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, 2000.
_______ 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
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Number of shares of common stock, $.01 par value, outstanding as of
October 24, 2000:
14,033,276
1
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CENTURY CASINOS, INC.
FORM 10-QSB
INDEX
Page Number
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PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of 3
September 30, 2000
Condensed Consolidated Statements of Income for the 4
Three Months Ended September 30, 2000 and 1999
Condensed Consolidated Statements of Income for the 5
Nine Months Ended September 30, 2000 and 1999
Condensed Consolidated Statements of Comprehensive 6
Income for the Three and Nine Months Ended
September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows 7
for the Nine Months Ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis 13
PART II OTHER INFORMATION 16
SIGNATURES 16
2
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<TABLE>
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
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<S> <C>
September 30, 2000
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ASSETS
Current Assets:
Cash and cash equivalents $ 3,345,000
Accounts receivable 582,000
Prepaid expenses and other 648,000
--------------------
Total current assets 4,575,000
Property and Equipment, net 28,730,000
Goodwill, net 8,909,000
Other Assets 3,081,000
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Total $ 45,295,000
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 874,000
Accounts payable and accrued expenses 2,905,000
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Total current liabilities 3,779,000
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Long-Term Debt, less current portion 18,136,000
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Minority Interest 1,287,000
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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;
14,485,776 shares issued; 14,085,276 shares outstanding 144,000
Additional paid-in capital 21,967,000
Accumulated other comprehensive loss - foreign currency translation (649,000)
Retained earnings 1,344,000
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22,806,000
Treasury stock - 400,500 shares, at cost (713,000)
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Total shareholders' equity 22,093,000
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Total $ 45,295,000
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</TABLE>
See notes to condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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<S> <C> <C>
For the Three Months Ended September 30,
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2000 1999
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Operating Revenue:
Casino $ 6,876,000 $ 6,436,000
Food and beverage 369,000 281,000
Hotel 47,000 55,000
Other 89,000 111,000
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7,381,000 6,883,000
Less promotional allowances 191,000 179,000
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Net operating revenue 7,190,000 6,704,000
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Operating Costs and Expenses:
Casino 2,692,000 2,222,000
Food and beverage 224,000 160,000
Hotel 180,000 49,000
General and administrative 1,689,000 1,655,000
Depreciation and amortization 851,000 848,000
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Total operating costs and expenses 5,636,000 4,934,000
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Income from Operations 1,554,000 1,770,000
Other income (expense), net (328,000) 765,000
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Income before Income Taxes and Minority Interest 1,226,000 2,535,000
Provision for income taxes 613,000 1,079,000
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Income before Minority Interest 613,000 1,456,000
Minority interest in subsidiary losses 217,000 0
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Net Income $ 830,000 $ 1,456,000
============== ==============
Earnings Per Share:
Basic $ 0.06 $ 0.10
============== ==============
Diluted $ 0.06 $ 0.10
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
4
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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<S> <C> <C>
For the Nine Months Ended September 30,
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2000 1999
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Operating Revenue:
Casino $ 18,485,000 $ 16,935,000
Food and beverage 912,000 701,000
Hotel 123,000 133,000
Other 247,000 166,000
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19,767,000 17,935,000
Less promotional allowances 531,000 485,000
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Net operating revenue 19,236,000 17,450,000
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Operating Costs and Expenses:
Casino 7,164,000 6,606,000
Food and beverage 467,000 398,000
Hotel 243,000 153,000
General and administrative 5,573,000 4,611,000
Depreciation and amortization 2,580,000 2,447,000
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Total operating costs and expenses 16,027,000 14,215,000
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Income from Operations 3,209,000 3,235,000
Other income (expense), net 533,000 188,000
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Income before Income Taxes and Minority Interest 3,742,000 3,423,000
Provision for income taxes 1,785,000 1,506,000
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Income before Minority Interest 1,957,000 1,917,000
Minority interest in subsidiary losses 248,000 0
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Net Income $ 2,205,000 $ 1,917,000
=============== ===============
Earnings Per Share:
Basic $ 0.15 $ 0.13
=============== ===============
Diluted $ 0.15 $ 0.13
=============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
5
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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<CAPTION>
<S> <C> <C>
For the Three Months Ended September 30,
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2000 1999
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Net Income $ 830,000 $ 1,456,000
Foreign currency translation adjustments (297,000) 4,000
-------------- --------------
Comprehensive Income $ 533,000 $ 1,460,000
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For the Nine Months Ended September 30,
---------------------------------------
2000 1999
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Net Income $ 2,205,000 $ 1,917,000
Foreign currency translation adjustments (617,000) (26,000)
-------------- --------------
Comprehensive Income $ 1,588,000 $ 1,891,000
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
6
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CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<S> <C> <C>
For the Nine Months Ended September 30,
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2000 1999
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Cash provided by operating activities $ 3,094,000 $ 3,346,000
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Cash provided by (used in) investing activities (7,166,000) 233,000
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Cash provided by (used in) financing activities 4,909,000 (2,413,000)
-------------- --------------
Increase in cash and cash equivalents 837,000 1,166,000
Cash and cash equivalents at beginning of period 2,508,000 2,176,000
-------------- --------------
Cash and cash equivalents at end of period $ 3,345,000 $ 3,342,000
============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 784,000 $ 696,000
Cash paid for income taxes $ 1,336,000 $ 736,000
</TABLE>
Non-cash Investing and Financing Activities:
In connection with the Company's acquisition of CCBC (see Note 4), the minority
shareholder contributed fixed assets valued at $3,836,000 in exchange for a note
payable to the minority shareholder of $2,302,000 and an equity interest of
$1,534,000.
