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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 March 31, 2003
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.
---------------------
(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.)
157 East Warren Ave., Cripple Creek, Colorado 80813
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(Address of principal executive offices)
(Zip Code)
(719) 689-9100
(Registrant's telephone number, including
area code)
Indicate by check mark whether the registrant (1) 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___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes___ No _X_
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common stock, $0.01 par value, 13,540,264 shares outstanding as of May 06,
2003.
-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 March 31, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Earnings for the Three
Months Ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Comprehensive Earnings for the Three Months
Ended March 31, 2003 and 2002 5
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 34
Item 4. Controls and Procedures 35
PART II OTHER INFORMATION
Item 1. Legal Proceedings 36
Item 6. Exhibits and Reports on Form 8-K 36
SIGNATURES 36
SECURITIES EXCHANGE ACT RULE 13a-14 AND 15d-14 CERTIFICATIONS OF CEO, PRESIDENT AND
CAO 37
-2-
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands, except for share information)
- -------------------------------------------------------------------------------------------------------------
March 31, 2003 December 31, 2002
-------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,275 $ 4,582
Restricted cash 546 491
Accounts receivable 120 133
Prepaid expenses and other 578 564
---------- ----------
Total current assets 5,519 5,770
Property and Equipment, net 35,016 33,965
Goodwill, net 7,957 7,899
Casino License Costs, net 1,410 1,298
Deferred Taxes 1,019 1,078
Other Assets 1,130 1,133
---------- ----------
Total $ 52,051 $ 51,143
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,700 $ 1,664
Accounts payable and accrued liabilities 2,067 2,309
Accrued payroll 404 1,098
Taxes payable 1,237 747
---------- ----------
Total current liabilities 5,408 5,818
Long-Term Debt, less current portion 17,483 16,531
Other Non-current Liabilities 738 788
Minority Interest - 903
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;
13,575,964 and 13,580,864 shares outstanding, respectively 145 145
Additional paid-in capital 21,865 21,874
Accumulated other comprehensive loss (466) (1,052)
Retained earnings 8,681 7,926
---------- ----------
30,225 28,893
Treasury stock - 909,812 and 904,912 shares at cost,
respectively (1,803) (1,790)
---------- ----------
Total shareholders' equity 28,422 27,103
---------- ----------
Total $ 52,051 $ 51,143
========== ==========
See notes to condensed consolidated financial statements.
-3-
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(Dollar amounts in thousands, except for share information)
- -------------------------------------------------------------------------------------------------------------
For The Three Months Ended March 31,
2003 2002
---- ----
Operating Revenue:
Casino $ 7,520 $ 7,206
Hotel, Food and beverage 821 572
Other 121 151
---------- ----------
8,462 7,929
Less promotional allowances 1,081 1,037
---------- ----------
Net operating revenue 7,381 6,892
---------- ----------
Operating Costs and Expenses:
Casino 2,649 2,233
Hotel, Food and beverage 569 296
General and administrative 1,817 1,793
Depreciation and amortization 648 597
---------- ----------
Total operating costs and expenses 5,683 4,919
---------- ----------
Earnings from Operations 1,698 1,973
Interest expense (527) (461)
Other income, net 58 23
---------- ----------
Earnings before Income Taxes and Minority Interest 1,229 1,535
Provision for income taxes 466 618
---------- ----------
Earnings before Minority Interest 763 917
Minority interest in subsidiary (earnings) losses (8) 8
---------- ----------
Net Earnings $ 755 $ 925
========== ==========
Earnings Per Share:
Basic $ 0.06 $ 0.07
========== ==========
Diluted $ 0.05 $ 0.06
========== ==========
See notes to condensed consolidated financial statements.
-4-
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Unaudited)
(Dollar amounts in thousands)
- -------------------------------------------------------------------------------------------------------------
For The Three Months Ended March 31,
2003 2002
---- ----
Net Earnings $ 755 $ 925
Foreign currency translation adjustments 555 289
Change in fair value of interest rate swaps, net of income taxes 31 86
---------- ----------
Comprehensive Earnings $ 1,341 $ 1,300
========== ==========
See notes to condensed consolidated financial statements.
-5-
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
- -------------------------------------------------------------------------------------------------------------
For The Three Months Ended March 31,
2003 2002
---- ----
Cash Flows from Operating Activities:
Net earnings $ 755 $ 925
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation 648 597
Amortization of deferred financing costs 28 16
Deferred tax expense 16 3
Minority interest in subsidiary earnings (losses) 8 (8)
Other 3 (31)
Changes in operating assets and liabilities
Receivables 16 (21)
Prepaid expenses and other assets 19 47
Accounts payable and accrued liabilities (442) (338)
Accrued payroll (710) -
Taxes payable 468 -
--------- ---------
Net cash provided by operating activities 809 1,190
--------- ---------
Cash Flows from Investing Activities:
Purchases of property and equipment (874) (959)
Acquisition of subsidiary, net of cash acquired (918) -
Restricted cash (increase) decrease 3 (19)
--------- ---------
Net cash used in investing activities (1,789) (978)
--------- ---------
(continued)
-6-
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
- -------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31,
2003 2002
---- ----
Cash Flows from Financing Activities:
Proceeds from borrowings $ 6,999 $ 3,425
Principal repayments (6,424) (3,544)
Proceeds from exercise of options 7 -
Purchases of treasury stock (31) -
Other 2 -
---------- ----------
Net cash provided by (used in) financing activities 553 (119)
---------- ----------
Effect of exchange rate changes on cash 120 38
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents (307) 131
Cash and Cash Equivalents at Beginning of Period 4,582 3,031
---------- ----------
Cash and Cash Equivalents at End of Period $ 4,275 $ 3,162
========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $10 in 2003 and $15 in 2002 $ 568 $ 628
========== ==========
Income taxes paid $ - $ -
========== ==========
See notes to condensed consolidated financial statements.
-7-
CENTURY CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, except for share information)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Century Casinos, Inc. ("CCI", the "Company") 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 100% of Century Casinos Caledon (Pty) Ltd.
("CCAL"), 55% of Century Casinos West Rand (Pty) Ltd. ("CCWR") and 50% of
Rhino Resort Ltd. ("RRL", a dormant subsidiary). The Company owns and/or
manages casino operations in the United States, 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 604 slot machines,
six limited stakes gaming tables, 21 hotel rooms and a restaurant.
CCA owns and operates The Caledon Casino, Hotel and Spa near Cape
Town, South Africa and has a management contract to operate the
casino. The resort has 275 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. The Company and another entity have each
agreed to purchase a 50% ownership interest in Casino Millennium a.s.
In December 2002, the Company paid $236 towards a 10% ownership
interest, which was subject to the repayment of a CM loan by Strabag
AG, the Company's proposed partner, which was repaid in April 2003.
The balance of the acquisition is expected to be completed in 2003 by
contributing assets of the casino currently owned by the Company and
certain pre-operating costs paid by the Company with a combined value
of $852.
