment including but not
limited to all parts, materials, labor, services, transportation, taxes, and all
other charges of every kind and nature associated therewith.
c. NON-PERFORMANCE: If LESSEE fails to perform any of its covenants,
warranties, terms or conditions herein, LESSOR may, at its option, perform on
LESSEE's behalf and all monies advanced by LESSOR, if any, shall be repayable by
LESSEE as Additional Rent. However, in no event shall LESSOR'S performance on
behalf of LESSEE be deemed to relieve LESSEE of its obligations hereunder.
4. LEGAL TITLE, LIENS AND QUIET ENJOYMENT: During the term of this MASTER
LEASE, legal title to all equipment, including software, wiring and cabling,
shall at all times vest in LESSOR. LESSEE'S interest in the equipment shall be
limited to its possession and use and LESSEE shall not have or assert any right,
title or interest therein, except as expressly set forth herein, and shall
protect, indemnify and defend, at its expense, LESSOR'S legal title. LESSEE
shall, at its expense, keep the equipment free and clear of any lien or
encumbrance of any kind whatsoever except that of LESSOR arising hereunder.
LESSEE warrants that the equipment will at all times remain personal property,
regardless of how it may be affixed to any real property. Prior to LESSOR'S
acceptance of this MASTER LEASE, LESSEE shall provide LESSOR with a waiver, in
form satisfactory to LESSOR, by any person having an interest in the premises in
which the equipment is located, of such landlord's or mortgagee's rights in and
to the equipment and/or the rent due under this MASTER LEASE. In lieu of such
waiver, LESSEE HEREBY AGREES TO HOLD LESSOR harmless and indemnify LESSOR with
regard to any and all claims, actions, damages, costs and attorneys fees
asserted by any landlord or mortgagee against LESSOR or the equipment herein.
LESSOR shall have the right to affix a stencil, plate, label or other indicia of
its ownership to the equipment and LESSEE shall not remove or conceal such
identification. LESSEE shall have the right to quiet enjoyment of the equipment
during the term of the Lease Schedule, so long as no Event of Default (as herein
defined) occurs.
5. TAXES: LESSEE shall pay all taxes, including but not limited to value
added tax, any import duties and levies all assessments or fees assessed against
the equipment, including all accessories, attachments and upgrades, or payable
by LESSOR or LESSEE with respect to the equipment, including any interest or
penalties therein, excepting only federal or state taxes based on the net income
of LESSOR.
<PAGE>
6. LOCATION, USE, MODIFICATIONS AND ALTERATIONS: LESSEE shall not move, or
permit the movement of, the equipment from the location (hereinafter referred to
as "Equipment Location") specified in the Lease Schedule without LESSOR'S prior
written consent. LESSEE shall not use, or permit the use of, the equipment
unless such use is consistent with LESSEE'S business, by Century Casinos
Management, Inc. (or any of its assigns or affiliates) as operators/managers
under LESSEE'S control and in compliance with (A) applicable laws and
regulations; (B) the specifications of, and use contemplated by, the
manufacturer of the equipment (hereinafter referred to as "Manufacturer"); (C)
the terms of LESSEE'S insurance coverage and (D) the requirements of LESSEE'S
maintenance agreement regarding the equipment. LESSEE shall not discontinue
using the equipment for any extended period of time. LESSEE shall not make any
modifications, alterations or additions to the equipment without LESSOR'S prior
written consent (other than manufacturer's changes, as such term is hereinafter
defined) unless said additions (A) are readily removable without causing any
damage to the equipment and (B) do not impair the quality, safety, function or
marketability of the equipment (hereinafter referred to as a "Permitted
Modification"). Any Permitted Modification shall not become the property of
LESSOR and shall not be subject to the Lease Schedule, provided that upon
termination or expiration of the term, LESSEE shall remove all Permitted
Modifications and restore the equipment to its original condition (ordinary wear
and tear excepted), all at no expense to LESSOR. LESSEE shall permit the
Manufacturer, its agents or its contractors, access to the equipment for the
purpose of performing such upgrades, recall orders or engineering changes as the
Manufacturer shall require to enhance or maintain the equipment's standard of
performance (herein defined as "Manufacturer's Changes), all of which shall
immediately become the property of LESSOR and be subject to the Lease Schedule.
