UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
___X___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002.
OR
_______ 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
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
200-220 E. Bennett Ave., Cripple Creek, Colorado 80813
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(Address of principal executive offices)
(Zip Code)
(719) 689-9100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, $0.01 par value, 13,615,564 shares outstanding as of October
29, 2002.
1
CENTURY CASINOS, INC.
FORM 10-Q
INDEX
Page Number
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 3
Condensed Consolidated Statements of Earnings for the Three Months Ended September
30, 2002 and 2001 4
Condensed Consolidated Statements of Earnings for the Nine Months Ended September
30, 2002 and 2001 5
Condensed Consolidated Statements of Comprehensive Earnings for the Three Months
Ended September 30, 2002 and 2001 6
Condensed Consolidated Statements of Comprehensive Earnings for the Nine Months
Ended September 30, 2002 and 2001 6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 7
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
PART II OTHER INFORMATION 33
Item 1. Legal Proceedings 33
Item 5. Other Information 33
Item 6. Exhibits and Reports on Form 8-K 33
SIGNATURES 33
CERTIFICATIONS 34
2
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
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(Dollar amounts in thousands, except for share information)
September 30, 2002 December 31, 2001
------------------ -----------------
ASSETS
Current Assets:
Cash and cash equivalents
(including restricted cash of $391 and $334, respectively) $ 3,520 $ 3,365
Accounts receivable 66 433
Prepaid expenses and other 787 591
-------- --------
Total current assets 4,373 4,389
Property and Equipment, net 31,962 29,338
Goodwill, net 7,776 7,709
Casino License Costs, net 991 1,010
Other Assets 2,481 2,373
-------- --------
Total $ 47,583 $ 44,819
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,376 $ 1,554
Accounts payable and accrued expenses 3,541 3,512
-------- --------
Total current liabilities 4,917 5,066
Long-Term Debt, less current portion 15,888 15,991
Other Non-current Liabilities 882 979
Minority Interest 752 605
Commitments and Contingencies - -
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;
13,651,364 and 13,728,784 shares outstanding, respectively 145 145
Additional paid-in capital 21,901 21,901
Accumulated other comprehensive loss (2,601) (3,291)
Retained earnings 7,328 4,847
-------- --------
26,773 23,602
Treasury stock - 834,412 and 756,992 shares, respectively,
at cost (1,629) (1,424)
-------- --------
Total shareholders' equity 25,144 22,178
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Total $ 47,583 $ 44,819
======== ========
See notes to condensed consolidated financial statements.
3
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
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(Dollar amounts in thousands, except for share information)
For The Three Months Ended September 30,
2002 2001
---- ----
Operating Revenue:
Casino $ 8,235 $ 7,992
Food and beverage 489 576
Hotel 233 228
Other 122 227
-------- ---------
9,079 9,023
Less promotional allowances 1,194 1,122
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Net operating revenue 7,885 7,901
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Operating Costs and Expenses:
Casino 2,595 2,456
Food and beverage 253 306
Hotel 156 183
General and administrative 1,862 1,855
Property write-down and other write-offs 1,122 -
Depreciation and amortization 616 1,085
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Total operating costs and expenses 6,604 5,885
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Earnings from Operations 1,281 2,016
Other (expense), net (448) (390)
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Earnings before Income Taxes and Minority Interest 833 1,626
Provision for income taxes 317 908
-------- ---------
Earnings before Minority Interest 516 718
Minority interest in subsidiary income (63) (31)
-------- ---------
Net Earnings $ 453 $ 687
======== =========
Earnings Per Share:
Basic $ 0.03 $ 0.05
======== =========
Diluted $ 0.03 $ 0.05
======== =========
See notes to condensed consolidated financial statements.
4
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
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(Dollar amounts in thousands, except for share information)
For The Nine Months Ended September 30,
2002 2001
---- ----
Operating Revenue:
Casino $ 23,257 $ 22,909
Food and beverage 1,245 1,456
Hotel 639 552
Other 415 571
-------- --------
25,556 25,488
Less promotional allowances 3,350 2,885
-------- --------
Net operating revenue 22,206 22,603
-------- --------
Operating Costs and Expenses:
Casino 7,170 7,104
Food and beverage 655 862
Hotel 400 509
General and administrative 5,684 6,063
Property write-down and other write-offs 1,122 57
Depreciation and amortization 1,766 3,576
-------- --------
Total operating costs and expenses 16,797 18,171
-------- --------
Earnings from Operations 5,409 4,432
Other (expense), net (1,319) (1,406)
-------- --------
Earnings before Income Taxes and Minority Interest 4,090 3,026
Provision for income taxes 1,548 1,431
-------- --------
Earnings before Minority Interest 2,542 1,595
Minority interest in subsidiary (income) losses (61) 134
-------- --------
Net Earnings $ 2,481 $ 1,729
======== ========
Earnings Per Share:
Basic $ 0.18 $ 0.13
======== ========
Diluted $ 0.16 $ 0.12
======== ========
See notes to condensed consolidated financial statements.
5
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Unaudited)
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(Dollar amounts in thousands)
For The Three Months Ended September 30,
2002 2001
---- ----
Net Earnings $ 453 $ 687
Foreign currency translation adjustments (94) (663)
Change in fair value of interest rate swaps, net of income taxes 8 (269)
-------- --------
Comprehensive Earnings (Loss) $ 367 $ (245)
======== ========
For The Nine Months Ended September 30,
2002 2001
---- ----
Net Earnings $ 2,481 $ 1,729
Foreign currency translation adjustments 689 (881)
Cumulative effect of change in accounting principle related to interest
rate swaps, net of income taxes - (175)
Change in fair value of interest rate swaps, net of income taxes 1 (422)
-------- --------
Comprehensive Earnings $ 3,171 $ 251
======== ========
See notes to condensed consolidated financial statements.
6
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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(Dollar amounts in thousands)
For The Nine Months Ended September 30,
2002 2001
---- ----
Cash Flows from Operating Activities:
Net earnings $ 2,481 $ 1,729
Adjustments to reconcile net earnings to net cash provided by
operating activities
Write-down value of nonoperating casino and land
held for sale (Note 7) 447 -
Write-off receivables and advances, including interest
(Notes 1 and 6) 702 -
Depreciation 1,766 2,507
Amortization of goodwill - 1,069
Amortization of deferred financing costs 67 62
Gain on disposition of assets (27) (14)
Deferred tax expense (benefit) (58) 181
Minority interest in subsidiary income (losses) 61 (134)
Other (9) -
Changes in operating assets and liabilities
Receivables (302) (67)
Prepaid expenses and other assets (106) (213)
Accounts payable and accrued liabilities (31) (217)
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Net cash provided by operating activities 4,991 4,903
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Cash Flows from Investing Activities:
Purchases of property and equipment (3,770) (2,508)
Expenditures for deposits and other assets - (1,074)
Proceeds received from disposition of assets 176 8
-------- --------
Net cash used in investing activities (3,594) (3,574)
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(continued)
7
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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(Dollar amounts in thousands)
For the Nine Months Ended September 30,
2002 2001
---- ----
Cash Flows from Financing Activities:
Proceeds from borrowings $ 15,439 $ 18,069
Principal repayments (16,459) (24,477)
Deferred financing costs (112) 63
Purchases of treasury stock (205) (552)
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Net cash used in financing activities (1,337) (6,897)
-------- --------
Effect of exchange rate changes on cash 95 (216)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 155 (5,784)
Cash and Cash Equivalents at Beginning of Period 3,365 9,077
-------- --------
Cash and Cash Equivalents at End of Period $ 3,520 $ 3,293
======== ========
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $57 in 2002 and $203 in 2001 $ 1,434 $ 677
======== ========
Income taxes paid $ 1,725 $ 993
======== ========
See notes to condensed consolidated financial statements.