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 171 gaming positions on the four combined
shipboard casinos currently in operation. On March 28, 2003 the
Company entered into a casino concession agreement with Oceania
Cruises to operate shipboard casinos, with approximately 66 gaming
positions each, on two luxury cruise ships. On April 19, 2003, the
Company successfully opened its casino aboard the Insignia, a 684
passenger luxury cruise ship operated by Oceania. The vessel is
scheduled to cruise to various destinations in the western
Mediterranean until September 2003 and then resume operations in May
2004. The second cruise ship is scheduled to sail on its maiden voyage
in the third quarter of 2003.
The Company regularly pursues additional gaming opportunities
internationally and in the United States.
-8-
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 that region
of the greater Johannesburg area of South Africa known as the West Rand at
a cost of approximately 400 million Rand ($50.7 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. In November 2002, and upon the advice of legal counsel, Silverstar,
with the support and agreement of all other parties to the original two
applications for the West Rand license, including CCA, made representation
to the GGB requesting that the sole remaining license for the province of
Gauteng now be awarded to Silverstar pursuant to its original 1997
application. Notwithstanding Silverstar's belief as to the legal and
public-policy framework that would now justify such an award, the GGB in
December 2002 denied Silverstar's request. In consequence, Silverstar on
March 4, 2003 initiated legal action against the GGB in the High Court of
South Africa seeking, inter alia, that the court now compel the authorities
to award the license to Silverstar. Due process in terms of such an action
will likely result in the matter not being heard by the High Court before
the third quarter of 2003. CCA, through its majority-owned subsidiary -
Century Casinos West Rand (Pty) Ltd. - remains contracted to Silverstar by
a resort management agreement. Under the circumstances, the conditions to
CCA's previous funding commitment of 50 million Rand to the project are
rendered incapable of fulfillment without specific waiver by CCA, and the
appropriateness of any waiver of conditions will be determined by CCA, at
such time as CCA believes sufficient progress on Silverstar's efforts is
achieved.
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 2002 financial information
in order to conform to the 2003 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. The
accompanying consolidated financial statements include the accounts of CCI
and its majority-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. The financial statements of
all foreign subsidiaries consolidated herein have been converted to US GAAP
for financial statement presentation purposes. Accordingly the consolidated
financial statements are presented in accordance with US GAAP. 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-K for the year ended December 31, 2002. The
results of operations for the period ended March 31, 2003 are not
necessarily indicative of the operating results for the full year.
-9-
2. CHANGE IN ACCOUNTING PRINCIPLES AND RECENTLY ISSUED STANDARDS
In 2002 the Company adopted Statement of Financial Accounting Standards No.
148 (SFAS 148), "Accounting for Stock-Based Compensation-Transition and
Disclosure" which amends the disclosure requirements of Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation" to require prominent disclosure in both annual
and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on
reported results. SFAS 148 also provides alternative methods of transition
for a voluntary change to fair value based methods of accounting which have
not been adopted at this time. SFAS 123 encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation for employees using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees", and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire that stock. The Company
values stock-based compensation granted to non-employees at fair value.
At March 31, 2003, the Company has one stock-based employee compensation
plan. The Company accounts for this plan under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. No
stock-based compensation cost is reflected in net earnings, as all options
granted under the plan had an exercise price equal to the market value of
the underlying common stock on the date of the grant. The following table
illustrates the effect on net earnings and earnings per share if the
Company had applied the fair value recognition provisions of FASB Statement
No. 123, "Accounting for Stock Based Compensation", to stock-based employee
compensation.
For the three months ended March 31,
2003 2002
---- ----
Net earnings, as reported $ 755 $ 925
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects 1 2
--------- ---------
Pro forma net earnings $ 754 $ 923
========= =========
Earnings per share
Basic As reported $ 0.06 $ 0.07
Pro forma $ 0.06 $ 0.07
Diluted As reported $ 0.05 $ 0.06
Pro forma $ 0.05 $ 0.06
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.
-10-
3. INCOME TAXES
The income tax provisions are based on estimated full-year earnings for
financial reporting purposes adjusted for permanent differences. Effective
with the adoption of SFAS No. 142 "Goodwill and Other Intangible Assets" on
January 1, 2002, the Company no longer amortizes goodwill, eliminating the
majority of permanent differences.
4. EARNINGS PER SHARE
Basic and diluted earnings per share for the three months ended March 31,
2003 and 2002 were computed as follows:
For the Three Months Ended March 31,
2003 2002
---- ----
Basic Earnings Per Share:
Net earnings $ 755 $ 925
========== ==========
Weighted average common shares 13,579,411 13,728,784
========== ==========
Basic earnings per share $ 0.06 $ 0.07
========== ==========
Diluted Earnings Per Share:
Net earnings, as reported $ 755 $ 925
========== ==========
Weighted average common shares 13,579,411 13,728,784
Effect of dilutive securities:
Stock options and warrants 1,124,382 1,355,129
---------- ----------
Dilutive potential common shares 14,703,793 15,083,913
========== ==========
Diluted earnings per share $ 0.05 $ 0.06
========== ==========
Excluded from computation of diluted earnings per share
Due to antidilutive effect:
Options and warrants to purchase common shares 15,000 -
Weighted average exercise price $ 2.27 $ -
-11-
5. CRIPPLE CREEK, COLORADO
Womacks is nearing completion of its 6,022 square foot expansion,
approximately half of which is providing additional space for gaming and
the other half increasing the "back of house" area. On April 19, 2003
construction was completed on the gaming space added to Womacks. In
conjunction with the expansion, the main floor of Womacks and the mezzanine
section were re-carpeted and significant changes were made to the floor
layout, providing our customers with an attractive and more comfortable
area in which to play. Altogether we have added a total of approximately
3,000 square feet of gaming area since September of 2002. Most importantly,
having spanned the alley behind the existing property, Womacks will be able
to continue building out the casino to the rear of the property on a single
level at a later date.
The total construction cost, excluding new slot machines, is expected to be
$2.0 million, of which $1.7 million has been spent as of March 31, 2003.
The project is expected to be completed in the second quarter of 2003.
6. CALEDON, SOUTH AFRICA
The casino opened on October 11, 2000 and currently operates 275 slot
machines and 8 gaming tables. In addition to the casino license, hotel and
spa, CCAL owns approximately 600 acres of land, which may be used for
future expansion.
In January 2003, CCA purchased the remaining 35% interest in CCAL, becoming
the sole owner of all of the common stock of CCAL. The Company paid 21.5
million Rand or $2.6 million, based on the conversion rate at January 10,
2003. In accordance with FASB Statement No. 141, "Business Combinations",
the cost of acquisition was allocated to the assets acquired and the
liabilities assumed based on fair values at the date of acquisition. The
assets and liabilities of CCAL, which were carried in the Company's
consolidated financial statements at the date of acquisition, had fair
values which approximated their carrying value, with the exception of land
to which $341 of the acquisition price was allocated. Simultaneous with the
transaction, the Hotel Management Agreement between CCAL and Fortes King
Hospitality (Pty) Limited ("FKH") was cancelled and CCA assumed the
management of the hotel. Financing for the transaction was provided by the
RCF.
