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 SEPTEMBER 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
November 5, 1999: 14,573,985
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CENTURY CASINOS, INC.
FORM 10-QSB
INDEX
Page Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet as of September 30, 1999 3
Consolidated Statements of Operations for the Three 4
Months Ended September 30, 1999 and 1998
Consolidated Statements of Operations for the Nine 5
Months Ended September 30, 1999 and 1998
Consolidated Statements of Comprehensive Income for 6
the Three and Nine Months Ended September 30, 1999
and 1998
Consolidated Condensed Statements of Cash Flows for 7
the Nine Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis 12
PART II OTHER INFORMATION 16
SIGNATURES 17
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -----------------------------------------
September 30, 1999
------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,341,776
Prepaid expenses and other 1,323,493
-------------------
Total current assets 4,665,269
PROPERTY AND EQUIPMENT, NET 19,196,494
GOODWILL, NET 10,251,002
OTHER ASSETS 622,134
-------------------
TOTAL $ 34,734,899
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 183,165
Accounts payable and accrued expenses 3,053,062
-------------------
Total current liabilities 3,236,227
LONG-TERM DEBT, LESS CURRENT PORTION 10,565,472
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; 14,588,785 shares outstanding 158,619
Additional paid-in capital 23,329,189
Accumulated other comprehensive
loss - foreign currency translation (41,226)
Accumulated deficit (1,164,709)
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22,281,873
Treasury stock - 1,273,100 shares, at cost (1,348,673)
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Total shareholders' equity 20,933,200
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TOTAL $ 34,734,899
===================
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 September 30,
----------------------------------------
1999 1998
---- ----
OPERATING REVENUE:
Casino $ 6,435,965 $ 5,192,797
Food and beverage 281,116 265,117
Hotel 54,967 14,314
Other 111,190 56,758
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6,883,238 5,528,986
Less promotional allowances (178,515) (172,609)
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Net operating revenue 6,704,723 5,356,377
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OPERATING COSTS AND EXPENSES:
Casino 2,221,757 2,125,148
Food and beverage 160,107 173,742
Hotel 49,274 7,171
General and administrative 1,654,924 1,521,415
Depreciation and amortization 848,382 728,153
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Total operating costs and expenses 4,934,444 4,555,629
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INCOME FROM OPERATIONS 1,770,279 800,748
Other income, net 764,697 135,723
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INCOME BEFORE INCOME TAXES 2,534,976 936,471
Provision for income taxes 1,079,000 391,000
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NET INCOME $ 1,455,976 $ 545,471
============= ===========
EARNINGS PER SHARE:
Basic $ 0.10 $ 0.04
============= ===========
Diluted $ 0.10 $ 0.04
============= ===========
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- -----------------------------------------------------
For the Nine Months Ended September 30,
---------------------------------------
1999 1998
---- ----
OPERATING REVENUE:
Casino $ 16,934,831 $ 14,246,694
Food and beverage 701,082 662,078
Hotel 132,703 38,999
Other 166,229 100,935
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17,934,845 15,048,706
Less promotional allowances (484,848) (496,070)
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Net operating revenue 17,449,997 14,552,636
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OPERATING COSTS AND EXPENSES:
Casino 6,605,782 5,712,447
Food and beverage 397,755 328,276
Hotel 152,589 21,184
General and administrative 4,610,933 4,193,544
Depreciation and amortization 2,447,448 2,245,398
-------------- -------------
Total operating costs and expenses 14,214,507 12,500,849
-------------- -------------
INCOME FROM OPERATIONS 3,235,490 2,051,787
Other income (expense), net 187,677 (3,905)
-------------- -------------
INCOME BEFORE INCOME TAXES 3,423,167 2,047,882
Provision for income taxes 1,506,000 98,000
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NET INCOME $ 1,917,167 $ 1,949,882
============== =============
EARNINGS PER SHARE:
Basic $ 0.13 $ 0.13
============= =============
Diluted $ 0.13 $ 0.13
============= =============
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 September 30,
----------------------------------------
1999 1998
---- ----
NET INCOME $ 1,455,976 $ 545,471
Foreign currency translation adjustments 3,882 28,616
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COMPREHENSIVE INCOME $ 1,459,858 $ 574,087
============= ===========
For the Nine Months Ended September 30,
---------------------------------------
1999 1998
---- ----
NET INCOME $ 1,917,167 $ 1,949,882
Foreign currency translation adjustments (25,918) 17,728
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COMPREHENSIVE INCOME $ 1,891,249 $ 1,967,610
============= =============
See notes to consolidated financial statements.