8
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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(Dollar amounts in thousands, except for share information)
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1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Century Casinos, Inc. ("CCI") is an international gaming company. Wholly
owned subsidiaries of CCI include Century Casinos Management, Inc. ("CCM"),
Century Casinos Nevada, Inc. ("CCN", a dormant subsidiary), Century
Management u. Beteiligungs GmbH ("CMB"), and WMCK-Venture Corp. ("WMCK").
Wholly owned subsidiaries of WMCK include WMCK-Acquisition Corp ("ACQ") and
Century Casinos Cripple Creek, Inc. ("CCC"). Century Casinos Africa (Pty)
Ltd. ("CCA"), a 94.8% owned subsidiary of CCI, owns 65% of Century Casinos
Caledon (Pty) Ltd. ("CCAL"), 55% of Century Casinos West Rand (Pty) Ltd.
("CCWR") and 50% of Rhino Resort Ltd. ("RRL"). CCI and subsidiaries (the
"Company") own and/or manage casino operations in the United States of
America, South Africa, the Czech Republic, and international waters as
follows:
WMCK owns and operates Womacks Casino and Hotel ("Womacks"), a
limited-stakes gaming casino in Cripple Creek, Colorado. Womacks is
one of the largest gaming facilities in Cripple Creek and is currently
the core operation of the Company. The facility has 683 slot machines,
five limited stakes gaming tables, 21 hotel rooms, 2 restaurants and
is currently expanding the gaming space to accommodate an additional
44 gaming devices.
CCA owns 65% of the Caledon Casino, Hotel and Spa near Cape Town,
South Africa and has a management contract to operate the casino. The
resort has 250 slot machines and eight gaming tables, a 92-room hotel,
mineral hot springs and spa facility, 2 restaurants, 3 bars, and
conference facilities.
CCM manages Casino Millennium located within a five-star hotel in
Prague, Czech Republic. Subject to the approval by regulators, the
Company and another entity have each agreed to purchase a 50%
ownership interest in Casino Millennium. The acquisition is expected
to be completed in late 2002 or early 2003 and is expected to cost
approximately $200 in cash plus the contribution of operating assets
of the casino currently owned by the Company and certain pre-operating
costs paid by the Company.
CCI serves as concessionaire of small casinos on five luxury cruise
vessels, one of which is temporarily out of service. The Company has a
total of approximately 167 gaming positions on the four combined
shipboard casinos currently in operation.
The Company regularly pursues additional gaming opportunities
internationally and in the United States.
9
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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(Dollar amounts in thousands, except for share information)
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During September 2001, CCA entered into an agreement to secure a 50%
ownership interest in Rhino Resort Ltd. ("RRL"), a consortium which
includes Silverstar Development Ltd. ("Silverstar"). RRL submitted an
application for a proposed hotel/casino resort development in the greater
Johannesburg area of South Africa at a cost of approximately 400 million
Rand ($38.0 million). In November 2001, RRL was awarded the sixth and final
casino license serving the Gauteng province in South Africa. In February
2002, Tsogo Sun Holdings (Pty) Ltd ("Tsogo"), a competing casino, filed a
Review Application seeking to overturn the license award by the Gauteng
Gambling Board ("GGB"). In September 2002, the High Court of South Africa
overturned the license award. RRL, the GGB, and the Company are currently
assessing the implications of this judgment which cited certain procedural
and technical deficiencies in the actions of the GGB (in the process that
led to the original award of the casino license) in order to determine any
potential future actions. Under the existing agreements, the Company's
obligation to make the presumed equity investment of 50 million Rand or
approximately $4.8 million expires on December 31, 2004 unless RRL has
obtained a final license by such date. As a result of these developments,
the Company has recorded a $377 write-off for all advances made, and
pre-construction cost incurred, in conjunction with the Johannesburg
project (Note 12). CCA maintains the ownership of the land that was
intended for the casino project.
Commitments that are denominated in a foreign currency and all balance
sheet accounts other than shareholders' equity are translated and presented
based on the exchange rate at the end of the period.
Certain reclassifications have been made to the 2001 financial information
in order to conform to the 2002 presentation.
The accompanying condensed 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-Q and Rule 10-01 of Regulation S-X.
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,
2001. The results of operations for the period ended September 30, 2002 are
not necessarily indicative of the operating results for the full year.
2. INCOME TAXES
The income tax provisions are based on estimated full-year earnings for
financial reporting purposes adjusted for permanent differences, which
consist primarily of nondeductible goodwill amortization prior to the
adoption of SFAS No. 142 (Note 10).
10
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
3. EARNINGS PER SHARE
Basic and diluted earnings per share for the three months ended September
30, 2002 and 2001 were computed as follows:
For the Three Months Ended September 30,
2002 2001
---- ----
Basic Earnings Per Share:
Net earnings $ 453 $ 687
========== ==========
Weighted average common shares 13,664,605 13,813,043
========== ==========
Basic earnings per share $ 0.03 $ 0.05
========== ==========
Diluted Earnings Per Share:
Net earnings $ 453 $ 687
========== ==========
Weighted average common shares 13,664,605 13,813,043
Effect of dilutive securities:
Stock options and warrants 1,435,047 1,119,927
---------- ----------
Dilutive potential common shares 15,099,652 14,932,970
========== ==========
Diluted earnings per share $ 0.03 $ 0.05
========== ==========
Excluded from computation of diluted earnings per share
Due to antidilutive effect:
Options and warrants to purchase common shares - 5,000
Weighted average exercise price $ - $ 2.25
11
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
Basic and diluted earnings per share for the nine months ended September
30, 2002 and 2001 were computed as follows:
For the Nine Months Ended September 30,
2002 2001
---- ----
Basic Earnings Per Share:
Net earnings $ 2,481 $ 1,729
========== ==========
Weighted average common shares 13,707,085 13,856,842
========== ==========
Basic earnings per share $ 0.18 $ 0.13
========== ==========
Diluted Earnings Per Share:
Net earnings, as reported $ 2,481 $ 1,729
Interest expense, net of income taxes,
on convertible debenture - 8
---------- ----------
Net earnings available to common shareholders $ 2,481 $ 1,737
========== ==========
Weighted average common shares 13,707,085 13,856,842
Effect of dilutive securities:
Convertible debenture - 90,181
Stock options and warrants 1,511,765 1,076,118
---------- ----------
Dilutive potential common shares 15,218,850 15,023,141
========== ==========
Diluted earnings per share $ 0.16 $ 0.12
========== ==========
Excluded from computation of diluted earnings per share Due to
antidilutive effect:
Options and warrants to purchase common shares - 5,000
Weighted average exercise price $ - $ 2.25
12
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
4. CRIPPLE CREEK, COLORADO
On May 1, 2002, WMCK-Venture Corp. acquired the Palace Casino building and
adjoining property for $1.2 million. Womacks has spent an additional $157
to complete the acquisition and convert the majority of the property, which
is adjacent to the Womacks Casino and Hotel, into an additional 41 parking
spaces.
5. CALEDON, SOUTH AFRICA
In September 2001, CCA, CCAL and Fortes King Hospitality (Pty) Limited
("FKH") entered into a Memorandum of Agreement, which amends the casino and
hotel management agreements signed in December 1999, such that any and all
management fees shall be deemed to equal zero from the inception of those
agreements and shall remain so until no earlier than January 1, 2002. By
agreement, the management fees that would have been payable to CCA and FKH
are given preferential treatment in the event of the sale or liquidation of
CCAL. Consequently, the minority interest in subsidiary (income) losses in
the consolidated statement of earnings for the nine months ended September
2002 includes $50 net of $21 of income tax benefit, representing the
management fees that would have been payable to FKH. As a result, the
consolidated net earnings for the South African segment or the consolidated
net earnings for the Company were not affected by this agreement. Beginning
January 1, 2002, either CCA or FKH have the option to declare the fees
calculable and payable. As of September 30, 2002, neither party has
exercised their option.