7. PRAGUE, CZECH REPUBLIC
In January 2000, the Company entered into a memorandum of agreement to
either acquire a 50% ownership interest in CM or to form a new joint
venture with B.H. Centrum a.s., which joint venture would acquire all of
the assets of CM. The Company and Strabag AG have each agreed to purchase a
50% ownership interest. The documentation for this transaction has been
submitted, as required, to the Ministry of Finance of the Czech Republic
for approval, which has been obtained. The first step in acquiring a 50%
ownership interest was taken in December 2002 with the payment of $236 in
cash. This payment will allow the Company a 10% ownership in CM, subject to
the repayment of a CM loan by Strabag AG, which has been repaid in April
2003. As of March 31, 2003 and December 31, 2002, the initial payment of
$236 is classified in other assets on the Company's consolidated balance
sheet. The Company will carry the investment at cost until such time that
its investment is at least 20%, but not more that 50%, at which time the
Company will include its percentage of the equity earnings or loss in CM in
its consolidated balance sheet, consolidated statement of earnings
-12-
and consolidated statement of cash flows. The balance of the acquisition is
expected to be completed in 2003 by contributing assets leased to CM and
certain pre-operating costs paid by the Company with a combined value of
$852. Should we acquire a 51% or greater interest in CM, we would expect to
consolidate the financial statements of the subsidiary. In addition, we
will evaluate the professional literature on this matter at the time our
investment reaches a 50% interest, including the requirements of FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities".
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 was
severely limited and has negatively affected and will likely continue to
negatively affect the casino operation. 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. Management fee
income for the three months ended March 31, 2003 and 2002 was $0 and $60,
respectively.
8. LONG-TERM DEBT
The principal balance outstanding under the Wells Fargo Bank Revolving Line
of Credit Facility ("RCF") as of March 31, 2003 was $13,702 compared to
$11,500 at December 31, 2002. The amount available under the RCF as of
March 31, 2003 was $11,575, net of amounts outstanding as of that date,
compared to $14,500 at December 31, 2002. The loan agreement includes
certain restrictive covenants on financial ratios of WMCK. The Company is
in compliance with the covenants as of March 31, 2003. Interest rates at
March 31, 2003 were 4.25% for $2,202 outstanding under prime based
provisions of the loan agreement and 3.59% 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 March
31, 2003 and December 31, 2002 of $738 and $788, respectively, is reported
as a liability in the consolidated balance sheets. The net gain on the
interest rate swaps of $31, net of deferred income tax expense of $19 for
the first three months of 2003 has been reported in accumulated other
comprehensive loss in the shareholders' equity section of the accompanying
March 31, 2003 condensed consolidated balance sheet. Net additional
interest expense to the Company under the swap agreements was $142 and $128
for the three months ended March 31, 2003 and 2002, respectively. Including
the impact of the swaps and the amortization of the deferred financing
cost, the effective rate on the borrowings under the RCF was 9.13% and
9.56% for the three months ended March 31, 2003 and 2002, respectively.
-13-
In April 2000, CCAL entered into a loan agreement with PSG Investment Bank
Limited ("PSGIB"), which provided for a principal loan of approximately
$6,016 to fund development of the Caledon project. The outstanding balance
and interest rate as of March 31, 2003 and December 31, 2002 was $4,294 and
$4,179 (based on the exchange rate as of December 31, 2002), respectively
and 17.05% in both years. The outstanding balance and interest rate on the
standby facility with PSGIB as of March 31, 2003 and December 31, 2002 was
$429 and $418 (based on the exchange rate as of December 31, 2002),
respectively and 15.1% in both years. 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
$507). 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 March 31, 2003. PSGIB was recently acquired by ABSA Bank
(ABSA). There have been no changes in the terms or conditions of the
current loan, as amended, with PSGIB.
An unsecured note payable, in the amount of $380, to a founding shareholder
bears interest at 6%, payable quarterly. The note holder, 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 sheets as of March 31, 2003 and
December 31, 2002.
The remaining amount of $378 in debt, as of March 31, 2003, consists
primarily of capital leases totaling $374.
The consolidated weighted average interest rate on all borrowings was
10.63% and 10.23% for the three months ended March 31, 2003 and 2002,
respectively.
9. SHAREHOLDERS' EQUITY
During the first quarter of 2003, the Company repurchased 14,900 shares of
its common stock on the open market at an average per share price of $2.09.
The Company re-issued 10,000 shares of treasury stock in January 2003 when
one of its outside directors exercised his options. As of March 31, 2003,
the Company held 909,812 shares in treasury at an average price per share
of $1.98. Subsequent to March 31, 2003, the Company purchased 35,700
additional shares of its common stock on the open market at an average per
share price of $2.28.
-14-
Subsequent to March 31, 2003, in conjunction with his resignation (see Item
6.(b) Reports on Form 8-K) and in accordance with the Company's Employees'
Equity Incentive Plan ("EEIP"), a director elected to exercise all 618,000
of his outstanding options, carrying an average strike price of $1.306,
such shares to be issued out of treasury, and will pay for the options by
transferring 357,080 shares of outstanding stock that he has owned since
1994 to the Company at a per share price of $2.26 established at the close
of the market on April 16, 2003. Additionally, the Company has accepted an
offer to repurchase 132,184 shares from the director at the per share price
of $2.26. The net effect of these transactions will be to reduce treasury
shares by 128,736 and increase the outstanding shares by 128,736.
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 each of
whom have one seat on the board of directors of CCAL, neither of whom are
officers, directors or affiliates of Century Casinos, Inc. 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 March 31, 2003, no dividend has been declared for
the preference shareholders.
-15-
10. 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; Colorado, South Africa, Cruise Ships, and Corporate operations.
The operating results of the Colorado segment are those of WMCK-Venture
Corp. and subsidiaries which own Womacks Hotel and Casino ("Womacks") in
Cripple Creek, Colorado. The operating results of the South African segment
are those of Century Casinos Africa (Pty) Limited and its subsidiaries,
primarily Century Casinos Caledon (Pty) Limited which owns the Caledon
Casino, Hotel and Spa.
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. The gaming industry commonly uses EBITDA as
a method of arriving at the economic value of a casino operation. It is
also used by our lending institutions to gauge operating performance.
Management uses EBITDA to compare the relative operating performance of
separate operating units by eliminating the interest expense, income tax
expense, and depreciation and amortization expense associated with the
varying levels of capital expenditures for infrastructure required to
generate revenue, and the oftentimes high cost of acquiring existing
operations.
Segment information as of, and for the three months ended March 31, 2003
and 2002 is presented below.