7. MAINTENANCE AND INSPECTION: THIS IS A NET LEASE. LESSEE shall, at its own
expense, maintain the equipment in good condition and repair and furnish all
necessary repairs, parts, materials and supplies. At all times herein, LESSEE
shall keep in full force and effect a maintenance agreement with the
Manufacturer or, with LESSOR'S consent, with an equivalent service organization
that routinely maintains such equipment (hereinafter referred to as "Equivalent
Service Organization"). LESSEE shall also create and preserve maintenance
records on the equipment. During reasonable business hours and subject to
LESSEE'S reasonable security precautions, LESSEE shall permit LESSOR access to
all of the equipment for the purpose of inspecting the equipment and maintenance
records to determine LESSEE'S compliance with this MASTER LEASE. If LESSEE is
not in compliance with this MASTER LEASE, LESSOR shall notify LESSEE in writing
of the acts of noncompliance and LESSEE shall immediately cease using the
equipment until full compliance is achieved or LESSOR shall have a maintenance
agreement put in place and invoice the LESSEE for charges incurred.
8. DISCCLAIMER OF WARRANTIES: LESSEE has selected at its own risk the
Manufacturer, size and design of the equipment in accordance with the terms and
conditions of the purchase order which LESSEE has issued, or induced LESSOR to
issue. LESSEE acknowledges the LESSOR is not the Manufacturer, or its agent or
distributor, and that LESSOR MAKES NO REPRESENTATIONS OR WARRANTY OF ANY KIND
WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO REPRESENTATIONS OR
WARRANTIES WITH RESPECT TO THE MERCHANTABILITY, VALUE, CONDITION, QUALITY,
DESIGN, CAPACITY, MATERIAL, WORKMANSHIP OR FITNESS OR SUITABILITY FOR ANY
PURPOSE OR USE BY LESSEE, OR PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSOR
SHALL NOT BE LIABLE FOR LOSSES OR DAMAGES THEREFROM, INCLUDING BUT NOT LIMITED
TO LOSS OF BUSINESS, OR ACTUAL OR ANTICIPATED PROFITS, OR OTHER DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER ARISING ROM THIS
MASTER LEASE OR THE EQUIPMENT. So long as no Event of Default (as herein
defined) has occurred and continues uncured, LESSOR assigns LESSEE all of
Manufacturer's warranties and indemnification's, to the extent said warranties
and indemnification's are assignable.
<PAGE>
9. RISK OF LOSS: LESSEE hereby assumes and shall bear the entire risk of
changes to, loss, theft, damage, destruction or seizure (hereinafter referred to
as "Event of Loss") of the equipment from every cause whatsoever. No Event of
Loss shall relieve LESSEE of its obligations to pay rent or to perform any other
obligation under this MASTER LEASE. If any of the equipment is damaged and
repairable, LESSEE shall promptly notify LESSOR of the occurrence of the Event
of Loss and shall, at LESSEE'S expense within thirty (30) days of such Event of
Loss, cause repairs to be made to the equipment to restore it to the condition
required pursuant to Section 6 herein. If the equipment is damaged beyond repair
or lost, stolen, destroyed or seized, LESSEE shall promptly notify LESSOR of the
occurrence of the Event of Loss and shall, at LESSEE'S expense within thirty
(30) days of the Event of Loss, replace the equipment with like equipment in
good repair and working order, causing title to vest in LESSOR free and clear of
all liens, claims and encumbrances.