6. PRAGUE, CZECH REPUBLIC
The Company has a memorandum of agreement to acquire a 50% ownership
interest in Casino Millennium a.s., a Czech company. Subject to approval by
the regulators, the Company anticipates closing the transaction in late
2002 or early 2003 at an expected cost of approximately $200 in cash plus
the contribution of the casino equipment currently owned by the Company and
certain preoperating costs paid by the Company in the amount of $196. In
August 2002, Prague, Czech Republic experienced a devastating flood
throughout the city. Although the Casino Millennium property was not
damaged, public access to the city in the vicinity of the casino is
severely limited and has negatively affected and will likely continue to
negatively affect the casino operation. As a result, the Company, in
September 2002, wrote off unpaid management fees and loans from Casino
Millennium, which resulted in a pre-tax charge of $325. $298 of the
write-off is reported in property write-down and other write-offs (Note 12)
and $27 is reported as a reduction of other (expense), net. Effective
September 1, 2002, management fees and interest due to the Company will not
be accrued until a certainty of cash flow is attained for Casino
Millennium. As of September 30, 2002, the Company's net fixed assets leased
to the Casino Millennium approximated $691 and management fee income for
the three months ended September 30, 2002 and 2001 was approximately $32
and $38, respectively. Management fee income for the eight months ended
August 31, 2002 and nine months ended September 30, 2001 was approximately
$138 and $170, respectively.
7. OTHER PROPERTIES
The Company is currently holding non-operating casino property and land for
sale in Wells, Nevada. The property and land was acquired in 1994 from an
un-affiliated party at a cost of $921. Included in property write-down and
other write-offs, is a pre-tax charge in the amount of $447, to reduce the
value of the property to its fair value, less costs to sell, based on the
current assessment of the property (Note 12).
13
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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(Dollar amounts in thousands, except for share information)
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8. LONG-TERM DEBT
On August 28, 2002, the Company and Wells Fargo Bank (the "Bank") entered
into the Second Amendment to the Amended and Restated Credit Agreement (the
"Agreement" or "RCF") which increased the Company's aggregate borrowing
commitment from the Bank to $26 million and extended the maturity date to
August 2007. The aggregate commitment available to the Company will be
reduced quarterly by $722, beginning January 2003 through the maturity
date. The same provision was contained in the first amendment to the RCF.
The terms of the RCF remain principally the same. The principal balance
outstanding under the RCF as of September 30, 2002 was $11,538. The amount
available under the RCF as of September 30, 2002 was $14,462. The loan
agreement includes certain restrictive covenants on financial ratios of
WMCK. The Company is in compliance with the covenants as of September 30,
2002. Interest rates at September 30, 2002 were 4.75% for $38 outstanding
under prime based provisions of the loan agreement and 4.16% for $11,500
outstanding under LIBOR based provisions of the loan agreement.
The fair value of the Company's interest rate swap derivatives as of
September 30, 2002 of $882 is reported as a liability in the consolidated
balance sheet. The net loss on the interest rate swaps of $1 for the first
nine months of 2002 has been reported in accumulated other comprehensive
loss in the shareholders' equity section of the accompanying September 30,
2002 condensed consolidated balance sheet. Net additional interest expense
to the Company under the swap agreements was $133 and $119 for the three
months ended September 30, 2002 and 2001, respectively, and $388 and $119
for the nine months ended September 30, 2002 and 2001, respectively.
In April 2000, CCAL entered into a loan agreement with PSG Investment Bank
Limited ("PSGIB"), for a principal loan to fund development of the Caledon
project. The outstanding balance and interest rate as of September 30, 2002
was $3,581 and 17.05%, respectively. In April 2001, CCAL entered into an
addendum to the loan agreement in which PSGIB provided CCAL with a standby
facility to provide additional funding for the Caledon project. The
outstanding balance and interest rate on the standby facility with PSGIB as
of September 30, 2002 was $359 and 15.1%, respectively. Under the original
terms of the agreement CCAL made its first principal payment in December
2001, based on a repayment schedule that required semi-annual installments
continuing over a five-year period. On March 26, 2002 CCAL and PSGIB
entered into an amended agreement that changed the repayment schedule to
require quarterly installments beginning on March 31, 2002 and continuing
over the remaining term of the original five-year agreement. The amendment
also changed the requirements for the sinking fund. The original agreement
required CCAL to have on deposit a "sinking fund" in the amount equal to
the next semi-annual principal and interest payment. The amended agreement
changes the periodic payments from semi-annual to quarterly and requires a
minimum deposit in the sinking fund equal to four million Rand
(approximately $380). In addition, one third of the next quarterly
principal and interest payment must be deposited on the last day of each
month into the fund and used for the next quarterly installment. The loan
agreement includes certain restrictive covenants for CCAL. CCAL is in
compliance with the covenants as of September 30, 2002.
14
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
The dollar value of CCAL's outstanding note agreement with Caledon Overberg
Investments (Proprietary) Limited ("COIL") as of September 30, 2002 is
approximately $1,042. In September 2001, CCA, CCAL, CCI and COIL amended
the loan agreement to reduce the rate of interest charged on the loan to 0%
(zero), effective with the original date of the agreement. The loan from
CCA and COIL are proportionate to each shareholder's percentage of
ownership. The additional net income reported by CCAL, as a result of
reducing the interest charged, is shared proportionately by each
shareholder, therefore, there is no change in the consolidated net earnings
of the South African segment or the consolidated net earnings of the
Company. Each shareholder has the option to reinstate the interest rate to
be charged from January 1, 2002 forward. As of September 30, 2002, neither
party has exercised their option.
An unsecured note payable, in the amount of $380, to a founding shareholder
who is also a principal shareholder with 18.3% of the outstanding common
shares as of September 30, 2002, bears interest at 6%, payable quarterly.
The noteholder, at his option, may elect to receive any or all of the
unpaid principal by notifying CCI 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. Accordingly, the note is
classified as noncurrent in the accompanying condensed consolidated balance
sheet as of September 30, 2002 and December 31, 2001.
The remaining amount of $364 in debt, as of September 30, 2002, consists
primarily of capital leases totaling $320.
The consolidated weighted average interest rate on all borrowings was 9.95%
for the nine months ended September 30, 2002.
9. SHAREHOLDERS' EQUITY
During the first nine months of 2002, the Company repurchased, on the open
market, an additional 77,420 shares of its common stock at an average price
per share of $2.64. The Company held 834,412 shares in treasury as of
September 30, 2002 at an average share price of $1.95. Subsequent to
September 30, 2002, the Company purchased, on the open market, 35,800
additional shares of its common stock at an average per share price of
$2.08.
In July 2002, the Company amended the Rights Agreement between Century
Casinos, Inc. and Computershare Investor Services, Inc., adopted in April
1999 as amended and approved by the Shareholders in 2000, to increase the
defined purchase price from $4 to $10 per share and increased the
redemption period, the time during which the Company may elect to redeem
all of the outstanding rights, from 20 to 90 days. The purchase price is
the exercise amount at which a registered holder is entitled to purchase a
given amount of shares of non-redeemable Series A Preferred Stock of the
Company, subject to certain adjustments.
15
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
In connection with the granting of a gaming license to CCAL by the Western
Cape Gambling and Racing Board in April 2000, CCAL issued a total of 200
preference shares, 100 shares each to two minority shareholders, neither of
which is an officer, director or principal shareholder of Century Casinos
Inc., each of whom have one seat on the board of directors of CCAL. The
preference shares are not cumulative, nor are they redeemable. The
preference shares entitle the holders of said shares to dividends of 20% of
the after-tax profits directly attributable to the CCAL casino business
subject to working capital and capital expenditure requirements and CCAL
loan obligations and liabilities as determined by the directors of CCAL.