-16-
================================ ========================== =========================== =============================
Colorado South Africa Cruise Ships
================================ ========================== =========================== =============================
As of and for the Three Months 2003 2002 2003 2002 2003 2002
Ended March 31,
================================ ============= ============ ============= ============= ============== ==============
Property and equipment, net $ 21,671 $ 19,556 $ 11,977 $ 8,705 $ 212 $ 235
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Total assets $ 32,448 $ 30,419 $ 16,459 $ 11,864 $ 418 $ 416
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Operating revenue $ 5,614 $ 6,123 $ 2,518 $ 1,641 $ 330 $ 105
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Promotional allowances $ (970) $ (930) $ (111) $ (107) $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Net operating revenue $ 4,644 $ 5,193 $ 2,407 $ 1,534 $ 330 $ 105
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Operating expenses (excluding
depreciation and amortization) $ 2,775 $ 2,825 $ 1,710 $ 1,100 $ 214 $ 96
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Depreciation & amortization $ 352 $ 343 $ 239 $ 187 $ 15 $ 13
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Earnings from operations $ 1,517 $ 2,025 $ 458 $ 247 $ 101 $ (4)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest income $ 3 $ 4 $ 53 $ 16 $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest expense,
including debt issuance cost $ 370 $ 344 $ 236 $ 196 $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Other income, net $ - $ - $ - $ - $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Earnings (loss) before income
taxes and minority interest $ 1,150 $ 1,685 $ 275 $ 67 $ 101 $ (4)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Income tax expense(benefit) $ 437 $ 775 $ 111 $ 50 30 $ (1)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Minority interest expense
(benefit) $ - $ - $ 8 $ (8) $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Net earnings (loss) $ 713 $ 910 $ 156 $ 25 $ 71 $ (3)
=====================================================================================================================
=====================================================================================================================
Reconciliation to EBITDA:
================================ ==== ===============================================================================
Net earnings (loss) (US GAAP) $ 713 $ 910 $ 156 $ 25 $ 71 $ (3)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest income $ (3) $ (4) $ (53) $ (16) $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest expense $ 370 $ 344 $ 236 $ 196 $ - $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Income taxes $ 437 $ 775 $ 111 $ 50 $ 30 $ (1)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Depreciation & amortization $ 352 $ 343 $ 239 $ 187 $ 15 $ 13
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
EBITDA $ 1,869 $ 2,368 $ 689 $ 442 $ 116 $ 9
=====================================================================================================================
-17-
================================ ========================== =========================== =============================
Corporate and Other Inter-segment Elimination Consolidated
================================ ========================== =========================== =============================
As of and for the Three Months 2003 2002 2003 2002 2003 2002
Ended March 31,
================================ ============= ============ ============= ============= ============== ==============
Property and equipment, net $ 1,156 $ 1,708 $ - $ - $ 35,016 $ 30,204
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Total assets $ 2,726 $ 3,065 $ - $ - $ 52,051 $ 45,764
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Operating revenue $ - $ 60 $ - $ - $ 8,462 $ 7,929
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Promotional allowances $ - $ - $ - $ - $ (1,081) $ (1,037)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Net operating revenue $ - $ 60 $ - $ - $ 7,381 $ 6,892
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Operating expenses (excluding
depreciation and amortization) $ 336 $ 301 $ - $ - $ 5,035 $ 4,322
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Depreciation & amortization $ 42 $ 54 $ - $ - $ 648 $ 597
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Earnings from operations $ (378) $ (295) $ - $ - $ 1,698 $ 1,973
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest income $ 86 $ 88 $ (85) $ (85) $ 57 $ 23
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest expense,
including debt issuance cost $ 6 $ 6 $ (85) $ (85) $ 527 $ 461
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Other income, net $ 1 $ - $ - $ - $ 1 $ -
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Earnings (loss) before income
taxes and minority interest $ (297) $ (213) $ - $ - $ 1,229 $ 1,535
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Income tax expense(benefit) $ (112) $ (206) $ - $ - $ 466 $ 618
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Minority interest expense
(benefit) $ - $ - $ - $ - $ 8 (8)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Net earnings (loss) $ (185) $ (7) $ - $ - $ 755 $ 925
=====================================================================================================================
=====================================================================================================================
Reconciliation to EBITDA
================================ ==== ===============================================================================
Net earnings (loss) (USGAAP) $ (185) $ (7) $ - $ - $ 755 $ 925
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest income $ (86) $ (88) $ 85 $ 85 $ (57) $ (23)
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Interest expense $ 6 $ 6 $ (85) $ (85) $ 527 $ 461
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Income taxes $ (112) $ (206) $ - $ - $ 466 $ 618
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
Depreciation & amortization $ 42 $ 54 $ - $ - $ 648 $ 597
================================ ==== ======== === ======== === ========= === ========= === ========== === ==========
EBITDA $ (335) $ (241) $ - $ - $ 2,339 $ 2,578
=====================================================================================================================
-18-
11. OTHER INCOME, NET
Other income, net, consists of the following:
For the Three Months Ended March 31,
2003 2002
---- ----
Interest income $ 57 $ 23
Foreign currency exchange gains 1 -
---------- ----------
$ 58 $ 23
========== ==========
12. PROMOTIONAL ALLOWANCES
Promotional allowances presented in the condensed consolidated statement of
earnings for the period ended March 31, 2003 and March 31, 2002 include the
following:
For the Three Months Ended March 31,
2003 2002
---- ----
Food & Beverage and Hotel Comps $ 327 $ 325
Free Plays or Coupons 401 $ 382
Player Points 353 $ 330
---------- ---------
Total Promotional Allowances $ 1,081 $ 1,037
========== ===========
We issue free play or coupons for the purpose of generating future revenue.
The coupons are valid for a limited number of days (generally not exceeding
7 days). The net win from the coupons is expected to exceed the value of
the coupons issued. The cost of the coupons redeemed is applied against the
revenue generated on the day of the redemption.
Members of the casinos' players clubs earn points as a percentage of
coin-in. The cost of the points is offset against the revenue in the period
that the revenue generated the points. The value of the unused or
unredeemed points is included in the accounts payable and accrued
liabilities on our consolidated balance sheet.
-19-
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, 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.
-20-
Results of Operations
Three Months Ended March 31, 2003 vs. 2002
Colorado
The operating results of the Colorado segment are those of WMCK-Venture Corp.
and subsidiaries which own Womacks Hotel and Casino ("Womacks") in Cripple
Creek, Colorado. Womacks' results of operations for the quarters ended March 31,
2003 and 2002 are as follows:
For the three months ended March 31, Increase % of
(Decrease) Change
2003 2002
---- ----
Operating Revenue
Casino $ 5,293 $ 5,825 $ (532) -9.1%
Hotel, food and beverage 296 269 27 10.0%
Other 25 29 (4) -13.8%
---------------- -----------------
5,614 6,123
Less promotional allowances (970) (930) 40 4.3%
---------------- -----------------
Net operating revenue 4,644 5,193 (549) -10.6%
---------------- -----------------
Costs and Expenses
Casino 1,641 1,644 (3) -0.2%
Hotel, food and beverage 69 57 12 21.1%
General and administrative 1,065 1,124 (59) -5.2%
Depreciation and amortization 352 343 9 2.6%
---------------- -----------------
3,127 3,168
---------------- -----------------
Earnings from operations 1,517 2,025 (508) -25.1%
Interest expense (370) (344) (26) 7.6%
Other income, net 3 4 -1 -25.0%
---------------- -----------------
Earnings before income taxes 1,150 1,685 (535) -31.8%
Income tax expense 437 775 (338) -43.6%
---------------- -----------------
Net Earnings $ 713 $ 910 $ (197) -21.6%
================ =================
Overall operating results were impacted by the casino results detailed below.