See notes to condensed consolidated financial statements.
7
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CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Century Casinos, Inc. and subsidiaries (the "Company") is an
international gaming company which owns and operates a limited-stakes
gaming casino in Cripple Creek, Colorado, manages a casino within a
hotel located in Prague, Czech Republic, owns 50% of, is developing, and
manages a hotel and casino resort in Caledon, South Africa, and serves
as concessionaire of small casinos on luxury cruise vessels. The
Company regularly pursues additional gaming opportunities internationally
and in the United States.
The Company's operations in Cripple Creek, Colorado began with the
1994 acquisition of Legends Casino ("Legends"), followed by the 1996
acquisition of Womack's Saloon & Gaming Parlor ("Womacks"), which is
immediately adjacent to Legends. Following the 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.
In July 1999, the Company began providing management services and leasing
gaming equipment to the Casino Millennium, located in the five-star
Marriott Hotel in Prague, Czech Republic. In January 2000, the Company
entered into a memorandum of agreement to acquire a 50% ownership
interest in Casino Millennium. The Company is in the process of
negotiating a definitive purchase agreement.
In April 2000, the Company's South African subsidiary acquired a
50% equity interest in Caledon Casino Bid Company (Pty) Limited
("CCBC"). CCBC owns a 92-room resort hotel and spa and approximately
600 acres of land in Caledon, South Africa and was recently awarded a
casino license for the project. The Company has a long-term agreement to
manage the operations of the casino, which began on October 11, 2000.
In May 2000, the Company entered into a five-year agreement to
serve as concessionaire of small casinos providing unlimited-stakes gaming
operations on four luxury cruise vessels. The Company will operate the
casinos for its own account and pay concession fees based on
passenger count and gross gaming revenue. On September 18, 2000 the
Company announced the opening of the first of four casinos with 55
gaming positions. In August 2000, the Company entered into a five-year
agreement to serve as concessionaire of a small casino aboard a vessel
designed to be an exclusive residential community at sea. The Company
will operate the casino for its own account and pay concession fees
based on gross gaming revenue. The maiden voyage is expected
early in 2002.
The accompanying consolidated financial statements and related notes
have been prepared in accordance with accounting principles generally
accepted in the United States of America 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 accounting
principles generally accepted in the United States of America, 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 condensed 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, 1999.
8
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2. INCOME TAXES
The income tax provisions are based on estimated full-year income for
financial reporting purposes adjusted for permanent differences, which
consist primarily of nondeductible goodwill amortization resulting
from the Legends acquisition.