Should the casino business be sold or otherwise dissolved, the preference
shareholders are entitled to 20% of any surplus directly attributable to
the CCAL casino business, net of all liabilities attributable to the CCAL
casino business. As of September 30, 2002, no dividend has been declared
for the preference shareholders.
10. CHANGE IN ACCOUNTING PRINCIPLES AND RECENTLY ISSUED STANDARDS
Effective January 1, 2002 the Company adopted the Financial Accounting
Standards Board (the "FASB") SFAS No. 141 "Business Combinations", SFAS No.
142 "Goodwill and Other Intangible Assets", and SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets".
SFAS No. 141 addresses financial accounting and reporting for business
combinations. SFAS No. 141 requires that all business combinations be
accounted for using the purchase method of accounting. The use of the
pooling-of-interest method of accounting for business combinations is
prohibited. The provisions of SFAS No. 141 apply to all business
combinations initiated after June 30, 2001. The Company will account for
any future business combinations in accordance with SFAS No. 141.
SFAS No. 142 addresses the methods used to capitalize, amortize and to
assess impairment of intangible assets, including goodwill resulting from
business combinations accounted for under the purchase method. Effective
with the adoption of SFAS No. 142, the Company no longer amortizes goodwill
and other intangible assets with indefinite useful lives. Other intangible
assets consist of deferred license costs. Included in assets at September
30, 2002 is unamortized goodwill of approximately $7,776 and unamortized
casino license costs of approximately $991.
In accordance with SFAS No. 142, the Company has completed step one of the
impairment test on each of the reporting units for which it has recorded
goodwill. The Company contracted third-party valuation firms to complete
the analysis of each reporting unit. In completing its analysis of the fair
value of WMCK-Venture Corporation, parent company of Womacks Casino and
Hotel, the Company used the Discounted Cash Flow ("DCF") Method in which
the reporting unit is valued by discounting the projected cash flows, to a
period in which the annual growth rate is expected to stabilize, to their
present value based on a risk-adjusted discount rate. In completing its
analysis of the fair value of Century Casinos Caledon (Pty) Ltd, the owner
of Caledon Casino, Hotel and Spa, the Company also applied the DCF method
and the results were compared to other methods of valuation, most notably
the net asset value of Caledon in order to further justify the range of
values. As a result of the testing, the Company has determined that there
is no impairment of goodwill or other intangible assets. The Company will
be required to assess goodwill and other intangibles for impairment at
least annually hereafter.
16
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
A reconciliation of previously reported net earnings, basic earnings per
share and diluted earnings per share to the amounts adjusted for the
exclusion of amortization related to goodwill and other intangible assets
with indefinite useful lives, net of related tax effect, follows:
For The Three Months Ended September 30,
2002 2001
---- ----
Reported net earnings $ 453 $ 687
Add back: Goodwill amortization,
net of income taxes - 294
Add back: Casino license amortization,
net of income taxes - 47
-------- --------
Adjusted net earnings $ 453 $ 1,028
======== ========
Basic earnings per share:
Reported net earnings $ 0.03 $ 0.05
Goodwill amortization - 0.02
Casino license amortization - -
-------- --------
Adjusted net earnings $ 0.03 $ 0.07
======== ========
Diluted earnings per share:
Reported net earnings $ 0.03 $ 0.05
Goodwill amortization - 0.02
Casino license amortization - -
-------- --------
Adjusted net earnings $ 0.03 $ 0.07
======== ========
17
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
For The Nine Months Ended September 30,
2002 2001
---- ----
Reported net earnings $ 2,481 $ 1,729
Add back: Goodwill amortization,
net of income taxes - 882
Add back: Casino license amortization,
net of income taxes - 141
-------- --------
Adjusted net earnings $ 2,481 $ 2,752
======== ========
Basic earnings per share:
Reported net earnings $ 0.18 $ 0.13
Goodwill amortization - 0.06
Casino license amortization - 0.01
-------- --------
Adjusted net earnings $ 0.18 $ 0.20
======== ========
Diluted earnings per share:
Reported net earnings $ 0.16 $ 0.12
Goodwill amortization - 0.06
Casino license amortization - -
-------- --------
Adjusted net earnings $ 0.16 $ 0.18
======== ========
SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No.
121 did not address the accounting for a segment of a business accounted
for as a discontinued operation, which resulted in two accounting models
for long-lived assets to be disposed of. SFAS No. 144 establishes a single
accounting model for long-lived assets to be disposed of by sale and
requires that those long-lived assets be measured at the lower of the
carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations.
The Company has reviewed all recently issued, but not yet effective,
accounting pronouncements and does not believe that any such pronouncements
will have a material impact on its financial statements.
18
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
11. SEGMENT INFORMATION
The Company has adopted FASB Statement No. 131 "Disclosures about Segments
of an Enterprise and Related Information". The Company is managed in four
segments; Cripple Creek, Colorado, South Africa, Cruise Ships, and
Corporate operations. Corporate operations include the revenue and expense
of certain corporate gaming projects for which the Company has secured long
term management contracts. Earnings before interest, taxes, depreciation
and amortization (EBITDA) is not considered a measure of performance
recognized as an accounting principle generally accepted in the United
States of America. Management believes that EBITDA is a valuable measure of
the relative performance amongst its operating segments. Segment
information for the three months ended September 30, 2002 and 2001 is
presented below.
================================== ========================== =========================== =============================
Cripple Creek CO South Africa Cruise Ships
================================== ============= ============ ============= ============= ============== ==============
For the Three Months Ended 2002 2001 2002 2001 2002 2001
September 30,
================================== ============= ============ ============= ============= ============== ==============
Net operating revenue $ 5,818 $ 5,731 $ 1,743 $ 1,656 $ 293 $ 426
Depreciation & amortization $ 332 $ 679 $ 228 $ 339 $ 14 $ 13
Interest income $ 4 15 $ 27 $ 19 - -
Interest expense, $ 358 $ 396 $ 202 $ 105 - -
including debt issuance cost
Earnings (loss) before income $ 1,963 $ 1,770 $ (145) $ (120) $ 103 $ 181
taxes and minority interest
Income tax expense(benefit) $ 903 $ 814 $ (47) $ 64 $ 38 $ 79
Net earnings (loss) $ 1,060 $ 956 $ (161) $ (215) $ 65 $ 102
EBITDA $ 2,649 $ 2,830 $ 195 $ 274 $ 117 $ 194
================================== ==== ======== === ======== === ========= === ========= === ========== === ==========
================================== =========================== =========================== =============================
Corporate and Other Inter-segment Elimination Consolidated
================================== ============== ============ ============= ============= ============== ==============
For the Three Months Ended 2002 2001 2002 2001 2002 2001
September 30,
================================== ============== ============ ============= ============= ============== ==============
Net operating revenue $ 31 $ 88 - - $ 7,885 $ 7,901
Depreciation & amortization $ 42 $ 54 - - $ 616 $ 1,085
Interest income $ 61 $ 88 $ (85) $ (85) $ 7 $ 37
Interest expense, $ 5 $ 13 $ (85) $ (85) $ 480 $ 429
including debt issuance cost
Earnings (loss) before income $ (1,088) $ (205) - - $ 833 $ 1,626
taxes and minority interest
Income tax expense(benefit) $ (577) $ (49) - - $ 317 $ 908
Net earnings (loss) $ (511) $ (156) - - $ 453 $ 687
EBITDA $ (1,102) $ (226) - - $ 1,859 $ 3,072
================================== ==== ========= === ======== === ========= === ========= === ========== === ==========
19
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
Segment information as of, and for the nine months ended September 30, 2002
and 2001 is presented below.