-21-
Casino Margin and Market Data
------------------------------------------------------ ------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
------------------------------------------------------ ------------------- -------------------- ------------
Casino revenue $ 5,293 $ 5,825 -9.1%
Casino promotional allowances $ 713 $ 688 3.6%
Casino revenue, net $ 4,580 $ 5,137 -10.8%
Casino expense $ 1,641 $ 1,644 -0.2%
Casino margin $ 2,939 $ 3,493 -15.9%
Casino margin as a % of casino revenue, net 64.2% 68.0%
Market share of the Cripple Creek market 16.14% 17.47%
Average number of slot machines 666 612
Market share of Cripple Creek gaming devices 15.70% 14.76%
Average slot machine win per day 87 dollars 104 dollars
Cripple Creek average slot machine win per day 85 dollars 87 dollars
When comparing 2003 to 2002, continued distractions from major construction
in the casino, limited access to the casino from the adjoining parking lot,
and poor weather conditions, particularly in March 2003, had an adverse
effect on casino revenue and overall operating results. The casino is also
feeling the impact of the covered parking garages provided by two of its
competitors, even more so in conjunction with the inclement weather. There
is not enough history at this time for management to determine the impact
of these garages on the casino over the course of a full year.
Subsequent to March 31, 2003, Womacks has made significant changes to the
casino floor layout and reduced the number of slot machines to 604.
During the three months ended March 31, 2003, Womacks leased approximately
48 slot machines from manufacturers on which it pays a fee calculated as a
percentage of the net win. All of the leases have short term commitment
periods not exceeding three months and are classified as operating leases.
The leases can be cancelled with no more than 30 days written notice. On a
portion of the leases, the manufacturer is guaranteed a minimum fee per day
that can range from 15 dollars to 35 dollars for the duration of the lease.
In most instances, the branded games that are being introduced to the
market are not available for purchase. For financial reporting purposes,
the net win on the slot machines is included in our revenue and the amount
due to the manufacturer is recorded as an expense, in the period during
which the revenue is earned, as casino operating cost. Management makes its
decisions to introduce these machines based on the consumer demand for the
product. The amount paid under these agreements was $117 and $48 for the
quarters ended March 31, 2003 and 2002 respectively.
Management continues to focus on the marketing of the casino through the
expansion of the successful 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.
-22-
Hotel, Food and Beverage Margin
-------------------------------------------------------- ------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
-------------------------------------------------------- ------------------- -------------------- ------------
Hotel, food and beverage revenue $ 296 $ 269 10.0%
Hotel, food and beverage expense $ 69 $ 57 21.1%
Hotel, food and beverage margin $ 227 $ 212 7.1%
Hotel, food and beverage margin as % of hotel, food
and beverage revenue 76.7% 78.8%
Hotel revenue, included in Hotel, food and beverage revenue, increased by
16.4%, as a result of introducing 3 additional luxury rooms at the end of
the first quarter of 2002. All of the revenue generated by the hotel
operations is derived from comps to better players and is included in
promotional allowances.
In the first quarter of 2003, the Gold Mine restaurant was closed and Bob's
Grill was expanded in order to provide better service on the gaming floor
and improve accessibility. The cost of food and beverage promotional
allowances, which are included in casino costs, decreased to $217 in 2003
from $224 in 2002.
Other
Interest expense, including debt issuance cost, increased to $370 in 2003
from $344 in 2002. Since the second quarter of 2000 the Company has
borrowed a total of $9.5 million under the RCF to fund its investments in
South Africa. The interest on the investments has resulted in a charge of
approximately $256 and $180 to the Company's Colorado operations for the
first three months of the years 2003 and 2002, respectively. The
weighted-average interest rate on the borrowings under the RCF, including
effects of the swap agreements, has marginally decreased to 9.13% in 2003
from 9.56% in 2002.
The Colorado segment recognized income tax expense of $437 in 2003 versus
$775 in 2002, principally the result of a decrease in earnings before
income taxes.
-23-
South Africa
The operating results of the South African segment are those of Century
Casinos Africa (Pty) Limited and its subsidiaries, primarily Century
Casinos Caledon (Pty) Limited which owns the Caledon Casino Hotel and Spa.
Improvement in the Rand versus the dollar when comparing the first quarter
of last year to the current year has had a positive impact on the reported
revenues and a negative impact on expenses.
Operational results in US dollars for the three months ended March 31, 2003
and 2002 are as follows: (See next page for results in Rand)
For the three months ended March 31, Increase % of
(Decrease) Change
2003 2002
---- ----
Operating Revenue
Casino $ 1,904 $ 1,281 $ 623 48.6%
Hotel, food and beverage 525 303 222 73.3%
Other 89 57 32 56.1%
---------------- -----------------
2,518 1,641
Less promotional allowances (111) (107) 4 3.7%
---------------- -----------------
Net operating revenue 2,407 1,534 873 56.9%
---------------- -----------------
Costs and Expenses
Casino 794 493 301 61.1%
Hotel, food and beverage 500 239 261 109.2%
General and administrative 416 368 48 13.0%
Depreciation and amortization 239 187 52 27.8%
---------------- -----------------
1,949 1,287
---------------- -----------------
Earnings from operations 458 247 211 85.4%
Interest expense (236) (196) (40) 20.4%
Other income, net 53 16 37 231.3%
---------------- -----------------
Earnings before income taxes 275 67 208 310.4%
Income tax expense 111 50 61 122.0%
Minority interest expense (benefit) 8 (8) 16 200.0%
---------------- -----------------
Net Earnings $ 156 $ 25 $ 131 524.0%
================ =================
Average exchange rate (Rand/USD) 8.26 11.49 -28.1%
================ =================
Net Earnings for South Africa $ 156 $ 25
Non-CCAL (income) expense:
General & administrative expenses 86 35
Interest Income (8) (1)
Income tax benefit (21) (4)
Minority interest expense (benefit) 8 (8)
---------------- -----------------
65 22
---------------- -----------------
CCAL Net Earnings $ 221 $ 47
================ =================
-24-
Operational results in Rand for the three months ended March 31, 2003 and 2002
are as follows:
For the three months ended March 31, Increase % of
(Decrease) Change
2003 2002
---- ----
Operating Revenue
Casino R 15,723 R 14,721 R 1,002 6.8%
Hotel, food and beverage 4,324 3,482 842 24.2%
Other 737 651 86 13.2%
---------------- -----------------
20,784 18,854
Less promotional allowances (918) (1,233) (315) -25.5%
---------------- -----------------
Net operating revenue 19,866 17,621 2,245 12.7%
---------------- -----------------
Costs and Expenses
Casino 6,569 5,677 892 15.7%
Hotel, food and beverage 4,135 2,748 1,387 50.5%
General and administrative 3,439 4,221 (782) -18.5%
Depreciation and amortization 1,974 2,142 (168) -7.8%
---------------- -----------------