3. EARNINGS PER SHARE
Basic and diluted earnings per share for the three months ended September
30, 2000 and 1999 were computed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For the Three Months Ended September 30,
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2000 1999
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Basic Earnings Per Share:
Net income $ 830,000 $ 1,456,000
============= ==============
Weighted average common shares 14,125,496 14,649,752
============= ==============
Basic earnings per share $ 0.06 $ 0.10
============= ==============
Diluted Earnings Per Share:
Net income, as reported $ 830,000 $ 1,456,000
Interest expense, net of income taxes, on convertible debenture 6,000 8,300
------------- --------------
Net income available to common shareholders $ 836,000 $ 1,464,300
============= ==============
Weighted average common shares 14,125,496 14,649,752
Effect of dilutive securities:
Convertible debenture 204,395 271,739
Stock options and warrants 681,710 174,748
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Dilutive potential common shares 15,011,601 15,096,239
============= ==============
Diluted earnings per share $ 0.06 $ 0.10
============= ==============
Excluded from computation of diluted earnings per share
due to antidilutive effect:
Options and warrants to purchase common shares 535,000 3,774,928
Weighted average exercise price $ 2.43 $ 1.92
</TABLE>
9
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Basic and diluted earnings per share for the nine months
ended September 30, 2000 and 1999 were computed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For the Nine Months Ended September 30,
----------------------------------------
2000 1999
---- ----
Basic Earnings Per Share:
Net income $ 2,205,000 $ 1,917,000
============== ==============
Weighted average common shares 14,308,060 14,658,941
============== ==============
Basic earnings per share $ 0.15 $ 0.13
============== ==============
Diluted Earnings Per Share:
Net income, as reported $ 2,205,000 $ 1,917,000
Interest expense, net of income taxes, on convertible debenture 23,000 25,000
-------------- --------------
Net income available to common shareholders $ 2,228,000 $ 1,942,000
============== ==============
Weighted average common shares 14,308,060 14,658,941
Effect of dilutive securities:
Convertible debenture 249,127 271,739
Stock options and warrants 516,019 172,406
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Dilutive potential common shares 15,073,206 15,103,086
============== ==============
Diluted earnings per share $ 0.15 $ 0.13
============== ==============
Excluded from computation of diluted earnings per share
due to antidilutive effect:
Options and warrants to purchase common shares 565,000 3,774,928
Weighted average exercise price $ 2.39 $ 1.92
</TABLE>
4. CALEDON, SOUTH AFRICA
On April 13, 2000, the Caledon Casino Bid Company (Pty) Limited ("CCBC")
was awarded a gaming license for a casino at a 92-room resort hotel and
spa in Caledon, province of the Western Cape, South Africa. On April
17, 2000, the Company's South African subsidiary, Century Casinos Africa
(Pty) Ltd ("CCA"), acquired a 50% equity interest in CCBC. In March
2000, in anticipation of the award of the final license, the Company
borrowed approximately $4.0 million under its revolving credit facility
and, in April 2000, the Company (through CCA) made its equity
investment of approximately $1,534,000 in and a loan of approximately
$2,302,000 to CCBC. In a concurrent transaction, another 50% investor
contributed fixed assets to CCBC in exchange for a 50% equity
investment of approximately $1,534,000 and a loan payable of
approximately $2,302,000. The acquisition of CCBC by the Company and
the other investor has been recorded using the purchase method of
accounting. As of September 30, 2000, net long-lived assets held
by CCBC, included in the Company's condensed consolidated balance
sheet, approximated $8.7 million.
10
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In April 2000, CCBC entered into a loan agreement with PSG Investment
Bank Limited ("PSGIB"), which agreement provides for a principal
loan of approximately $6,200,000 to fund development of the Caledon
project and a working capital facility of approximately $2,100,000. CCBC
is required to make principal payments beginning January 2002 and
continuing over a five-year period. Outstanding borrowings bear
interest at the bank's base rate plus 2.75-3.75%. The shareholders
of CCBC have pledged all of the common shares held by them in CCBC to
PSGIB as collateral. As of September 30, 2000, $3.5 million has been
advanced against the loan agreement. The loan agreement includes
certain restrictive covenants, as defined in the agreement, the most
significant of which include, i) CCBC must maintain a debt/equity ratio of
44:56 after the first twelve months of operations and a 40:60 debt/equity
ratio after two years of operations, ii) CCBC must maintain an interest
coverage ratio of at least 2.0 after the first twelve months of operations,
iii) CCBC must maintain a debt service coverage ratio of at least 1.3 for
the principal loan and 1.7 for the working capital facility after the
first twelve months of operations, and iv) CCBC must maintain a loan life
coverage ratio of 1.5 for the principal loan and a loan life coverage
ratio of 2.5 for the working capital facility.
In December 1999, the Company entered into a ten-year casino management
agreement with CCBC, which agreement may be extended at the Company's
option for multiple ten-year periods. The Company will earn
management fees based on percentages of annual gaming revenue and earnings
before interest, income taxes, depreciation, amortization and certain
other costs. The casino opened on October 11, 2000 with 250 slot
machines and 14 gaming tables. In addition to the casino license, hotel
and spa, CCBC owns approximately 600 acres of land, which is expected
to be used for future expansion of the project.