================================== ============================= ========================== =============================
Cripple Creek CO South Africa Cruise Ships
================================== ============== ============== ============ ============= ============= ===============
As of and for the Nine Months 2002 2001 2002 2001 2002 2001
Ended September 30,
================================== ============== ============== ============ ============= ============= ===============
Property and equipment, net $ 21,373 $ 19,326 $ 9,203 $ 10,586 $ 215 $ 232
Goodwill, net (1) $ 7,233 $ 7,568 $ 543 $ 777 - -
Total assets $ 32,366 $ 30,629 $ 12,446 $ 14,322 $ 446 $ 534
Net operating revenue $ 16,517 $ 15,831 $ 4,953 $ 5,794 $ 598 $ 758
Depreciation & amortization $ 999 $ 2,321 $ 575 $ 1,049 $ 42 $ 34
Interest income $ 12 $ 15 $ 69 $ 45 - -
Interest expense, $ 1,049 $ 1,073 $ 599 $ 640 - -
including debt issuance cost
Earnings (loss) before income $ 5,574 $ 4,294 $ 31 $ (505) $ 172 $ 241
taxes and minority interest
Income tax expense(benefit) $ 2,564 $ 1,975 $ 38 (117) $ 64 $ 106
Net earnings (loss) $ 3,010 $ 2,319 $ (68) $ (254) $ 108 $ 135
EBITDA $ 7,610 $ 7,673 $ 1,075 $ 1,273 $ 214 $ 275
================================== ==== ========= == =========== == ========= === ========= ==== ======== ==== ==========
================================== ============================= ========================== =============================
Corporate and Other Inter-segment Elimination Consolidated
================================== =============== ============= ============ ============= ============== ==============
As of and for the Nine Months 2002 2001 2002 2001 2002 2001
Ended September 30,
================================== === =========== === ========= == ========= === ========= === ========== === ==========
Property and equipment, net $ 1,171 $ 1,823 - - $ 31,962 $ 31,967
Goodwill, net (1) - - - - $ 7,776 $ 8,345
Total assets $ 2,325 $ 3,284 - - $ 47,583 $ 48,769
Net operating revenue $ 138 $ 220 - - $ 22,206 $ 22,603
Depreciation & amortization $ 150 $ 172 - - $ 1,766 $ 3,576
Interest income $ 239 $ 267 $ (256) $ (256) $ 64 $ 71
Interest expense, $ 17 $ 37 $ (256) $ (256) $ 1,409 $ 1,494
including debt issuance cost
Earnings (loss) before income $ (1,687) $ (1,004) - - $ 4,090 $ 3,026
taxes and minority interest
Income tax expense(benefit) $ (1,118) $ (533) - - $ 1,548 $ 1,431
Net earnings (loss) $ (569) $ (471) - - $ 2,481 $ 1,729
EBITDA $ (1,759) $ (1,062) - - $ 7,140 $ 8,159
================================== === =========== === ========= == ========= === ========= === ========== === ==========
(1) The only change in goodwill, net, for the nine months ended September 30,
2002 was $67 for the translation effects related to goodwill denominated in
a foreign currency.
20
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
12. PROPERTY WRITE-DOWN AND OTHER WRITE-OFFS
Property write-down and other write-offs consist of the following:
For the Three Months Ended September 30,
2002 2001
---- ----
Write down non-operating casino property and land held for sale in $ 447 $ -
Nevada (Note 7)
Write off receivables and advances related to a casino acquisition
project and casino properties under management (Notes 1 and 6) 675 -
-------- --------
$ 1,122 $ -
======== ========
For the Nine Months Ended September 30,
2002 2001
---- ----
Write down non-operating casino property and land held for sale in $ 447 $ 57
Nevada (Note 7)
Write off receivables and advances related to a casino acquisition
project and casino properties under management (Notes 1 and 6) 675 -
-------- --------
$ 1,122 $ 57
======== ========
13. OTHER EXPENSE, NET
Other (expense), net, consists of the following:
For the Three Months Ended September 30,
2002 2001
---- ----
Interest income $ 7 $ 37
Interest expense (457) (399)
Foreign currency exchange gains - 2
Gain (loss) on disposition of assets 25 -
Amortization of deferred financing costs (23) (30)
-------- --------
$ (448) $ (390)
======== ========
For the Nine Months Ended September 30,
2002 2001
---- ----
Interest income $ 64 $ 71
Interest expense (1,342) (1,432)
Gain (loss) on disposition of assets 27 14
Foreign currency exchange gains - 3
Amortization of deferred financing costs (67) (62)
Other (1) -
--------- --------
$ (1,319) $ (1,406)
======== ========
21
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
14. CONTINGENCIES
The South African Revenue Service (SARS) is currently auditing the tax
returns of Century Casinos Caledon (Pty) Ltd (CCAL) filed for calendar
years 2000 and 2001. SARS is questioning the deductibility of certain
licensing and pre-opening costs, among others, deducted for tax purposes.
The outcome of this audit is not reasonably determinable at this time.
22
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
Forward-Looking Statements, Business Environment and Risk Factors
Forward-Looking Statements and Business Environment 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
Three Months Ended September 30, 2002 vs. 2001
Cripple Creek, Colorado
Womacks is located in Cripple Creek, Colorado. Net operating revenue for the
third quarter, derived principally from its gaming operations, increased to
$5,818 in 2002 from $5,731 in 2001. Womacks casino revenue for the third quarter
increased to $5,733 in 2002 from $5,567 in 2001, or 2.9%. In the fourth quarter
of 2001, Womacks began its 6,022 square foot addition to the casino and back of
house operations. In the third quarter of the year Womacks expended $298,
bringing the total cost of construction to $1,242 through September 30, 2002.
Womacks' share of the overall Cripple Creek market declined to 16.2% in 2002
from 16.3% in 2001. Womacks Casino operated approximately 15.3% of the gaming
devices in the Cripple Creek market in the third quarter of 2002 compared to
14.3% in 2001. The average win per day per machine was 108 dollars in 2002 and
115 dollars for the same period in 2001 compared with a market average of 102
dollars in 2002 and 99 dollars in 2001. Gross margin for the Cripple Creek
casino activities in the third quarter (casino revenues, net of applicable
casino gaming incentives, less casino expenses) decreased to 66.5% compared with
70.4% a year earlier. In the third quarter of 2002, Womacks paid a higher amount
of royalties on participation machines. With participation machines, Womacks
pays a fee to the manufacturer based on a percentage of the win. In most
instances, the branded games that are being introduced to the market are not
available for purchase. They can only be installed in the casino via revenue
sharing or participation agreements. Management makes its decisions to introduce
these machines based on the consumer demand for the product. Gaming tax in
Colorado is calculated on a graduated scale, therefore the effective rate
increases as casino revenue improves. The increase in the effective
23
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
gaming tax rate has had a negative impact on the margin. Management continues to
focus on the marketing of the casino through the expansion of the Gold Club.
Management continues to place emphasis on further refining the product mix,
upgrading both the interior of the facilities, as well as the slot machine mix.
Management has recently added an additional 41 parking spaces through the
purchase of the Palace Hotel property and introduced valet parking to its list
of customer benefits, expanding on the convenient and expansive parking
facilities currently provided by the casino.
Food and Beverage revenue in the third quarter of 2002 decreased to $281 from
$382 in 2001. In July 2002, Womacks introduced Bob's Grill on the main gaming
floor to improve customer convenience and converted the upstairs restaurant to a
fine dining restaurant with operating hours during the busiest days of the week.
Food and Beverage margins improved to 74.8% in 2002 compared to 68.5% in 2001.
Labor and food costs have been more controllable with the two restaurants. The
cost of food and beverage promotional allowances, which are included in casino
costs, decreased slightly to $263 in 2002 from $267 in 2001.
Hotel revenue increased to $64 in 2002 from $49 in 2001, or 31.5%. 10 new luxury
rooms were introduced in July of 2001 and 3 additional luxury rooms were added
at the end of the first quarter of 2002. All of the revenue generated by the
hotel operation is derived from comps to its better players.
General and administrative expenses increased to $1,151 in the third quarter of
2002 from $1,114 in same period of 2001, or 3.5%.