16,117 14,788
---------------- -----------------
Earnings from operations 3,749 2,833 916 32.3%
Interest expense (1,950) (2,259) (309) -13.7%
Other income, net 442 195 247 126.7%
---------------- -----------------
Earnings before income taxes 2,241 769 1,472 191.4%
Income tax expense 887 567 320 56.4%
Minority interest expense (benefit) 71 (87) 158 181.6%
---------------- -----------------
Net Earnings R 1,283 R 289 R 994 343.9%
================ =================
Net Earnings for South Africa R 1,283 R 289
Non-CCAL (income) expense:
General & administrative expenses 705 406
Interest income (66) (7)
Income tax benefit (191) (49)
Minority interest expense (benefit) 71 (87)
---------------- -----------------
519 263
---------------- -----------------
CCAL Net Earnings R 1,802 R 552
================ =================
Casino Margin (in USD)
------------------------------------------------------ -------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
------------------------------------------------------ ----- -------------- ----- -------------- ------------
Casino revenue $ 1,904 $ 1,281 48.6%
Casino promotional allowances $ 41 $ 24 70.8%
Casino revenue, net $ 1,863 $ 1,257 48.2%
Casino expense $ 794 $ 493 61.1%
Casino margin $ 1,069 $ 764 39.9%
Casino Margin and Market Data (in Rand)
------------------------------------------------------ -------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
------------------------------------------------------ -------------------- -------------------- ------------
Casino revenue R 15,723 R 14,721 6.8%
Casino promotional allowances R 339 R 276 22.8%
Casino revenue, net R 15,384 R 14,445 6.5%
Casino expense R 6,569 R 5,677 15.7%
Casino margin R 8,815 R 8,768 0.5%
Casino margin as a % of casino revenue, net 57.3% 60.7%
Market share of the Western Cape market 6.07% 6.93%
Market share of Western Cape gaming devices 10.5% 12.3%
Average number of slot machines 275 250
Average slot machine win per day 597 Rand 576 Rand 3.6%
Average number of tables 8 14
Average table win per day 1,702 Rand 1,533 Rand 11.0%
The 6.8% increase in the casino revenue is attributable to the increased
traffic generated by an increasing number of conferences and the 10%
increase in the number of slots which increased the potential of the
casino. Subsequent to the purchase of the remaining 35% interest in CCAL,
the Company is focused on marketing the resort as a unified property,
offering its guests an array of amenities that complement the gaming
experience. These include a 92-room hotel, a variety of dining experiences,
and the historic mineral hot spring & spa. Operating costs of the resort
are now fully allocated to the various departments, giving management a
clear picture of each cost center within the resort.
-26-
Hotel, Food and Beverage Margin (in USD)
-------------------------------------------------------- ------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
-------------------------------------------------------- ------------------- -------------------- -------
Hotel, food and beverage revenue $ 525 $ 303 73.3%
Hotel, food and beverage expense $ 500 $ 239 109.2%
Hotel, food and beverage margin $ 25 $ 64 -60.9%
Average exchange rate (Rand/USD) 8.26 11.49 -28.1%
Hotel, Food and Beverage Margin (in Rand)
--------------------------------------------------------- ------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
--------------------------------------------------------- ------------------- -------------------- ------------
Hotel, food and beverage revenue R 4,324 R 3,482 24.2%
Hotel, food and beverage expense R 4,135 R 2,748 50.5%
Hotel, food and beverage margin R 189 R 734 -74.3%
Hotel, food and beverage margin as % of food and
beverage revenue 4.4% 21.1%
Food and beverage revenue has increased partially as a result of increasing
meal prices by approximately 12.5%. More focus has been placed on
increasing the number of conferences and trade shows held at the resort.
Accordingly, marketing has been more focused in this area in an attempt to
gain additional exposure. A number of repairs in the hotel infrastructure,
including electrical and plumbing, were undertaken in order to maintain a
first-rate facility. Additionally, inflationary pressures in South Africa
have driven up base costs such as labor, supplies and utilities. Subsequent
to purchase of the remaining 35% of CCAL by the Company on January 10,
2003, management re-evaluated the distribution of various shared costs,
formerly accounted for as general and administrative expense, and concluded
that allocating the costs to the casino, hotel, and food and beverage
operations allowed management to better compare the relative operating
performance of the distinct operating units within the resort.
Other
Interest expense, including debt issuance cost, increased to $236 in 2003
from $196 in 2002 as a result of changes in the Rand/USD exchange rate.
Excluding the effect of changes in the exchange rate, interest expense
decreased by 13.7%. The weighted-average interest rate on the borrowings
under the ABSA loan agreement is 16.9% in the first three months of 2003
and 2002. Excluding the effect of fluctuations in the exchange rate,
interest expense has decreased by 13.7% as the principal balance of the
term loans and capitalized leases is repaid.
-27-
Cruise Ships
Cruise ships' operational results for the periods ending March 31, 2003 and
2002 are as follows:
For the three months ended March 31, Increase % Change
2003 2002 (Decrease)
---- ----
Operating Revenue
Casino $ 323 $ 100 223 223.0%
Other 7 5 2 40.0%
---------------- -----------------
330 105
Less promotional allowances - -
---------------- -----------------
Net operating revenue 330 105 225 214.3%
---------------- -----------------
Costs and Expenses
Casino 214 96 118 122.9%
Depreciation and amortization 15 13 2 15.4%
---------------- -----------------
229 109
---------------- -----------------
Earnings (Loss) from operations 101 (4) 105 2625.0%
Other income, net - -
---------------- -----------------
Earnings (Loss) before income taxes 101 (4) 105 2625.0%
Income tax expense (benefit) 30 (1) 31 3100.0%
---------------- -----------------
Net Earnings (Loss) $ 71 $ (3) 74 2466.7%
================ =================
Casino Margin
--------------------------------------------------------- ------------------- -------------------- ------------
For the three months ended March 31, 2003 2002 % Change
--------------------------------------------------------- ------------------- -------------------- ------------
Casino revenues $ 323 $ 100 223%
Casino expenses $ 214 $ 96 122.9%
Casino margin $ 109 $ 4 2625.0%
Casino margin as a % of casino revenue, net 33.7% 4.0%
In the first quarter of 2003 we operated casinos on a total of four ships,
three from Silverseas and one on the World of ResidenSea compared to a
total of three ships in 2002. The casino on the ResidenSea opened for
business on March 28, 2002.
Travel on the cruise vessels has increased since the initial decline
experienced following the tragic events at the World Trade Center on
September 11, 2001. In addition, we experience severe fluctuations in the
revenue generated on each cruise depending on the quality of the players.
This is a condition that we do not control.
Concession fees paid to the ship operators in accordance with the
agreements accounted for $118 and $6 of the total casino expenses incurred
in first three months ended March 31, 2003 and 2002, respectively.