Initial start up costs of the casino, resort hotel and spa have resulted in
a pre-tax charge of $216,177 and $247,626 against the income for the
quarter and nine months ended September 30, 2000, respectively.
The Company believes it has a controlling financial interest in CCBC and
has thus consolidated the financial statements of CCBC with CCA based
on its interpretation of the provisions of EITF 97-2, Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management
Arrangements.
5. PRAGUE, CZECH REPUBLIC
In January 2000, the Company entered into a memorandum of agreement
with B.H. Centrum a.s., the Company's Czech Republic business
partner in Casino Millennium, located in Prague, Czech Republic.
The memorandum of agreement provides for the two parties to acquire the
casino from third parties by either a joint acquisition of Casino
Millennium a.s. or the formation of a new joint venture. The transaction,
if completed, would result in the Company having a 50% equity interest
in Casino Millennium. Any funding required by the Company to consummate
this transaction would be met through a combination of existing liquidity
and anticipated cash flow. The Company is in the process of
negotiating a definitive purchase agreement. As of September 30,
2000, the Company's net fixed assets leased to the Casino Millennium
approximated $1.1 million and management fee income for the nine months
ended September 30, 2000 was approximately $124,000.
11
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6. REVOLVING CREDIT FACILITY
On April 26, 2000, the Company and Wells Fargo Bank (the "Bank") entered
into an Amended and Restated Credit Agreement (the "Agreement") which
increased the Company's aggregate borrowing commitment from the Bank
to $26 million and extended the maturity date to April 2004. The aggregate
commitment available to the Company will be reduced quarterly by $722,000
beginning October 2000 through the maturity date. Interest on the
Agreement is variable based on the interest rate option selected by the
Company, plus an applicable margin based on the Company's leverage ratio.
The Agreement also requires a nonusage fee based on the Company's leverage
ratio on the unused portion of the commitment. The consolidated
weighted average interest rate on all borrowings was 8.74% for the first
nine months of 2000. The principal balance outstanding under the loan
agreement as of September 30, 2000 was $12,067,000. The loan agreement
includes certain restrictive covenants, the most significant of which
include i) WMCK Venture Corp., a wholly owned subsidiary of the
Company, must maintain a maximum leverage ratio no greater than 3.10
to 1.00, ii) WMCK Venture Corp. must maintain a minimum interest
coverage ratio no less than 1.50 to 1.00, and iii) WMCK Venture Corp.
must maintain a TFCC ratio ( a derivative of EBITDA, as defined in
the agreement) of no less than 1.10 to 1.00.
7. CASINO CONCESSION AGREEMENTS
In May 2000, the Company entered into a five-year casino concession
agreement with a cruise line for casino operations aboard four
cruise vessels. The Company is required to pay a fee to the
owner of the vessels based on a percentage of gross gaming revenue, as
defined, in excess of an established per passenger per day amount.
The agreement requires the Company to provide all necessary gaming
equipment, which management estimates will have a cost of approximately
$500,000. On September 18, 2000, the Company announced the opening
of the first of four casinos with 55 gaming positions.
In August 2000, the Company entered into a five-year agreement to
serve as concessionaire of a small casino aboard a vessel designed to
be an exclusive residential community at sea. The Company will operate
the casino for its own account and pay concession fees based on gross
gaming revenue, as defined, in excess of an established per passenger
per day amount. The maiden voyage is expected early in 2002.
8. SHAREHOLDERS' EQUITY
In March 2000, the Company retired 1,385,000 shares of its common stock
held in treasury. During the third quarter of 2000, the Company
repurchased, on the open market, an additional 117,500 shares of its
common stock at an average price per share of $1.82. The Company held
400,500 shares in treasury as of September 30, 2000. Subsequent to
September 30, 2000, the Company purchased, on the open market, 52,000
additional shares of its common stock at an average per share price
of $1.63.
In February and April 2000, the Company granted options on 40,000 and
20,000 shares, respectively, of the Company's common stock. The options
have exercise prices of $1.00 and $1.75 per share, respectively, and
exercise periods of five years.
12
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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, 2000 vs. 1999
----------------------------------------------------
Net operating revenue for the first nine months of 2000 was $19.2 million
compared with $17.4 million for the same period in 1999, an increase of 10.2%.