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------
For the Nine Months Ended September 30,
---------------------------------------
1999 1998
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Cash provided by operating activities $ 3,346,457 $ 3,804,414
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Cash provided by (used in) investing activities 233,024 (4,787,566)
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Cash provided by (used in) financing activities (2,413,309) 178,021
------------- -----------
Increase (decrease) in cash and
cash equivalents 1,166,172 (805,131)
Cash and cash equivalents at beginning of period 2,175,604 4,227,978
------------- -----------
Cash and cash equivalents at end of period $ 3,341,776 $ 3,422,847
============= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid by the Company was $695,860 and $729,901 for the nine months
ended September 30, 1999 and 1998.
Income taxes paid by the Company were $736,000 and $443,591 for the nine
months ended September 30, 1999 and 1998.
See notes to consolidated financial statements.
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ENTURY 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, manage a hotel casino
in Prague, Czech Republic, 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 nine months ended September 30,
1999, and for the three months ended September 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 provision of $98,000 for
the nine months ended September 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
$913,000, 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 September
30, 1999 and 1998 were computed as follows:
For the Three Months Ended September 30,
----------------------------------------
1999 1998
---- ----
Basic Earnings Per Share:
Net income $ 1,455,976 $ 545,171
=========== ============
Weighted average common shares 14,649,752 15,187,135
=========== ============
Basic earnings per share $ 0.10 $ 0.04
=========== ============
Diluted Earnings Per Share:
Net income, as reported $ 1,455,976 $ 545,471
Interest expense, net of income
taxes, on convertible debenture 8,321 8,412
------------ ------------
Net income available to common
Shareholders $ 1,464,297 $ 553,883
============ ============
Weighted average common shares 14,649,752 15,187,135
Effect of dilutive securities:
Convertible debenture 271,739 271,739
Stock options and warrants 174,748 60,864
------------ ------------
Dilutive potential common shares 15,096,239 15,519,738
============ ============
Diluted earnings per share $ 0.10 $ 0.04
============ ============
Excluded from computation of
diluted earnings per share
due to antidilutive effect:
Options and warrants to purchase
common shares 3,774,928 5,607,281
Weighted average exercise price $ 1.92 $ 2.03
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Basic and diluted earnings per share for the nine months ended September 30,
1999 and 1998 were computed as follows:
For the Nine Months Ended September 30,
---------------------------------------
1999 1998
---- ----
Basic Earnings Per Share:
Net income $ 1,917,167 $ 1,949,882
============ ============
Weighted average common shares 14,658,941 15,440,244
============ ============
Basic earnings per share $ 0.13 $ 0.13
============ ============
Diluted Earnings Per Share:
Net income, as reported $ 1,917,167 $ 1,949,882
Interest expense, net of income
taxes, on convertible debenture 24,962 24,962
------------ ------------
Net income available to common
shareholders $ 1,942,129 1,974,844
============ ============
Weighted average common shares 14,658,941 15,440,244
Effect of dilutive securities:
Convertible debenture 271,739 271,739
Stock options and warrants 172,406 69,988
------------ ------------
Dilutive potential common shares 15,103,086 15,781,971
============ ============
Diluted earnings per share $ 0.13 $ 0.13
============ ============
Excluded from computation of
diluted earnings per share
due to antidilutive effect:
Options and warrants to
purchase common shares 3,774,928 5,678,709
Weighted average exercise price $ 1.92 $ 2.01
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 to provide casino management services for 10% of the
casino's gross revenue. The agreement required the Company to provide certain
gaming equipment, which the Company leases to Casino Millennium for 45% of the
casino's net profit. Through September 30, 1999, the Company had expended
approximately $1,140,000 for the purchase of the gaming equipment, with an
additional $360,000 remaining to be funded.