-28-
Corporate & Other
For the three months ended March 31, Increase % Change
(Decrease)
2003 2002
---- ----
Operating Revenue
Other - 60 (60) -100.0%
---------------- -----------------
- 60
Less promotional allowances - -
---------------- -----------------
Net operating revenue - 60 (60) -100.0%
---------------- -----------------
Costs and Expenses
General and administrative 336 301 35 11.6%
Depreciation and amortization 42 54 (12) -22.2%
---------------- -----------------
378 355
---------------- -----------------
Loss from operations (378) (295) (83) -28.1%
Interest expense (6) (6) - -%
Other income, net 87 88 (1) -1.1%
---------------- -----------------
Loss before income taxes (297) (213) (84) -39.4%
Income tax benefit (112) (206) (94) -45.6%
---------------- -----------------
Net Loss $ (185) $ (7) (178) -2542.9%
================ =================
Net operating revenues consisted of management fees earned from operating
Casino Millennium in Prague, Czech Republic and were $0 and $60 in the
first quarter of 2003 and 2002, respectively.
Effective September 1, 2002, management fees and interest due to the
Company from CM will not be accrued until a certainty of cash flow is
attained for Casino Millennium.
-29-
Liquidity and Capital Resources
Cash and cash equivalents totaled $4,275 plus restricted cash of $546 at
March 31, 2003, and the Company had working capital of $111. Additional
liquidity may be provided by the Company's revolving credit facility
("RCF") with Wells Fargo Bank, under which the Company had a total
commitment of $26,000 ($25,278 net of the quarterly reduction) and unused
borrowing capacity of approximately $11,575 at March 31, 2003.
For the three months ended March 31, 2003, cash provided by operating
activities was $809 compared with $1,190 in the prior-year period. Please
refer to management's discussion of the results of operation.
Cash used in investing activities of $1,789 for the first three months of
2003, consisted of: $193 towards the expansion of the Womacks casino at the
rear of the property that is expected to be completed in the second quarter
of 2003, which will provide additional gaming space; $95 for additional
improvements to the property in Caledon, South Africa, principally
additional capitalized building costs related to the original construction;
$1,259 towards the purchase of the remaining 35% interest in Century
Casinos Caledon (Pty) Limited, $918 of which was applied against the
minority shareholder liability and $341 of which increased the carrying
value of the land in Caledon; $79 principally for outfitting one of the two
new casinos aboard the luxury cruise ships operated by Oceania; and the
balance of $163 due to expenditures for other long lived assets. Cash used
in investing activities of $978 for the first three months of 2002,
consisted of: a $332 towards the expansion of the Womacks casino at the
rear of the property; $67 for additional improvements to the property in
Caledon, South Africa; $411 primarily for land purchased by CCA for the
proposed casino development in Johannesburg, South Africa; and the balance
of $168 due to expenditures for other long lived assets.
Cash from financing activities of $553 for the first three months of 2003
consisted of net borrowings of $2.2 million under the RCF with Wells Fargo
plus $7 in proceeds from the exercise of stock options, less net repayments
of $274 under the loan agreement with ABSA, $1.2 million to acquire a loan
to CCAL held by the minority shareholder, the repurchase of company's stock
on the open market, with a cost of $31, and other net repayments of $149.
Cash used in financing activities for the first three months of 2002
consisted of net repayments of $159 under the loan agreement with ABSA,
other net repayments of $32, less net borrowings of $72 under the RCF with
Wells Fargo.
The Company entered into an amended RCF with Wells Fargo Bank in August
2002 which provides us with a total commitment of $26,000. Under the terms
of the agreement, the maturity date of the borrowing commitment was
extended to August 2007 and the funds available under the RCF are reduced
by $722 each quarter beginning with the first quarter of 2003. The Company
has the flexibility to use the funds for various business projects and
investments.
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 which began in January 1999. The hotel and casino opened in
July 1999. In January 2000, the Company entered into a memorandum of
agreement with B. H. Centrum, a Czech company which owns the hotel and
casino facility, to acquire the operations of the casino by either a joint
acquisition of Casino Millennium a.s. or the formation of a new joint
venture. The transaction, when completed, will result in the Company having
a 50% equity interest in Casino Millennium. In December 2002, the Company,
through CMB, paid $236 towards an initial equity investment of 10% in
Casino Millennium, subject to the repayment of a CM loan to a Czech bank by
Strabag AG, which has been repaid. The Company expects to contribute gaming
equipment and certain pre-operating costs, valued at $852, in exchange for
the additional 40%
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interest in Casino Millennium. The balance of the transaction is expected
to be completed in 2003, subject to certain contingencies and contract
conditions.
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 three months of 2003, the Company repurchased 14,900
shares of its common stock on the open market. Through March 31, 2003, the
Company had repurchased 2,382,620 shares of its common stock at a total
cost of approximately $3,404. 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.
Subsequent to March 31, 2003, in conjunction with his resignation (see Item
6.(b) Reports on Form 8-K) and in accordance with the Company's EEIP, a
director elected to exercise all 618,000 of his outstanding options,
carrying an average strike price of $1.306, such shares to be issued out of
treasury, and will pay for the options by transferring 357,080 shares of
outstanding stock that he has owned since 1994 to the Company at a per
share price of $2.26 established at the close of the market on April 16,
2003. Additionally, the Company has accepted an offer to repurchase 132,184
shares from the director at the per share price of $2.26.
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 that region
of the greater Johannesburg area of South Africa known as the West Rand at
a cost of approximately 400 million Rand ($50.7 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. As a result of these developments, the Company recorded a $377
write-off in September 2002 for all advances made, and pre-construction
cost incurred, in conjunction with the Johannesburg project. In November
2002, and upon the advice of legal counsel, Silverstar, with the support
and agreement of all other parties to the original two applications for the
West Rand license, including CCA, made representation to the GGB requesting
that the sole remaining license for the province of Gauteng now be awarded
to Silverstar pursuant to its original 1997 application. Notwithstanding
Silverstar's belief as to the legal and public-policy framework that would
now justify such an award, the GGB in December 2002 denied Silverstar's
request. In consequence, Silverstar on March 4, 2003 initiated legal action
against the GGB in the High Court of South Africa seeking, inter alia, that
the court now compel the authorities to award the license to Silverstar.
Due process in terms of such an action will likely result in the matter not
being heard by the High Court before the third quarter of 2003. CCA,
through its majority-owned subsidiary - Century Casinos West Rand (Pty)
Ltd. - remains contracted to Silverstar by a resort management agreement.
Under the circumstances, the conditions to CCA's previous funding
commitment of 50 million Rand to the project are rendered incapable of
fulfillment without specific waiver by CCA, and the appropriateness of any
waiver of conditions will be determined by CCA, at such time as CCA
believes sufficient progress on Silverstar's efforts is achieved.
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In the fourth quarter of 2001, Womacks began a 6,022 square foot expansion.
Approximately half of the space will provide additional gaming space on the
street level. The other half will increase the "back of house" area. The
total construction cost is expected to be $2.0 million, of which $1.7
million has been spent through March 31, 2003. The project is expected to
be completed in the second quarter of 2003.
In April of 2003 the Company signed a concession agreement to operate
casinos aboard two luxury cruises vessels operated by Oceania. In
conjunction with the agreement the Company is expected to disburse
approximately $121 in the second quarter of 2003 to finish outfitting the
casinos aboard the ships and provide the necessary working capital.