10. INSURANCE: LESSEE shall provide and maintain, at its sole cost and
expense: (1) all risk property insurance on the equipment for its full
replacement value in an amount no less than the Casualty Value, and (2)
comprehensive public liability and property damage insurance on the equipment in
amounts not less than ATS ______________ per occurrence and ATS_____________ in
the aggregate, with an insurer reasonably acceptable to LESSOR considering the
risks to be insured. LESSEE shall provide LESSOR or its assigns (in a form
acceptable to LESSOR) with certificates of insurance and a loss payable
endorsement in favor of LESSOR and its assigns, as loss payee for property
damage coverage and as additional insured for public liability coverage. LESSEE
shall provide a copy of the insurance policy under which the certificates are
issued to LESSOR. The insurance endorsement shall provide that the coverage
shall not be materially altered or cancelled unless thirty (30) days prior
written notice has been given to LESSOR and its assigns, and that the coverage
afforded to LESSOR and its assigns, shall not be rescinded, impaired or
invalidated by any act or omission of LESSEE. LESSOR may apply proceeds of any
such insurance to any of LESSEE'S obligations hereunder, but shall pay excess
proceeds, if any, to LESSEE upon LESSEE'S full satisfaction of its obligations
hereunder.
11. GENERAL INDEMNIFICATION: Except for liability arising from the gross
negligence or willful misconduct of LESSOR, its employees or agents, LESSEE
hereby agrees to indemnify, defend, protect and hold LESSOR, its agents,
employees, directors and assigns harmless from and against any and all claims,
losses, damages, injuries, suits, demands or expenses, including but not limited
to attorney's fees and costs of whatever kind and nature, arising in connection
with the equipment, including without limitation its selection, purchase,
installation, use, de-installation, delivery, return or manufacture (including
without limitation patent, trademark or other infringement). LESSEE shall
promptly notify LESSOR or its assigns of any matter hereby indemnified against.
12. RETURN OF EQUIPMENT: Upon the expiration of any Lease Schedule or
termination for any other cause, LESSEE at is sole cost and expense, shall
assemble, crate, insure and deliver all of the equipment, including cabling,
wiring, attachments and accessories thereto, and all operating manuals along
with maintenance and service records relating thereto, subject to the Lease
Schedule, to LESSOR in the same good condition and repair as when received,
ordinary wear and tear excepted, to such destination as LESSOR shall designate.
<PAGE>
13. LESSEE'S REPRESENTATIONS AND WARRANTIES: LESSEE represents and warrants
to LESSOR with regard to this MASTER LEASE and each Lease Schedule to be
executed hereunder that:
a. The execution, delivery and performance of the MASTER LEASE and any Lease
Schedule have been duly authorized by all necessary action on the part of LESSEE
and this MASTER LEASE constitutes a valid and binding obligation of LESSEE
enforceable against LESSEE in accordance with its terms;
b. The individual(s) executing the MASTER LEASE on behalf of the LESSEE is
(are) duly authorized;
c. Neither the execution or delivery by LESSEE of the MASTER LEASE, nor the
performance thereof by LESSEE, conflicts with, results in a breach of or
constitutes a default or violation of LESSEE'S Certificate of Incorporation,
By-Laws, Statutes, applicable law, court order or any agreement or other
instrument to which LESSEE is a party or by which it is bound;
d. LESSEE is duly organized and in good standing in its state of
incorporation, will be duly qualified to do business in each jurisdiction where
the equipment is located and where such qualification is required;
e. Upon request by LESSOR, LESSEE shall furnish its most recent audited
annual financial statements prepared in accordance with generally accepted
accounting principles;
f. LESSEE shall provide to LESSOR any other documents reasonably requested
to consummate this transaction or any Lease Schedule or as reasonably required
under this MASTER LEASE;
g. No approval, consent or authorization is required from any governmental
authority with respect to the execution, delivery or performance of this MASTER
LEASE, or if any such approval, consent or authorization is required, it will be
obtained.