Casino revenue for Womacks/Legends Casino increased from $16.9 million in 1999
to $18.5 million in 2000, or 9.2%. 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 18.1 % through the first nine months of 2000 compared
with 18.5% a year earlier. Womacks/Legends Casino operated 15.3% of the slot
machines in the Cripple Creek market and achieved an average daily win per
machine of $107 versus the Cripple Creek average of $88. Gross margin for the
Company's casino activities increased to 61.2% from 61.0% a year earlier, due
principally to more favorable gaming tax rates and continued improvement in
casino operating efficiencies, but was offset by start up cost in Caledon, South
Africa.
Food and beverage revenue increased by 30.1% to $912,000 for the first nine
months of 2000 compared with $701,000 in 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 slightly to $613,000 compared with $627,000
in the prior year. The decrease in hotel revenue is a result of the termination
of a hotel marketing agreement in late 1999 offset by hotel revenues generated
in Caledon, South Africa. The increase in hotel costs are associated with the
operation of the hotel in Caledon, South Africa.
General and administrative expense as a percentage of net operating revenue was
29.0% for the first nine months of 2000 compared with 26.4% in 1999. The
increase was primarily due to the writeoff of a noncompete agreement with a
former officer/director in March 2000 and bonuses paid to certain
officers/directors relating to the final payment received in January 2000 from
the previous sale of the Company's interest in its Indiana riverboat gaming
license.
13
<PAGE>
Depreciation expense increased to $1.6 million in the 2000 period from $1.4
million in 1999, primarily due to the addition of new machines at
Womacks/Legends Casino and Casino Millennium, which opened in July 1999, and
ongoing improvements to Womacks/Legends Casino. Amortization of goodwill
remained unchanged at $1.0 million for both periods.
Other income, net, for the first nine months of 2000 consists of $1.4 million
from the final payment received in January by the Company from the sale of its
interest in a riverboat gaming license in Indiana, offset by net interest costs
of $892,000 and gains on the disposal of fixed assets totaling $44,000. Other
income, net, for the first nine months of 1999 consists of $1.0 million from
the payment received in July 1999 by the Company from the sale of its interest
in the riverboat gaming license in Indiana, offset primarily by net interest
costs of $843,000.
The income tax provisions for the nine months ended September 30, 2000 and 1999,
are based on estimated full-year income for financial reporting purposes
adjusted for permanent book-tax differences, consisting primarily of
nondeductible goodwill amortization resulting from the Legends acquisition.
Liquidity and Capital Resources
Cash and cash equivalents totaled $3.3 million at September 30, 2000, and the
Company had net working capital of $796,000. Additional liquidity may be
provided by the Company's revolving credit facility ("RCF") with Wells Fargo
Bank, under which the Company had a total commitment of $26.0 million and unused
borrowing capacity of approximately $13.9 million at September 30, 2000. For
the nine months ended September 30, 2000, cash provided by operating activities
was $3.1 million compared with $3.3 million in the prior-year period. Cash used
by investing activities of $7.2 million for the first nine months of 2000
included $1.9 million in capitalized licensing cost related to the hotel and
casino resort in Caledon, South Africa, $2.0 million for the purchase of land
for additional parking in Cripple Creek, $1.8 million towards the construction
of the Womacks Event Center and the purchase of other fixed assets, and $2.9
million towards construction of the hotel and casino resort in Caledon, South
Africa, offset by $1.4 million from the sale of the Company's interest in an
Indiana riverboat gaming license. Cash provided by financing activities for the
first nine months of 2000 consisted of net borrowings of $2.9 million under the
RCF with Wells Fargo, and $3.5 million borrowed under the loan agreement with
PSG, offset by the repurchase of company's stock, on the open market, with a
cost of $713,000, and other net payments of $800,000.
Effective April 26, 2000, the Company and Wells Fargo Bank entered into an
amended and restated credit agreement, which increased the borrowing commitment
as of that date from $17.2 million to $26.0 million and extended the maturity
date of the RCF until April 2004. The agreement provides for the availability
of funds, not to exceed a total of $10.5 million, for the Company's South Africa
and Casino Millennium investments and repurchase of the Company's common stock.