Depreciation decreased to $332 in 2002 from $344 in 2001. As a result of
adopting SFAS No. 142 the Company no longer amortizes the remaining balance in
goodwill resulting in a reduction of $335 in amortization expense.
Interest expense, including debt issuance cost, decreased to $358 in 2002 from
$396 in 2001. Since the second quarter of 2000 the Company has borrowed a total
of $6.5 million under the RCF to fund its investments in South Africa. The
resulting interest charge of approximately $185 and $155 has been charged
against the Cripple Creek segment and has not been allocated to the South
African segment during the third quarter of the years 2002 and 2001
respectively.
The Cripple Creek segment recognized income tax expense of $903 in 2002 versus
$814 in 2001 due to an increase in pre-tax earnings.
South Africa
When comparing the third quarter of last year to the current year, the
deterioration in the Rand versus the dollar has had a negative impact on the
reported revenues and a positive impact on expenses.
Net operating revenue increased to $1,743 in 2002 from $1,656 in 2001. The
Caledon Casino, Hotel and Spa also faces intense competition from a
significantly larger casino operation in Cape Town, S.A. approximately one hour
away. Caledon casino revenue increased to $1,368 in 2002 from $1,162 in 2001, or
15.0%. Excluding the effect of the change in the Rand conversion rate from year
to year, casino revenue increased by 34.4%. Gross margin for the Caledon casino
activities (casino revenues, less casino expenses) increased to 63.8% from 50.3%
a year earlier as a result of management's ability to contain costs while it has
increased gaming revenue through its marketing efforts.
Food and beverage revenue increased to $208 during the third quarter of 2002
from $194 during the third quarter of 2001, or 7.1%. Excluding the effect of the
change in the Rand conversion rate from year to year, food and beverage revenue
increased by 29.6%. Hotel revenue decreased to $169 during the third quarter of
2002 compared to $179 during the third quarter of 2001. Excluding the effect of
the change in the Rand conversion rate from year to year, hotel revenue
increased by 14.0%.
24
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
General and administrative expenses decreased to $322 in 2002 from $423 in 2001,
a reduction of 24.1%. Excluding the effect of the change in the Rand conversion
rate from year to year, general and administrative expenses decreased by 20.1%
as a result of management's continuing effort to improve the efficiency of the
operation.
Depreciation expense incurred in South Africa decreased to $228 in 2002 from
$318 in 2001 due in part to the effect of the currency devaluation. As a result
of adopting SFAS No. 142 the Company no longer amortizes the remaining balance
in goodwill resulting in a reduction of $21 in amortization expense.
Interest expense, including debt issuance cost, increased to $202 in 2002 from
$105 in 2001. In September 2001, the Company and COIL agreed to reduce the
interest rate on shareholder loans to zero, retroactive to the original date of
the loans. In conjunction with this agreement, the Company reversed the accrued
interest on the note to COIL resulting in an interest expense reduction of $192
in 2001. The weighted-average interest rate on the borrowings under the PSG loan
agreement is 16.9% in the third quarter of 2002 and 2001.
Property write-down and other write-offs for 2002 includes a pre-tax charge of
$377 to write off advances made, and pre-construction cost incurred, in
conjunction with the Johannesburg project.
The South African segment recognized an income tax benefit of $47 in 2002
compared to a tax expense of $64 in 2001.
Cruise Ships
Net operating revenue decreased to $293 in 2002 from $426 in 2001. Gross margin
for the casino activities (casino revenues, less casino expenses) decreased to
38.3% from 41.8% a year earlier. During the third quarter of 2002, the Company
operated casinos on a total of four ships, three on Silverseas and one on "World
of Residensea", compared to a total of four in the same period during the prior
year, all on Silverseas. The Silver Wind, which was removed from operation when
passenger traffic declined during the last year, has been completely refurbished
and is expected to return to operation in June 2003.
Depreciation expense has increased to $14 in 2002 from $13 in 2001.
Corporate & Other
Net operating revenues consisted of management fees earned from operating Casino
Millennium in Prague, Czech Republic which decreased to $31 in 2002 from $38 in
2001 and $50 received in 2001 as a final distribution of the consulting
agreement with Playboy Enterprises.
Depreciation decreased to $42 in 2002 from $54 in 2001.
General and administrative expense increased to $388 in 2002 from $317 in 2001,
or 22.2%.
Property write-down and other write-offs in 2002 includes a pre-tax charge in
the amount of $447 to reduce the value of a non-operating casino and land in
Nevada to its fair value, less costs to sell, based on the current assessment of
the property and a pre-tax charge of $298 to write off unpaid management fees
and loans related to its operations in Prague, Czech Republic. An additional $27
in interest income on the unpaid management fees and loans was also written off,
bringing the total pre-tax charge for the segment to $772.
25
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
Nine Months Ended September 30, 2002 vs. 2001
Cripple Creek, Colorado
Womacks is located in Cripple Creek, Colorado. Net operating revenue, derived
principally from its gaming operations, increased to $16,517 in 2002 from
$15,831 in 2001. Womacks casino revenue increased to $16,316 in 2002 from
$15,508 in 2001, or 5.0% compared to an increase of 3.2% in the Cripple Creek
Market. In the fourth quarter of 2001, Womacks began its 6,022 square foot
addition to the casino and back of house operations. In the first nine months of
the year the Womacks expended $842, bringing the total cost of construction to
$1,242 through September 30, 2002. Womacks' share of the overall Cripple Creek
market increased to 17.1% in the first nine months of 2002 from 16.7% in 2001.
Womacks Casino operated approximately 14.9% of the gaming devices in the Cripple
Creek market in 2002 compared to 14.1% in 2001. The average win per day per
machine was 107 dollars in 2002 and 108 dollars in 2001 compared with a market
average of 94 dollars in 2002 and 90 dollars in 2001. Gross margin for the
Cripple Creek casino activities (casino revenues, net of applicable casino
gaming incentives, less casino expenses) decreased to 67.6% compared with 70.5%
a year earlier. In the first nine months of 2002, Womacks paid a higher amount
of royalties on participation machines, based on a percentage of the win. In
most instances, the branded games that are being introduced to the market are
not available for purchase. They can only be installed in the casino via revenue
sharing or participation agreements. Management makes its decisions to introduce
these machines based on the consumer demand for the product. Gaming tax in
Colorado is calculated on a graduated scale, therefore the effective rate
increases as casino revenue improves. Management continues to focus on the
marketing of the casino through the expansion of the Gold Club. Management
continues to place emphasis on further refining the product mix, upgrading both
the interior of the facilities, as well as the slot machine mix and introducing
valet service on the Palace Hotel property.
Food and Beverage revenue in 2002 decreased to $703 from $846 in 2001, or 16.9%.
In July 2002, Womacks introduced Bob's Grill on the main gaming floor to improve
customer convenience and converted the upstairs restaurant to a fine dining
restaurant with operating hours during the busiest days of the week. Food and
Beverage margins improved to 78.3% in 2002 compared to 68.0% in 2001. Labor and
food costs have been more controllable with the two restaurants. The cost of
food and beverage promotional allowances, which are included in casino costs,
increased to $716 in 2002 from $690 in 2001.
Hotel revenue increased to $184 in 2002 from $85 in 2001, or 117.1%. 10 new
luxury rooms were introduced in July of 2001 and 3 additional luxury rooms were
added at the end of the first quarter of 2002. All of the revenue generated by
the hotel operation is derived from comps to its better players.
General and administrative expenses increased to $3,417 in 2002 from $3,291 in
2001, or 3.8%.
Depreciation decreased to $999 in 2002 from $1,315 in 2001. As a result of
adopting SFAS No. 142 the Company no longer amortizes the remaining balance in
goodwill resulting in a reduction of $1,006 in amortization expense.