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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 and 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 a portion of or all 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. OTHER INCOME
In July 1999, the Company received a payment from Hollywood Park, Inc. in the
amount of $1,040,000, which was 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) an aggregate discounted amount
of $1,453,000 in lieu of the monthly installments. While the Company believes
that Hollywood Park intends to complete the project, there can be no assurance
that Hollywood Park will do so, or, if the project is completed, when the
additional payments will be earned and received by the Company; accordingly, any
future payments to the Company will be recognized as income when earned.
Opening of the riverboat casino is expected in the second half of 2000.
7. AGREEMENT WITH FORMER OFFICER/DIRECTOR
In October 1999, in connection with the termination of an officer/director's
employment, the Company entered into a noncompete agreement with the former
officer/director with a term through March 31, 2001 for consideration of twelve
monthly payments of $14,000 beginning January 2000. The area covered by the
noncompetition agreement includes any geographical area in which the Company is
present. The Company will reflect the future monthly payments as expense over
the term of the noncompetition agreement. The agreement also provides for
limited consulting services to be performed by the former officer/director
during 2000.
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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
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS. 1998
- ----------------------------------------------------
Net operating revenue for the first nine months of 1999 was $17,449,997 compared
with $14,552,636 for the same period in 1998, an increase of 19.9%. Casino
revenue for Womacks/Legends Casino, included in net operating revenue for such
periods, increased to $16,934,831 in 1999 from $14,212,450 in 1998, or 19.2%.
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 18.3% for
the first nine months of 1999 compared with 16.6% a year earlier, as the
casino's revenue has grown at a faster rate than the Cripple Creek market.
Womacks/Legends Casino operated 14.5% of the slot machines in the Cripple Creek
market and achieved an average daily win per machine of $102 versus the Cripple
Creek average of $81. Gross margin for the Company's casino activities increased
slightly to 61.0% from 59.9% a year earlier, due principally to improved casino
operating efficiencies, partially offset by an overall increase in gaming taxes.
During the first nine months of 1999, the increase in the effective gaming tax
rate, compared to the first nine months of 1998, 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. The
overall increase in taxes during the current year was less than it otherwise
would have been as the Company began realizing the benefit of the reduced gaming
tax rates which became effective July 1, 1999, as discussed in the following
paragraph.
12
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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 5.9% to $701,082 in the first nine months
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
$627,160 compared with $660,102 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 and continued through September
1999.
General and administrative expense as a percentage of net operating revenue was
26.4% for the first nine months of 1999 compared with 28.8% in 1998. This
decrease was mostly due to lower expenses for legal and professional fees,
parking rent, office relocation and workers' compensation insurance.
Depreciation expense increased to $1,441,320 in the first nine months of 1999
from $1,239,270 in 1998, primarily due to the addition of new machines and
ongoing improvements to Womacks/Legends Casino, while amortization of goodwill
remained unchanged at $1,006,128 for both periods.
Other income, net, for the first nine months of 1999 comprised $29,290 of
interest income, $775,727 of interest expense, a loss of $9,504 from the
disposal of fixed assets, amortization of deferred financing costs of $96,382,
and income of $1,040,000 from a payment received relating to the Company's
economic interest in a riverboat gaming application in Indiana. Other expense,
net, for the first nine months of 1998 comprised $81,429 of interest income,
$745,844 of interest expense, a gain of $47,842 from the disposal of fixed
assets, a gain of $550,000 from a terminated management agreement, income of
$431,000 from a payment received relating to the Company's economic interest in
the riverboat gaming application, an impairment loss of $196,022 for an
investment in South Africa, amortization of deferred financing costs of $74,460,
and a writeoff of $97,850 of expired supplier trade credits.
The income tax provision for the nine months ended September 30, 1999, is based
on estimated full-year income for financial reporting purposes which has been
adjusted for permanent book-tax differences, primarily consisting of
nondeductible goodwill amortization resulting from the Alpine acquisition. The
income tax provision of $98,000 for the nine months ended September 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 $913,000, based on estimated
full-year income for financial reporting purposes which has been adjusted
primarily for nondeductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $3,341,776 at
September 30, 1999, and the Company had net working capital of $1,456,042.