On April 13, 2000, the Caledon Casino Bid Company (Pty) Limited ("CCBC") was
awarded a gaming license for a casino at a 92-room resort hotel and spa in
Caledon, province of the Western Cape, South Africa. On April 17, 2000, the
Company's subsidiary, Century Casinos Africa (Pty) Ltd ("CCA"), acquired a 50%
equity interest in CCBC by making an equity investment of approximately $1.5
million in and loans totaling approximately $2.3 million to CCBC with borrowings
obtained under the Company's RCF. The Company has a ten-year casino management
agreement with CCBC, which agreement may be extended at the Company's option for
multiple ten-year periods. The Company will earn management fees based on
percentages of annual gaming revenue and earnings before interest, income taxes,
depreciation, amortization and certain other costs. The casino opened on
October 11, 2000 with 250 slot machines and 14 gaming tables. In addition to
the casino license, hotel and spa, CCBC owns approximately 600 acres of land,
which is expected to be used for future expansion of the Caledon project. In
April 2000, CCBC entered into a loan agreement with PSG Investment Bank Limited,
which agreement provides for a principal loan of approximately $6.2 million to
fund development of the Caledon project and a working capital facility of
approximately $2.1 million. As of September 30, 2000, $3.5 million has been
advanced against the loan agreement.
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The Company has a 20-year agreement with Casino Millennium a.s., a Czech
company, to operate a casino in the five-star Marriott Hotel, in Prague, Czech
Republic. The hotel and casino opened in July 1999. The Company provides
casino management services in exchange for ten percent of the casino's gross
revenue and leases gaming equipment, with an original cost of approximately $1.3
million, to the casino for 45% of the casino's net profit. In January 2000, the
Company entered into a memorandum of agreement with B. H. Centrum, a Czech
company which owns the hotel and casino facility, to acquire the operations of
the casino by either a joint acquisition of Casino Millennium a.s. or the
formation of a new joint venture. The transaction, if completed, would result
in the Company having a 50% equity interest in Casino Millennium. Any funding
required by the Company to consummate this transaction would be met through a
combination of RCF borrowings, existing liquidity and anticipated cash flow.
The Company is in the process of negotiating a definitive purchase agreement.
In May 2000, the Company entered into a five-year casino concession agreement
with a cruise line for casino operations aboard four cruise vessels. The
Company is required to pay a fee to the owner of the vessels based on a
percentage of gross gaming revenue, as defined, in excess of an established per
passenger per day amount. In August 2000, the Company entered into a similar
agreement to serve as concessionaire of a small casino aboard a vessel designed
to be an exclusive residential community at sea. Both agreements require the
Company to provide all necessary gaming equipment, the majority of which the
Company expects to purchase during the second half of 2000 at an estimated cost
of approximately $500,000. On September 18, 2000 the Company announced the
opening of the first of four casinos aboard the cruise vessels with 55 gaming
positions.
The Company's Board of Directors has approved a discretionary program to
repurchase up to $5 million of the Company's outstanding common stock. The
Board believes that the Company's stock is undervalued in the trading market in
relation to both its present operations and its future prospects. During the
first nine months of 2000, the Company purchased 400,500 additional shares at an
average cost per share of $1.78. Beginning in 1998 and through September 30,
2000, the Company has repurchased a total of 1,785,500 shares at a total cost of
approximately $2,176,000. In October 2000, the Company repurchased an
additional 52,000 shares at a total cost of approximately $85,000. Management
plans to retire all treasury shares on a periodic basis. Management expects to
continue to review the market price of the Company's stock and repurchase shares
as appropriate, with funds coming from existing liquidity or borrowings under
the RCF.
The Company is the contracted casino management partner with and has the right
to a minority equity interest in Silverstar Development Ltd. ("Silverstar").
Silverstar has submitted an application for a proposed $60 million, hotel/casino
resort development in the greater Johannesburg area of South Africa. In the
event that Silverstar is awarded a license, the Company would be required to
make an equity investment of approximately $1.5 million. This funding
requirement would be met through borrowings under the RCF. The Company has also
projected additional development costs of up to $500,000 which could be incurred
by the Company related to this project. At the present time, however, there can
be no certainty regarding an award of this gaming license or that this license
will ultimately be awarded to Silverstar.
Management believes that the Company's cash and working capital at September 30,
2000, together with expected cash flows from operations and borrowing capacity
under the RCF, will be sufficient to fund its anticipated capital expenditures,
pursue additional business growth opportunities for the foreseeable future, and
satisfy its debt repayment obligations.
* * * * * * * * * * * * * * * *
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PART II
OTHER INFORMATION
Item 1. - Legal Proceedings
The Company is not a party to, nor is it aware of,
any pending or threatened litigation 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:
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
* * * * * * *
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 Hannappel
___________________________
Larry Hannappel
Chief Accounting Officer and duly authorized officer
Date: October 24, 2000
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