Interest expense, including debt issuance cost, decreased to $1,049 in 2002 from
$1,073 in 2001. Since the second quarter of 2000 the Company has borrowed a
total of $6.5 million under the RCF to fund its investments in South Africa. The
resulting interest charge of approximately $534 and $452 has been charged to the
Cripple Creek segment and has not been allocated to the South African segment
for the first nine months of the years 2002 and 2001, respectively. The
weighted-average interest rate on the borrowings under the RCF, including
effects of the swap agreements, has increased slightly to 8.96% in 2002 from
8.91% in 2001.
26
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
The Cripple Creek segment recognized income tax expense of $2,564 in 2002 versus
$1,975 in 2001 due to an increase in pre-tax earnings.
South Africa
When comparing the first nine months of last year to the current year, the
deterioration in the Rand versus the dollar has had a negative impact on the
reported revenues and a positive impact on expenses.
Net operating revenue decreased to $4,953 in 2002 from $5,794 in 2001. The
Caledon Casino, Hotel and Spa faces intense competition from a significantly
larger casino operation in Cape Town, S.A. approximately one hour away. Caledon
casino revenue decreased to $4,004 in 2002 from $4,565 in 2001, or 14.0%.
Excluding the effect of the Rand conversion rate from year to year, casino
revenue increased by 16.7%. Gross margin for the Caledon casino activities
(casino revenues, less casino expenses) increased to 62.4% from 55.1% a year
earlier as a result of management's ability to contain costs while it has
increased gaming revenue through its marketing efforts.
Food and beverage revenue decreased to $542 during the first nine months of 2002
from $610 during the first nine months of 2001, or 11.0%. Excluding the effect
of the change in the Rand conversion rate from year to year, food and beverage
revenue increased by 17.1%. Hotel revenue decreased only slightly to $455 during
the first nine months of 2002 compared to $467 during the first nine months of
2001. Excluding the effect of the change in the Rand conversion rate from year
to year, hotel revenue increased by 28.1%, primarily due to the increase in the
amount of rooms comped by the casino to its better players.
General and administrative expenses decreased to $1,115 in 2002 from $1,543 in
2001, a reduction of 27.7%. Excluding the effect of the change in the Rand
conversion rate from year to year, general and administrative expenses decreased
by 12.3%, as a result of management's emphasis on improving the efficiency of
the operation.
Depreciation expense incurred in South Africa decreased to $575 in 2002 from
$986 in 2001 due in part to the effect of the currency devaluation. As a result
of adopting SFAS No. 142 the Company no longer amortizes the remaining balance
in goodwill resulting in a reduction of $63 in amortization expense.
Interest expense, including debt issuance cost, decreased to $599 in 2002 from
$640 in 2001. The weighted-average interest rate on the borrowings under the PSG
loan agreement is 16.9% in the first nine months of 2002 and 2001.
Property write-down and other write-offs in 2002 includes a pre-tax charge of
$377 to write off advances made, and pre-construction cost incurred, in
conjunction with the Johannesburg project.
27
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
Cruise Ships
Net operating revenue decreased to $598 in 2002 from $758 in 2001. Gross margin
for the casino activities (casino revenues, less casino expenses) increased
slightly to 32.0% from 31.2% a year earlier. In October 2001, Silversea Cruises
removed one of the four ships from service. Silversea Cruises expects to return
the ship to operation in June 2003.
Depreciation expense has increased to $42 in 2002 from $34 in 2001.
Corporate & Other
Net operating revenues consisted principally of management fees earned from
operating Casino Millennium in Prague, Czech Republic which decreased to $138 in
2002 from $170 in 2001 and $50 received in 2001 as a final distribution of the
consulting agreement with Playboy Enterprises. These management fees are
included in the $325 write-off of unpaid management fees and loans.
Depreciation decreased to $150 in 2002 from $172 in 2001.
General and administrative expense decreased to $1,151 in 2002 from $1,227 in
2001, or 6.2%.
Property write-down and other write-offs in 2001 includes a charge of $57 for
the write-down in value of non-operating property and land held by the Company
in Nevada.
Property write-down and other write-offs in 2002 includes a pre-tax charge in
the amount of $447 to reduce the value of the non-operating casino property and
land held by the Company in Nevada to its fair value, less costs to sell, based
on the current assessment of the property and a pre-tax charge of $298 to write
off unpaid management fees and loans related to its operations in Prague, Czech
Republic. An additional $27 in interest income on the unpaid management fees and
loans was also written off, bringing the total pre-tax charge for the segment to
$772.
28
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
Liquidity and Capital Resources
Cash and cash equivalents totaled $3,520 (including $391 of restricted cash) at
September 30, 2002, and the Company had net deficit working capital of $544.
Additional liquidity may be provided by the Company's revolving credit facility
("RCF") with Wells Fargo Bank, under which the Company has a total commitment of
$26,000 and unused borrowing capacity of approximately $14,462 at September 30,
2002.
For the nine months ended September 30, 2002, cash provided by operating
activities was $4,991 compared with $4,903 in the prior-year period.
Cash used in investing activities of $3,594 for the first nine months of 2002,
consisted of $1,400 towards the purchase and improvements of the Palace Hotel
and property, $842 towards the expansion of the Womacks casino at the rear of
the property that is expected to be completed in 2003, which will provide
additional gaming space, $135 towards the construction of a restaurant & grill
on the first floor of Womacks casino, $390 for additional improvements to the
property in Caledon, South Africa, $460, primarily for land purchased for the
proposed casino development in Johannesburg, South Africa and the balance of
$367 due to expenditures for other long-lived assets. Cash used in investing
activities of $3,574 for the first nine months of 2001, consisted of a $250 loan
provided by the Company to an unrelated party in Cripple Creek, Colorado, $2,141
was due to improvements to the Caledon Casino, Hotel and Spa in South Africa,
$997 and was due to improvements to the Womacks/Legends casino in Cripple Creek,
Colorado and the balance of $186 was due to expenditures for other long-lived
assets.
Cash used in financing activities for the first nine months of 2002 consisted of
net repayments of $263 under the RCF with Wells Fargo, plus net repayments of
$712 under the loan agreement with PSG, additional deferred financing charges
incurred by the Caledon Casino, Hotel and Spa, with a cost of $19, additional
deferred financing charges incurred by the Company to amend the RCF, with a cost
of $88, the repurchase of company's stock, on the open market, with a cost of
$205 and other net repayments of $50. Net cash used in financing activities for
the first nine months of 2001 consisted of net repayments of $6,701 under the
RCF with Wells Fargo, net borrowings of $1,298 under the PSG loan agreements,
the repurchase of company's stock, on the open market, with a cost of $552, and
other net repayments of $942.
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 $17,200 to $26,000 and extended the maturity date of the
RCF until April 2004. The agreement was further amended in August 2001 to give
greater flexibility to the ability to use the borrowed funds for projects for
the Company. Under the terms of the previous agreements the borrowing commitment
under the RCF reduced by $722 each quarter. The agreement was again amended in
August 2002 to increase the available funds to $26,000 and to extend the
maturity date of the RCF to August 2007. Prior to signing the current amendment
the borrowing commitment had been reduced to $20,222.
29
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
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 $1.2
million, to the casino for 45% of the casino's net profit. The Company has a
memorandum of agreement to acquire a 50% ownership interest in Casino Millennium
a.s., a Czech company. 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 acquisition is expected to be completed
in late 2002 or early 2003, subject to certain contingencies and contract
conditions, and is expected to cost approximately $200 in cash plus contributed
assets.