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 $10.8 million at September 30, 1999. For the nine
months ended September 30, 1999, cash provided by operating activities was
13
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$3,346,457 compared with $3,804,414 in the prior-year period, with the decrease
principally due to a higher current tax provision and increases in prepaid and
other current assets of approximately $576,000 in the current year. Cash
provided by investing activities of $233,024 for the nine months ended September
30, 1999, included a $1,040,000 payment received relating to the sale of the
Company's interest in the riverboat gaming application and net redemptions of
short-term investments of $1,038,496, partially offset by fixed asset purchases
of $1,774,753 and advances of $65,458 to Casino Millennium a.s. Cash used in
financing activities for the first nine months of 1999 included net repayments
of borrowings of approximately $2,303,000.
In July 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 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. As of September 30, 1999, the Company has purchased gaming equipment
totaling $1,140,000 which is being leased to the casino, and has an additional
$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.
In April 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 statements of operations for the periods ended September 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. In March 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
in April 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. In June 1999, the Executive Council of
the provincial government resolved not to concur with the Board's recommendation
of the competing applicant. In July 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. There can be no certainty regarding the award
of this license.
Management believes that the Company's working capital position at September 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 nearing
the conclusion 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.
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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
and 1999. The Company did not incur any significant incremental costs in making
these systems Y2K compliant.
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
September 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.
15
<PAGE>
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. The Company has
concluded its study of its major systems and believes that such systems are Y2K
compliant; however, there can be no assurance that the cost of Y2K compliance
might not become material if different information becomes available.
* * * * * * * * * * * * * * * *
PART II
OTHER INFORMATION
Item 1. - Legal Proceedings
On July 16, 1999, a competing applicant for a license in the West Rand area of
Gauteng, South Africa, threatened in correspondence to take action against the
Company in an unspecified court in the United States with regard to certain
statements in the Company's 1998 Annual Report which the competitor alleged to
be defamatory and for which it claimed it would seek damages of approximately
$1.6 million. The Company and its legal advisers in South Africa believe the
allegations of the competitor to be entirely without merit and vexatious in
nature. To date, no action in this regard has been initiated by that competitor
(a South African company) in the United States. On September 28, 1999, the
competitor was granted an urgent order by the High Court of South Africa against
a director of the Company and the Company's South African subsidiary (together,
the "Respondents") to seize and have held in the safekeeping of the sheriff of
the High Court certain documents the competitor alleged to be vital for the
substantiation of its claim against the Company. The procedure leading to the
grant of this order of the High Court provided no opportunity for the
Respondents to defend the action before the order was granted, or the seizure
pursuant thereto was made. Subsequent to the seizure of the documents, the
Respondents sought to overturn the seizure order of the High Court. On October
22, 1999, a judge of the High Court overturned the previous court order and
awarded costs against the competitor and in favor of the Respondents while
further causing all documents to be returned. In overturning the previous
order, the judge questioned the motives of the competitor in initiating the
action and awarded costs in favor of the Respondents on the highest level of a
punitive scale as a mark of the disapproval of the court for the competitor's
conduct. Under South African law, an unsuccessful party does not have an
automatic right of appeal in the High Court but leave must be granted by the
Trial Judge or the Chief Justice. The competitor has lodged an application for
leave to appeal and the court has yet to determine whether to grant the
competitor leave to prosecute an appeal.
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.
16
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibits are filed herewith or incorporated by
reference as indicated:
10.83 Waiver and Release and Consulting Agreement between Norbert
Teufelberger and Century Casinos, Inc., dated October 15, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended September 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/ Larry J. Hannappel
___________________________
Larry J. Hannappel
Chief Accounting Officer and duly authorized officer
Date: November 11, 1999
17
<PAGE>
Exhibit 10.83
WAIVER AND RELEASE AND CONSULTING AGREEMENT
------ --- ------- --- ---------- ---------
I. RECITALS
A. Norbert Teufelberger (hereinafter referred to as "Employee') has
been employed by Century Casinos, Inc., and by CCI's wholly-owned Austrian
subsidiary "Century Management-und Beteiligungs GmbH" ("CMB") (collectively
referred to as "CCI"). The term CCI shall also include all of CCl's subsidiaries
and affiliates without exception. Employee and CCI are desirous of terminating
their employment relationship in an amicable manner under the terms of this
Waiver and Release and Consulting Agreement ("Waiver and Release"). Employee
also has held certain positions with CCI's subsidiaries and served as a director
on CCI's Board. By this Waiver and Release the parties also seek to reiterate
and ensure that all employment and business relationships between them are
terminated, except as specifically provided herein with regard to Employee's
service as a consultant.