14. EVENT OF DEFAULT: The occurrence of any of the following events shall
constitute an event of default by LESSEE (hereinafter referred to as an "Event
of Default")
a. Failure to pay when due any installment of rent or other sum due
hereunder, and such failure shall continue for more than five (5) days; or
b. Failure to perform any other term or condition, covenant, representation
or warranty of this MASTER LEASE or any Lease Schedule, and such failure
continues for a period of twenty (20) days after notice thereof; or
c. If LESSEE ceases doing business as a going concern, becomes insolvent,
admits in writing its inability to pay its debts as they become due, makes as
assignment for the benefit of its creditors, file a voluntary petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state
statue, law or regulation, admits, consents to or acquiesces in the appointment
of a receiver or trustee of any of its property, the commission of any act of
dissolution, liquidation or the bankruptcy or death of the LESSEE'S guarantor in
the event that the guarantor is a natural person; or
d. If LESSEE voluntarily or involuntarily permits the Equipment to be
subject to a lien, the event will be a breach of LESSEE'S covenants under the
MASTER LEASE; or
e. Failure within sixty (60) days after the commencement of any proceeding
against LESSEE seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, bankruptcy or similar relief under any
current or future federal or state statute, law or regulation to obtain the
dismissal of such proceeding; or
f. If any warranty, covenant or representation made by LESSEE to LESSOR is
false, incorrect or untrue in any material respect; or if any equipment subject
to a Lease Schedule is attached, levied upon, encumbered, pledged or seized; or
LESSEE defaults under any other agreement with LESSOR or LESSOR'S Affiliates; or
defaults under any other material lease, loan or agreement for the borrowing of
money; or
g. If the LESSEE is a corporation, a controlling interest of the stock of a
corporate lessee is transferred (whether in increments or on one occasion) to
person(s) or other legal entities other than those holding said controlling
interests at the date of execution of the MASTER LEASE; or
h. There is a material adverse change in the financial condition of LESSEE;
or
i. There is a change in the Use of Equipment; or
j. If Century Casinos Management, Inc. (or its assigns or affiliates) is no
longer managing/operating under a Casino Services Agreement with LESSEE; or
k. If the composition of the board of directors or supervisory board of
LESSEE is changed without LESSOR'S prior written consent; or
l. If LESSEE'S shareholders sell, pledge or otherwise dispose of their
shares in LESSEE without LESSOR'S prior written consent; or
m. If any of LESSEE'S shareholders shall give notice or otherwise terminate
the effectiveness of the Power of Attorney delivered to the LESSOR.
<PAGE>
15. REMEDIES: At any time after an Event of Default, LESSOR shall have the
right to immediately exercise any one or more of the following cumulative
remedies:
a. Accelerate without notice to LESSEE all of LESSEE'S obligations hereunder
and to sue for and recover all rents and other amounts which have accrued and
would be payable for six months following the Event of Default under this MASTER
LEASE, all of which shall become immediately due and payable upon demand by
LESSOR;
b. Require that LESSEE assemble the equipment and deliver it to LESSOR as
provided under Section 12 or enter the premises where any equipment is located
without notice or process of law and take possession of the equipment without
incurring any liability to LESSEE or any other party for any damages arising
from such taking of possession;
c. Sell any or all of the equipment at public or private sale or relet same;
d. Cancel this MASTER LEASE or any Lease Schedule as to any or all of the
equipment;
e. At law or in equity, enforce any of LESSOR'S rights or pursue any other
remedy now or hereafter arising.
LESSOR'S remedies hereunder are cumulative in nature, not exclusive and the
exercise of any particular remedy shall not be construed to be an election of
remedies by LESSOR nor shall any waiver or delay by LESSOR of any of its rights
or remedies under this MASTER LEASE be construed as a waiver of LESSOR'S rights
to enforce that, or any other, right or remedy in the future. Notwithstanding
LESSOR'S election of remedies, LESSEE shall remain liable for the present value
of all rents and other amounts which have accrued or would have accrued during
the six months following the Event of Default, in addition to (A) all of
LESSOR'S costs and expenses incurred in enforcing its rights hereunder, or in
taking of possession, storing, repairing, selling or reletting the equipment and
(B) court costs and reasonable attorney's fees, less (C) the net proceeds of a
public or private sale or reletting, if any, of the equipment, and (D) any
insurance proceeds recovered by LESSOR from insurance coverage provided by
LESSEE.