The Company's Board of Directors has approved a discretionary program to
repurchase up to $5,000 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 2002, the Company repurchased, on the open market, an
additional 77,420 shares of its common stock at an average price per share of
$2.64. Through September 30, 2002, the Company had repurchased 2,267,220 shares
of its common stock at a total cost of approximately $3,176. 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 of, and, as of September
2001, through its South African subsidiary, CCA, secured a 50% ownership
interest in Rhino Resort Ltd. ("RRL"), a consortium which includes Silverstar
Development Ltd. ("Silverstar"). RRL submitted an application for a proposed
hotel/casino resort development in the greater Johannesburg area of South Africa
at a cost of approximately 400 million Rand ($38.0 million). The dollar value of
the proposed development fluctuates with the USD/Rand exchange rate. In November
2001, the Gauteng Gambling Board ("GGB"), with the concurrence of the Executive
Council of the provincial government, awarded RRL the sixth, and final, casino
license for 700 slot machines and 30 gaming tables conditional upon the
satisfaction of certain requirements within three months of award. In February
2002, RRL filed documentation with the GGB in order to satisfy those conditions,
including evidence of the continuing commitment of Nedcor Investment Bank (one
of South Africa's leading financial institutions) to provide the necessary debt
financing and project guarantees required under the license. In February 2002,
Tsogo Sun Holdings, a competing casino, initiated a court action against the GGB
challenging the license award and in September 2002, the High Court of South
Africa overturned the license award. RRL, the GGB, and the Company are currently
assessing the implications of this judgment which cited certain procedural and
technical deficiencies in the actions of the GGB (in the process that led to the
original award of the casino license) in order to determine any potential future
actions. Under the existing agreements, the Company's obligation to make the
presumed equity investment of 50 million Rand or approximately $4.8 million
expires on December 31, 2004 unless RRL has obtained a final license by such
date.
In the fourth quarter 2001, Womacks began a 6,022 square foot expansion.
Approximately half of the space will provide additional gaming for approximately
115 slot machines on the street level. The other half will increase the "back of
house" area. Contracts for the project totaling $1.5 million have been signed as
of September 30, 2002. The total construction cost, including additional slot
machines, is expected to be $2.5 million, of which $1,242 has been spent through
September 30, 2002. The project is expected to be completed in the first quarter
or second quarter of 2003.
30
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
Management believes that the Company's cash at September 30, 2002, 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.
Critical Accounting Policies
In accordance with recent Securities and Exchange Commission guidance, those
material accounting policies that we believe are the most critical to an
investor's understanding of the Company's financial results and condition and/or
require complex management judgment have been expanded and are discussed below.
Revenue Recognition - Casino revenue is the net win from gaming activities,
which is the difference between gaming wins and losses. Management and
consulting fees are recognized as revenue as services are provided. The
incremental amount of unpaid progressive jackpots is recorded as a liability and
a reduction of casino revenue in the period during which the progressive
jackpots increase.
Goodwill and Other Intangible Assets - The Company's goodwill results from the
acquisitions of casino and hotel operations.
Effective January 1, 2002 the Company adopted Financial Accounting Standards
Board (the "FASB") SFAS No. 141 "Business Combinations" and SFAS No. 142
"Goodwill and Other Intangible Assets".
SFAS No. 141 addresses financial accounting and reporting for business
combinations. SFAS No. 141 requires that all business combinations be accounted
for using the purchase method of accounting. The use of the pooling-of-interest
method of accounting for business combinations is prohibited. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
The Company will account for any future business combinations in accordance with
SFAS No. 141.
SFAS No. 142 addresses the methods used to capitalize, amortize and to assess
impairment of intangible assets, including goodwill resulting from business
combinations accounted for under the purchase method. Effective with the
adoption of SFAS No. 142, the Company no longer amortizes goodwill and other
intangible assets with indefinite useful lives, principally deferred casino
license costs. In evaluating the Company's capitalized casino license cost
related to CCAL, which comprises principally all of its other intangible assets,
management considered all of the criteria set forth in SFAS No. 142 in
determining its useful life. Of particular significance in that evaluation was
the existing regulatory provision for annual renewal of the license at minimal
cost and the current practice of the Western Cape Gambling and Racing Board
("Board") of granting such renewals as long as all applicable laws are complied
with as well as compliance with the original conditions of the casino operator
license as set forth by the Board. Based on that evaluation, the Company has
deemed the casino license costs to have an indefinite life as of January 1,
2002. Included in assets at September 30, 2002 is unamortized goodwill of
approximately $7,776 and unamortized deferred license costs of approximately
$991.
31
CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except for share information, or as noted)
In accordance with SFAS No. 142, the Company has completed step one of the
impairment test on each of the reporting units for which it has recorded
goodwill. The Company contracted third-party valuation firms to complete the
analysis of each reporting unit. In completing its analysis of the fair value of
WMCK-Venture Corporation, parent company of Womacks Casino and Hotel, the
Company used the Discounted Cash Flow ("DCF") Method in which the reporting unit
is valued by discounting the projected cash flows, to a period in which the
annual growth rate is expected to stabilize, to their present value based on a
risk-adjusted discount rate. Projected cash flows through 2008, are based on
historical results, adjusted based on management's conservative projection of
future revenue growth given existing market conditions. A risk adjusted discount
rate of 10%, which estimates the return demanded by third-party investors,
taking into account market risks, and the cost of equity and after-tax debt in
the optimal hypothetical capital structure, was used in the DCF calculation of
WMCK-Venture Corp. In completing its analysis of the fair market value of
Century Casinos Caledon (Pty) Ltd, the owner of Caledon Casino, Hotel and Spa,
the Company also applied the DCF method and the results were compared to other
methods of valuation, most notably the net asset value of Caledon in order to
further justify the range of values. Cash flows were projected through the end
of 2015 to coincide with the exclusivity period of the gaming license. A risk
adjusted rate of 23.2%, taking into account risk free rates of return, the
return demanded by the South African equity market and a risk factor which
measures the volatility of Caledon relative to the equity markets, was used in
the DCF calculation of Caledon. As a result of the testing, the Company has
determined that there is no impairment of goodwill or other intangible assets.
The Company will be required to assess goodwill and other intangibles for
impairment at least annually hereafter.
Foreign Exchange - Current period transactions affecting the profit and loss of
operations conducted in foreign currencies are valued at the average exchange
rate for the period in which they are incurred. Except for equity transactions
and balances denominated in U.S. dollars, the balance sheet is translated based
on the exchange rate at the end of the period.
Controls and Procedures - Under the supervision and with the participation of
management, including its principal executive officer and principal financial
officer, the Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures (which are designed to ensure that
information required to be disclosed in the reports submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms). Based on their evaluation, the
Company's principal executive officer and principal financial officer have
concluded that these controls and procedures are effective.
* * * * * * * * * * * * * * * *
32
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.
Items 2 to 5 - None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibits are filed herewith:
10.115 Second Amendment to the Amended and Restated Credit Agreement, by
and among, WMCK Venture Corp., Century Casinos Cripple Creek,
Inc., and WMCK Acquisition Corp. (collectively, the "Borrowers"),
Century Casinos, Inc. (the "Guarantor") and Wells Fargo Bank,
National Association, dated August 28, 2002.
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, Chairman of the Board and Chief Executive Officer.
99.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, Vice-Chairman and President.
99.3 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, Chief Accounting Officer.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended September
30, 2002.
* * * * * * *
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 29, 2002
33
CERTIFICATION
I, Erwin Haitzmann, Chairman of the Board and Chief Executive Officer of Century
Casinos, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Century Casinos,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 29, 2002
/s/ Erwin Haitzmann
- ---------------------
Erwin Haitzmann
Chairman of the Board and Chief Executive Officer
34
CERTIFICATION
I, Peter Hoetzinger, Vice-Chairman and President of Century Casinos,Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Century Casinos,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 29, 2002
/s/ Peter Hoetzinger
- ---------------------
Peter Hoetzinger
Vice-Chairman and President
35
CERTIFICATION
I, Larry Hannappel, Chief Accounting Officer of Century Casinos,Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Century Casinos,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 29, 2002
/s/ Larry Hannappel
- -----------------------
Larry Hannappel
Chief Accounting Officer
36