B. This Waiver and Release sets forth below the terms and conditions of an
amicable settlement and a full accord and satisfaction of all claims and
controversies between Employee and CCI. Neither party admits to any wrongful
conduct by entering this release, and each party specifically denies such.
C. This Waiver and Release is executed in conjunction with the termination
of Employee's employment, and other relationships with CCI, but the scope of
this Waiver and Release is broader than that. The parties intend to settle by
this Waiver and Release all matters between them relating to or arising out of
events occurring up to the date of this Waiver and Release.
<PAGE>
II. COVENANTS
A. CCI agrees to make the following payments to Employee, in settlement
of any claims and as the entire payment for all claims that might have been
brought in any lawsuit or in any state or federal judicial or administrative
forum up to the date of the execution of this Waiver and Release, including any
claims for attorneys' fees and costs. The payments are also consideration for
Employee's other agreements contained herein. The payments shall be as follows:
I. CCI will forgive debt in the approximate amount of $38,000.00
(Thirty-Eight Thousand Dollars) owed by Employee to CCI.
2. CCI will allow Employee to keep furniture valued at approximately
$11,000 (Eleven Thousand Dollars) originally purchased by CCI.
3. CCI will allow Employee to keep the laptop computer (including
accessories) and two cellular telephones currently in Employee's possession.
4. CCI will pay Employee the sum of $40,000.00 (Forty Thousand Dollars) upon
the effective date of the Waiver and Release. The parties understand and agree
that this payment specifically represents payment for any severance to which
Employee may be entitled under the law of any country or political subdivision
of any country, as well as payment for Employee's returning all securities he
may have received under any plan of CCI.
<PAGE>
5. CCI will pay the additional amount of $14,000.00 (Fourteen Thousand
Dollars) each month for a period of 12 months beginning January, 2000 and
continuing through December, 2000. This amount shall be due on or before the
final Friday of the month. Employee shall not demand prepayment, but parties
agree that CCI may prepay this amount at any time in one or more lump sum
payments by paying Employee the net present value of the sum of the payments
still due Employee discounted at the U. S. Fed. Funds rate existing on the day
before the payment is made. These payments are specifically amounts to be paid
to Employee for services rendered as a consultant, as well as for Employee's
agreement not to compete as described below. Employee may, with CCI's approval,
which shall not be unreasonably withheld, nominate an assignee for receiving
these payments, subject, however, that the assignee shall be 100% owned and
controlled by Employee. The parties understand that CCI may determine in good
faith, but no later than the day CCI has filed the 10-KSB for 1999 with the SEC,
that Employee owes CCI some amount that the parties are not now aware of.
Employee agrees that CCI may deduct such amounts, in good faith, from any
payments due under this section, and CCI will inform Employee of the reason for
such deduction made. It is explicitly stated that CCI is aware of - and will
therefore not deduct - payments that have been made to Employee for Employee's
company car and his private use thereof, transportation costs (including
flights) of Employee's family for the purpose of avoiding alienation phenomena
<PAGE>
between Employee and Employee's family, Employee's personal use of telephones,
Employee's corporate apartment in Prague up to US-$ 2,000 per month, family
health insurance, payments for green card attorney and tax consulting up to
September 30, 1999 and CCI's contributions to its 401Kplan.