16. ASSIGNMENT AND SUBLEASE:
a. LESSOR'S ASSIGNMENT: LESSOR shall have the absolute right to assign this
MASTER LEASE and all LEASE SCHEDULES to any of its directly or indirectly
controlled affiliates at any time.
b. LESSEE understands and acknowledges that LESSOR has entered into this
MASTER LEASE and shall enter into each Lease Schedule in anticipation of
assigning, mortgaging, or otherwise transferring its rights and interests
thereunder and/or in the equipment (but not its obligations) to others
(hereinafter referred to as "Assignees") without notice to or the consent of
LESSEE. Accordingly, LESSOR and LESSEE agree that LESSEE will, after due notice,
acknowledge in writing such notice of assignment as reasonably requested by
LESSOR or its Assignee, and pay directly to the designated Assignee the amounts
which become due under each assigned Lease Schedule and such payment shall be
absolute and unconditional, without reduction, abatement, offset or counterclaim
of any kind. Notwithstanding the foregoing, LESSEE reserves its rights to have
recourse directly against LESSOR on account of any claim it may have against
LESSOR.
c. LESSEE'S ASSIGNMENT AND SUBLEASE: Without LESSOR'S prior written consent,
LESSEE shall not: (A) assign any of its obligations hereunder, (B) attempt to
sublease the equipment or (C) attempt to sell, transfer, hypothecate, dispose
of, lend or abandon the equipment or any of LESSEE'S rights in it. However,
LESSEE may at its expense, sublease its rights in the equipment to a
wholly-owned subsidiary or affiliate upon thirty (30) days prior written notice
to LESSOR, provided that: (A) such sublease shall not relieve LESSEE of any of
its obligations to LESSOR hereunder, and (B) such sublease shall be expressly
subject and subordinate to the terms of this MASTER LEASE, and (C) LESSEE and
sub-lessee agree to take such reasonable steps as LESSOR may request to protect
the title of LESSOR or its Assignee in and to the equipment. LESSEE shall pay to
LESSOR the costs and expense of accomplishing any assignment or sublease.
17. CHOICE OF LAW AND FORUM: This MASTER LEASE and the provisions contained
herein shall be deemed to have been executed and to be performed at LESSOR'S
parent company's principal place of business in Colorado AND SHALL BE GOVERNED
IN ALL RESPECTS BY THE LAWS OF THE State of Colorado.
18. NOTICES: All notices or demands provided for herein shall be in writing
and shall be deemed given when delivered or deposited, first class, postage
prepaid, addressed to the parties at their respective addresses set forth above,
or a such or other address as may be provided from time to time.
19. SURVIVAL OF OBLIGATIONS: All the terms and conditions, representations,
covenants, warranties and agreements contained in this MASTER LEASE and in any
Lease Schedule or in any document in connection herewith shall specifically
survive the expiration or termination of this MASTER LEASE.
<PAGE>
20. SEVERABILITY: To the extent any provision of this MASTER LEASE or any
Lease Schedule is deemed partially or wholly invalid or unenforceable under
applicable law, such provision shall be effective to the extent valid and
enforceable, and all other provisions shall remain in full force and effect.
21. LESSOR'S CONSENT: When LESSOR'S consent is required by the terms of this
MASTER LEASE, such consent shall not be unreasonably withheld.
22. LEASE SCHEDULE REAFFIRMATION: The execution by LESSOR and LESSEE of each
Lease Schedule shall constitute a reaffirmation by LESSEE of its covenants,
representations and warranties herein and that the same are true, correct and
complete with respect to the Lease Schedule as of the date of execution of each
Lease Schedule.