Additionally the Company expects to disburse approximately $31 in the
second quarter of 2003, $25 in working capital and $6 in slot machines for
the casino on the Silverwind which will resume operation in May 2003.
Management believes that the Company's cash at March 31, 2003, 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.
Consolidation - The accompanying consolidated financial statements include
the accounts of CCI and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. The financial
statements of all foreign subsidiaries consolidated herein have been
converted to US GAAP for financial statement presentation purposes.
Accordingly, the consolidated financial statements are presented in
accordance with US GAAP.
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 jackpot is recorded as a liability
and a reduction of casino revenue in the period during which the
progressive jackpot increases.
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. 142 "Goodwill and Other Intangible
Assets".
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
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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. Among other things, the Company also
evaluated the following criteria; 1) the high value of the
assets it has placed in service and the significant barrier that a high
initial investment poses to potential competitors, 2) the future potential
of the resort property, 3) the unique attraction of the resort property, 4)
the dependence of the hotel and other amenities of the resort property upon
the casino operation, and 5) the intentions of the Company to operate the
casino indefinitely. 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 March 31, 2003 is unamortized goodwill of
approximately $7,957 and unamortized casino license costs of approximately
$1,410. The Company will continue to assess goodwill and other intangibles
for impairment at least annually.
Impairment of Long-Lived Assets - The Company reviews long-lived assets for
possible impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If there is an
indication of impairment, which is estimated as the difference between
anticipated undiscounted future cash flows and carrying value, the carrying
amount of the asset is written down to its estimated fair value by a charge
to operations. Fair value is estimated based on the present value of
estimated future cash flows using a discount rate commensurate with the
risk involved. Estimates of future cash flows are inherently subjective and
are based on management's best assessment of expected future conditions.
During 2001 FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" which is effective for fiscal years
beginning after December 15, 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". While SFAS No. 144 retains many of the
provisions of SFAS No. 121 it provides guidance on estimating future cash
flows to test recoverability, among other things. The adoption of SFAS No.
144 did not have a material impact on the Company's financial statements.
The carrying value of the non-operating property held for sale in Wells
Nevada, is subject to periodic evaluation. The property has been listed for
sale since April 1998. In 2001 we attempted to reach agreement with an
interested third-party that would have recouped our investment through a
long-term lease agreement that contained a purchase option, which enabled
us to conclude that the carrying value was still reasonable. We could not
reach an agreement and, as the result of no further activity, reduced the
value of the property to its estimated fair value in 2002, which heretofore
was supported by an independent appraisal performed in January 2000.
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.
* * * * * * * * * * * * * * * *
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CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Dollar amounts in thousands, except for share information, or as noted)
- --------------------------------------------------------------------------------
We are exposed to market risk principally related to changes in interest
rates and foreign currency exchange rates. To mitigate some of these risks,
we utilize derivative financial instruments to hedge these exposures. We do
not use derivative financial instruments for speculative or trading
purposes. All of the potential changes noted below are based on information
available at March 31, 2003. Actual results may differ materially.
Interest Rate Sensitivity
The Company is subject to interest rate risk on the outstanding borrowing
under a Revolving Line of Credit Facility with Wells Fargo Bank. Interest
on the agreement is variable based on the interest rate option selected by
the Company, whereby the interest on the outstanding debt is subject to
fluctuations in the prime interest rate as set by Wells Fargo, or LIBOR.
In order to minimize the risk of increases in the prime rate or LIBOR the
Company has entered into two interest-rate swap agreements on a total of
$11.5 million notional amount of debt. In 1998, the Company entered into a
five-year interest rate swap agreement which matures on October 1, 2003 on
$7.5 million notional amount of debt under the RCF, whereby the Company
pays a LIBOR-based fixed rate of 5.55% and receives a LIBOR-based floating
rate reset quarterly based on a three-month rate. In May 2000, the Company
entered into a second five-year interest rate swap agreement which matures
on July 1, 2005 on $4.0 million notional amount of debt under the RCF,
whereby the Company pays a LIBOR-based fixed rate of 7.95% and receives a
LIBOR-based floating rate reset quarterly based on a three-month rate.
Generally, the swap arrangement is advantageous to the Company to the
extent that interest rates increase in the future and disadvantageous to
the extent that they decrease. Therefore, by entering into the interest
rate swap agreements, we have a cash flow risk when interest rates drop.
For example, for each hypothetical 100 basis points decrease in the three
month LIBOR rate below the fixed rate paid by the Company less the
applicable margin results in an increased use of $115 in cash on an annual
basis.
Foreign Currency Exchange Risk
The majority of our revenue, expense, and capital purchasing activities are
transacted in U.S. dollars. However, since a portion of our operations are
conducted outside of the U.S., we enter into transactions in other
currencies, primarily the South African Rand.
Fluctuations in the Rand affect the value of the Company's investment in
The Caledon Casino, Hotel and Spa. A hypothetical devaluation of 10% in the
dollar vs. the Rand based on the exchange rate as of March 31, 2003 would
reduce the value of the Company's investment by approximately $1.3 million.
* * * * * * * * * * * * * * * * * * * *
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CENTURY CASINOS, INC. AND SUBSIDIARIES
Item 4. CONTROLS AND PROCEDURES
(Dollar amounts in thousands, except for share information, or as noted)
- --------------------------------------------------------------------------------
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.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation. There were no significant deficiencies or
material weaknesses, and therefore there were no corrective actions taken.
* * * * * * * * * * * * * * * * * * * *
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PART II
OTHER INFORMATION
Item 1. - Legal Proceedings
The Company is not a party to, nor is it aware of, any pending or
threatened litigation which, in management's opinion, could have a material
adverse effect on the Company's financial position or results of
operations.
Items 2 to 5 - None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibits are filed herewith:
10.127 Waiver and Release Agreement by and between Century Casinos,
Inc. and James D. Forbes (director) dated May 01, 2003.
10.128 Agreement of Termination of Management Agreement Incorporating
New Consulting Agreement by and between Century Casinos Inc and
Respond Limited dated May 01, 2003.
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:
On April 30, 2003, the Registrant filed a Report on Form 8-K,
reporting that PriceWaterhouseCoopers Inc replaced Grant Thornton
Kessel Feinsten, a member firm of Grant Thornton, International,
as the independent accountant for Century Casinos Africa
(Proprietary) Limited.
On May 01, 2003, the Registrant filed a Report on Form 8-K,
reporting that James D. Forbes resigned as a director of Century
Casinos Inc., without disagreement, effective May 1, 2003.
On May 08, 2003 the Registrant filed a Current Report on Form
8-K/A in which it amended the disclosures on Item 4 of Form 8-K
filed on April 30, 2003.
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: May 9, 2003
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CERTIFICATION
I, Erwin Haitzmann, 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: May 9, 2003
/s/ Erwin Haitzmann
- ---------------------
Erwin Haitzmann
Chairman of the Board and Chief Executive Officer
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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: May 9, 2003
/s/ Peter Hoetzinger
- ---------------------
Peter Hoetzinger
Vice-Chairman and President
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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: May 9, 2003
/s/ Larry Hannappel
- -----------------------
Larry Hannappel
Chief Accounting Officer
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