B. In consideration of the payment by CCI to Employee of the
payments described in paragraph Il-A above, Employee, individually and on behalf
of his successors, heirs, and assigns, hereby forever releases, remises, waives,
acquits, and discharges CCI, together 'with any and all parent corporations of
CCI and their respective subsidiaries, successors, predecessors, assigns,
directors, officers, shareholders, supervisors, employees, attorneys, agents,
and representatives, from any and all actions, causes of action, claims,
demands, losses, damages, costs, attorneys' fees, judgments, liens,
indebtedness, and liabilities whatsoever, known or unknown, suspected or
unsuspected, past or present, arising from or relating or attributable to
Employee's employment by CCI, the termination of said employment, Employee's
subsequent search for other employment to the date of this Agreement, and,
without limiting the generality of the foregoing, from any and all matters
asserted, or which could have been asserted, in any state or federal judicial or
administrative forum, or in any judicial or administrative forum in any country
outside the United States, up to the date of this Waiver and Release,
specifically, but not by way of limitation, including claims under the Fair
Labor Standards Act, as amended, the National Labor Relations Act, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Post-Civil War
Reconstruction Acts, as amended, the Age Discrimination in Employment Act, as
<PAGE>
amended, the Americans with Disabilities Act, the Civil Rights Act of 1991, any
state civil rights act, and any claim of wrongful discharge, tort or contract
arising out of the common law of any state, and any claim of any kind arising
under the law of any country outside the United States- Employee agrees not to
pursue any claims he may have for pain and suffering, intentional infliction of
emotional distress, or similar claims. Employee further agrees that he will
provide no support of any kind for any person who threatens or brings any claim
against CCI. Employee will only provide information to any person, who Threatens
or brings a claim against CCI, under subpoena or court order and after informing
CCI of the subpoena or court order in question. Likewise CCI on its behalf, and
on behalf of any and all parent corporations, and their respective subsidiary
corporations, hereby forever releases, remises, waives, acquits, and discharges
Employee and his successors, assigns, or agents from any and all actions, causes
of action, claims, demands, losses, damages, costs, attorneys' fees, judgments,
liens, indebtedness, and liabilities whatsoever, known or unknown, suspected or
unsuspected, past or present, arising from or relating or attributable to
Employee's employment by CCI, the termination of said employment, Employee's
subsequent search for other employment to the date of this Agreement, and,
without limiting the generality of the foregoing, specifically from any and all
matters asserted or which could have been asserted in any lawsuit, up to the
date of this Waiver and Release.
<PAGE>
C. The payments referenced above shall be made without applying
withholdings of any kind and shall be reported on the Form 1099. The Employee
specifically agrees that he alone shall be responsible to pay any tax on the
payments due to any taxing authority and that the CCI has no responsibility to
do so.
D. CCI and Employee hereby covenant and warrant that they have not assigned
or transferred to any person any portion of any claims which are released,
remised, waived, acquitted, and discharged in paragraph 11-B above.
E. Also in consideration for the payments described in paragraph II.A,
above, Employee agrees as follows:
1. Within five (5) days of the signing of this Waiver and Release, Employee
will surrender to CCI all securities of every kind, Employee has received under
any CCI plan to issue securities, including but not limited to all warrants or
options. Under no circumstances will Employee exercise, attempt to exercise,
transfer, or attempt to transfer such warrants or options except as provided in
this sub-paragraph.
2. Employee confirms that he has resigned from any positions with CCI,
effective September 30, 1999, including any Director positions on the Board of
Directors of CCI, or any of its parents, affiliates or subsidiaries.
3. Employee will make himself available for consulting, and will consult in
good faith with CCI's designees for three hours every month, through December
31, 2000. Consultations shall take place by telephone, fax, electronic message
or similar methods chosen by CCI.
<PAGE>
4. Except as provided at the end of this paragraph II.E.4., for a period of
18 months after the effective date of this Agreement, Employee shall not within
any state of the United States, or within any country outside the United States,
where CCI operates any of its existing businesses, directly or indirectly,
either for the Employee's own account or as a partner, shareholder (other than
shares regularly traded in a recognized market), officer, employee, agent or
otherwise, be employed by, be connected with, participate in, consult or
otherwise associate with, any other business, enterprise or venture that is the
same as, similar to or competitive with CCI. As an example, and not as a
limitation, the foregoing shall preclude Employee's being in any way involved
with the management of any casino or gaming enterprise, or the giving of advice
or consultation concerning same, within the designated geographical areas and
time period. For purposes of this Waiver and Release, and specifically for
purposes of this covenant not to compete, Employee agrees that he is and has
been part of the "Executive and Management Personnel" of CCI as that term is
used in Colorado Revised Statutes 8-2-113, and that the duties of Employee
included the formulation and execution of management policy. As a limited
exception to this promise not to compete, CCI specifically agrees that Employee
may advise, be associated with or be employed by any company whose business
<PAGE>
involves gaming on the Internet only. Under no circumstances may such company
(in markers/areas where CCI currently operates) accept wagers or promote gaming
in any fixed location such as a casino, office or shop, or else this one
permitted exception to the covenant not to compete will not apply. CCI
recognizes that gaming on the Internet may not be legal in certain places and
does not endorse or sponsor such activity by agreeing to this limited exception.