23. HEADINGS: All section headings of this MASTER LEASE are for convenience
only, and shall not in any way limit or affect the meaning or scope of this
MASTER LEASE or its provisions.
24. NO WAIVER: No delay, omission or failure to act by LESSOR at any time to
exercise or enforce any right or remedy herein provided shall be a waiver of any
such right or remedy to which LESSOR is entitled, nor shall it in any way affect
the right of LESSOR to enforce such provisions thereafter.
25. ENTIRE AGREEMENT: This MASTER LEASE constitutes the entire agreement of
the parties hereto concerning the lease of equipment and no other written or
oral representations or warranties shall be binding upon the parties hereto. NO
AGENT OR EMPLOYEE OF THE MANUFACTURER OR SELLER OF THE EQUIPMENT IS AUTHORIZED
TO BIND LESSOR TO THIS MASTER LEASE OR ANY OTHER AGREEMENT OR TO WAIVE OR MODIFY
ANY OF THE PROVISIONS HEREOF. Any modification or waiver of any of the
provisions herein shall be effective only if in writing and executed by all of
the parties hereto, provided however that LESSOR may add applicable equipment
serial or identification numbers to Lease Schedules and financing statements.
26. SUCCESSOR: This MASTER LEASE and each Lease Schedule shall be binding
upon and shall inure to the benefit of LESSOR, LESSEE and their respective
successors, legal representatives and assigns.
27. STATUTORY FINANCE LEASE: LESSEE agrees and acknowledges that it is the
intent of both parties to this MASTER LEASE that it qualify as statutory
finance lease _________________________. LESSEE acknowledges and agrees that
LESSEE has selected both: (1) the equipment and (2) the supplier from whom
LESSOR is to purchase the equipment. LESSEE acknowledges that LESSOR has not
participated in any way in LESEE'S selection of the equipment or of the supplier
and LESSOR has not selected, manufactured, or supplied the equipment nor is he
an agent or a dealer of any of the above-mentioned. LESSEE is advised that it
may have rights under the contract evidencing the LESSOR'S purchase of the
equipment from the supplier chosen by LESSEE and that LESSEE should contact the
supplier of the equipment for a description of any such rights.
28. MULTIPLE LESSEES: If more than one LESSEE is named within this MASTER
LEASE, the liability of each shall be joint and several.
29. LEASE ACCEPTANCE: At no time shall this MASTER LEASE or any Lease
Schedule be deemed to constitute an offer binding upon LESSOR until it is
accepted by execution of LESSOR.
<PAGE>
<TABLE>
<CAPTION>
CASINO MILLENNIUM A. S.
(LESSEE)
<S> <C>
By:_________________________________ By:______________________________
a duly authorized signatory a duly authorized signatory
Position: Shareholder Position: Shareholder
Print name: Alois Slezacek Print name: Michal Janeba
By:_/s/ Gernot Leuthmetzer_______ By:_/s/ Peter Hoetzinger___________
a duly authorized signatory a duly authorized signatory
Position: Member of the Board Position: Member of the Board
Print name: Gernot Leuthmetzer Print name: Peter Hoetzinger
CENTURY MANAGEMENT- UND B. GMBH
(LESSOR)
By:_/s/ Erwin Haitzmann___________ By:___/s/ Peter Hoetzinger_____
a duly authorized signatory a duly authorized signatory
Position: Chairman Position: Vice Chairman
Print name: Erwin Haitzmann Print name: Peter Hoetzinger
</TABLE>
<PAGE>
LEASE SCHEDULE
This Lease Schedule incorporates the terms and conditions of Master Lease
Agreement dated as of the ___4th__ day of _January____, 1999 (the "Master
Lease") by and between Century Management- und B. GmbH, ("Lessor") and
CASINO MILLENNIUM A. S.