5. Employee agrees that he will return to CCI all property of CCI in
his possession, including but not limited to keys, credit cards, files, plans,
reports, and data of every kind relating to CCI's business, without limitation,
including but not limited to spreadsheets, calculations, and budgets. Employee
recognizes that this obligation specifically includes any data relating to CCI's
business stored in any electronic medium, whatever, including but not limited
to, any computer system or laptop computer in the Employee's possession or to
which the Employee has access. Employee agrees be will return such property
within five (5) days of the signing of this Waiver and Release to Mr. Christian
Kettner, or such other persons designated by CCI.
<PAGE>
6. Employee recognizes that as a managerial employee and director of
CCI, he had access to "Confidential Information" of CCI. For purposes of this
Waiver and Release, "Confidential Information" shall include any of CCI's
proprietary information or trade secret information as defined by Colorado Law.
"Confidential Information" specifically includes, but is not limited to, the
following types of information: discoveries, ideas, concepts, designs, drawings,
specifications, techniques, models, data, documentation, diagrams, flow charts,
research (including market research), financial information, processes,
procedures, marketing and development plans, customer names and other
information relating to customers, price lists, pricing and operational policy,
and financial information. Information, however, which is generally known in the
trade, or generic information which is learned outside of Employee's association
with CCI, shall not be deemed "Confidential Information" Employee agrees that he
will not disclose CCI's "Confidential Information" to any person, or entities,
without CCI's prior written permission.
7. Employee also agrees for a period of 18 months after the effective
date of this Waiver and Release, Employee will not, either directly or
indirectly, on Employee's own behalf or in the service of or on behalf of
others, employ any employee of CCI, or solicit, or recruit any employee of CCI
to leave employment with CCI, or otherwise terminate employment with CCI, or
join a competitor of CCI.
<PAGE>
8. Employee expressly recognizes that any breach of his obligations
under paragraphs II. E. 4, 5, 6, or 7 would result in irreparable injury to CCI
and agrees that CCI shall be entitled to institute and prosecute proceedings in
the Colorado State District Court, Fourth Judicial District, to enforce the
specific performance of paragraphs II. E. 4, 5, 6, or 7 or to enjoin Employee
from activities in violation of paragraphs II. E. 4, 5, 6, or 7, not
withstanding any other provision of this Agreement, including paragraph II.M.
With regard to Employee's obligations under paragraph II. E. 4, 5, 6, or 7,
Employee also recognizes that any remedy for CC1 at law would be inadequate, and
that CCI is or would be entitled to an injunction to enjoin the violations of
Employee's obligations under paragraphs II. E. 4, 5, 6, or 7. Employee
specifically agrees that in the event of a violation or threatened violation of
these sub-paragraphs, CCI may obtain an injunction, without posting any bond or
other security, to restrain the unauthorized violation or failure to comply with
Employee's obligations under paragraphs II. E. 4, 5, 6 or 7.
9. Employee also agrees to sign any papers necessary in connection with his
resignation from any position with CCI or the Board of CCI or any of its
parents, affiliates, or subsidiaries.
<PAGE>
F. Employee expressly agrees to keep the substance of negotiations and
conditions of the settlement, and the terms and substance of this Waiver and
Release, strictly confidential. With the exception of immediate family, tax
advisors, and attorneys, Employee further agrees that he will not communicate
(orally or in writing) or in any way disclose the substance of negotiations and
conditions of the settlement, and the terms or substance of this Waiver and
Release to any person, judicial or administrative agency or body, business
entity or association, or anyone else, for any reason whatsoever, without the
prior express written consent of CCI, unless compelled to do so by law. It is
expressly agreed that this confidentiality provision is an essential provision
of this Waiver and Release. Employee, may, however, disclose the terms of the
consulting portion of this Waiver and Release (II. E. 3) to his new employer.
CCI shall also agree to keep this Waiver and Release confidential, unless
otherwise advised by counsel.
G. Apart from the payment described in paragraph 11-A above, which Employee
will receive after the effective date of this Waiver and Release, each party
will bear its own costs and attorneys' fees.
H. This Waiver and Release sets forth the complete agreement between the
parties. No other covenants or representations have been made or relied on by
the parties, and no other consideration, other than that set forth herein, is
due between the parties. Specifically, but without limiting the scope of the
foregoing, no payment of money between the parties is due in any way, in any
amount, or on account of any charge, including attorneys' fees, other than the
sum described in paragraph II-A above.
<PAGE>
I. Employee represents that he has read this Waiver and Release and
understands each of its terms. Employee further represents that no
representations, promises, agreements, stipulations, or statements have been
made by CCI, or its parent corporation or their respective subsidiaries,
successors, predecessors, assigns, directors, officers, employees, shareholders,
supervisors, agents, attorneys, or representatives to induce this settlement,
beyond those contained herein. Employee further represents that he voluntarily
signs this Waiver and Release as his own free act.
J. If any provision of this Waiver and Release should be declared to be
unenforceable by any administrative agency or court of law, the remainder of the
Waiver and Release shall remain in full force and effect, and shall be binding
upon the parties hereto as if the invalidated provision were not part of this
Waiver and Release.
K. Colorado law shall govern the interpretation of this Waiver and Release.
L. Employee agrees that he shall not publicly disparage or deprecate CCI,
its officers or employees.
M. Except as provided in paragraph II.E.8, any dispute concerning the
interpretation of this Agreement, or the parties' obligations under this
Agreement, shall be resolved by final binding arbitration, under the
then-existing rules of the American Arbitration Association for Commercial
Arbitration, in Colorado Springs, Colorado. The arbitrator will be selected
pursuant to the mutual agreement of the parties, and, if the parties are unable
to agree, the arbitrator will be designated by the Chief Judge of the Fourth
Judicial District Court, State of Colorado. Any award rendered by the arbitrator
shall be enforced, if necessary, in the Fourth Judicial District Court, State of
Colorado. The arbitrator may award any relief recognized by Colorado law, which
could be awarded by a District Court of this State, including injunctive relief
and attorneys' fees. The arbitrator shall award reasonable attorneys' fees and
costs to the prevailing party.
<PAGE>
N. If a party is required to initiate an action in court to enforce this
Agreement, or to assert this Agreement as a defense to an action initiated by
the other party, the prevailing party shall be entitled to its costs and
attorneys' fees from the other party, to the extent such costs and fees are
related to the enforcement of this Agreement or the assertion of it as a
defense.
O. Employee certifies that, as of September 30, 1999, to the best of his
knowledge and professional judgment, all of CCI's books, financial statements,
and related data are in satisfactory order and are in conformance with all
rules, regulations, and laws that pertain to such data and information.
IN WITNESS THEREOF, and intending to be legally bound, the parties have
executed this Waiver and Release.
<PAGE>
- ------
Century Casino Inc.
- ------- ------ ---
By: /s/ Erwin Haitzmann
Its: Chairman & CEO
Date: Oct 15, 1999
Norbert Teufelberger
- ---------------------
By: /s/ Norbert Teufelberger
Dated: 10/13/99
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000911147
<NAME> Century Casinos, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-01-1999
<EXCHANGE-RATE> 1
<CASH> 3,341,776
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 58,999
<CURRENT-ASSETS> 4,665,269
<PP&E> 25,003,390
<DEPRECIATION> 5,806,896
<TOTAL-ASSETS> 34,734,899
<CURRENT-LIABILITIES> 3,236,227
<BONDS> 10,565,472
0
0
<COMMON> 158,619
<OTHER-SE> 20,774,581
<TOTAL-LIABILITY-AND-EQUITY> 34,734,899
<SALES> 0
<TOTAL-REVENUES> 17,449,997
<CGS> 0
<TOTAL-COSTS> 7,156,126
<OTHER-EXPENSES> 7,058,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 872,109
<INCOME-PRETAX> 3,423,167
<INCOME-TAX> 1,506,000
<INCOME-CONTINUING> 1,917,167
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,917,167
<EPS-BASIC> .13
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