-----------------------
("Lessee")
THIS IS A NON CANCELABLE LEASE SCHEDULE
1. Initial Term: 240 (two-hundred-and-forty) months commencing with the
---
first day of the month immediately following the Commencement Date (or beginning
with the Commencement Date if that date is the first day of the month.) The term
of this Master Lease shall automatically continue for a further period of 60
(sixty) months unless one party serves notice to the other party of their
intention to terminate this Master Lease at the end of the initial 240 months
period as defined above. Such notice must be in writing and delivered to the
other party by registered mail no later than six months before the end of the
initial 240 months term.
2. Rental Payments: 45% (forty-five percent) of the Gross Profit (Income
before Corporate Tax, according to Czech accounting regulations) of LESSEE'S
operations, plus any and all applicable taxes (e.g. VAT or DPH). The applicable
exchange rate for the computation of the rental payments shall be the average
exchange rate valid on the payment date as announced by the Czech National Bank.
3. LESSEE shall be obliged to pay to LESSOR a security deposit in the amount
equal to and under the same terms and conditions as the security deposit payable
from LESSEE to B. H. Centrum, a.s. under the Lease Agreement for the casino
premises (Article 9- Security).
4. Equipment: (See EXHIBIT A, Equipment Schedule attached hereto and made a
part hereof)
5. Commencement Date: _________________, as evidenced by the Certificate of
Acceptance, issued in respect to this Lease Schedule.
6. Equipment Location: the Equipment shall be located and operated in the
space leased by LESSEE for use as a casino at the Prague Millennium Plaza only.
7. Use of Equipment: all Equipment must be managed and operated by Century
Casinos Management, Inc. (or any of its affiliates or assigns) under a Casino
Services Agreement with LESSEE at all times.
ENTIRE AGREEMENT: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A
COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND AGREES TO BE BOUND BY ITS TERMS
AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE SCHEDULE, THE MASTER
LEASE AND ALL RIDERS THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT AND SUPERSEDE
ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER
COMMUNICATION BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY UNIT OF EQUIPMENT.
<PAGE>
This Lease Schedule is effective only upon acceptance by LESSOR.
Accepted on __January 4, 1999__________.
<TABLE>
<CAPTION>
CASINO MILLENNIUM A. S.
(LESSEE)
<S> <C>
By:____/s/ Alois Slezacek___________ By:___/s/ Michal Jeneba____________
a duly authorized signatory a duly authorized signatory
Position: Shareholder Position: Shareholder
Print name: Alois Slezacek Print name: Michal Janeba
By:____/s/ Gernot Leuthmetzer__________ By:__/s/ Peter Hoetzinger_____________
a duly authorized signatory a duly authorized signatory
Position: Member of the Board Position: Member of the Board
Print name: Gernot Leuthmetzer Print name: Peter Hoetzinger
CENTURY MANAGEMENT- UND B. GMBH
(LESSOR)
By:_/s/ Erwin Haitzmann______________ By:__/s/ Peter Hoetzinger_____________
a duly authorized signatory a duly authorized signatory
Position: Chairman Position: Vice Chairman
Print name: Erwin Haitzmann Print name: Peter Hoetzinger
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911147
<NAME> Century Casinos Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 2011348
<SECURITIES> 0
<RECEIVABLES> 396974
<ALLOWANCES> 0
<INVENTORY> 55660
<CURRENT-ASSETS> 2920966
<PP&E> 23512889
<DEPRECIATION> 5296430
<TOTAL-ASSETS> 33408362
<CURRENT-LIABILITIES> 2222634
<BONDS> 11639755
<COMMON> 158619
0
0
<OTHER-SE> 19385907
<TOTAL-LIABILITY-AND-EQUITY> 33408362
<SALES> 0
<TOTAL-REVENUES> 10745274
<CGS> 0
<TOTAL-COSTS> 4724988
<OTHER-EXPENSES> 4555075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 530086
<INCOME-PRETAX> 888191
<INCOME-TAX> 427000
<INCOME-CONTINUING> 461191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 461191
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
