Decrease in Net Earnings Attributable to Expansion Efforts and Ongoing
Sarbanes-Oxley Compliance Initiatives
COLORADO SPRINGS, Colo., Aug. 4 - For the quarter ended June 30, 2005, Century Casinos, Inc. (Nasdaq: CNTY) reported net earnings of $509,000 or $0.04 per share, compared to $1,147,000, or $0.08 per share, for the same period of 2004. Total earnings from operations were $877,000 in the second quarter of 2005 compared to $1,858,000 in the second quarter of 2004. This decrease in earnings is primarily due to second quarter expenditures associated with the documentation and testing associated with Sarbanes-Oxley requirements, staffing increases to support the Company's growth, non-routine SEC filings, pre-opening expenditures for new casinos in Edmonton, Canada and Central City, Colorado and other non-recurring legal and administrative costs.
Net operating revenue for the second quarter slightly increased to $8,908,000 in 2005 from $8,848,000 in 2004. EBITDA* (earnings before interest expense, income taxes, depreciation and amortization) reported for the second quarter of 2005 was $1,896,000 compared to $2,570,000 reported in 2004. On a company-wide basis, casino operating margins slightly decreased from 61.2% for the quarter ended June 30, 2004 to 60.4% for the same period of 2005.
The Company realized a net tax benefit for the second quarter of 2005 as higher taxed domestic losses (primarily in the Corporate and Other segment) outpaced income taxed at lower overseas rates.
"We feel that overall the company is performing at the level which we expected. The company has spent significant resources on the development, implementation and testing of internal control policies. As the company continues its strong growth, we feel that having these controls in place will ensure the safeguarding of our assets for the company and its shareholders," said Erwin Haitzmann, Century Casino's Chairman and Co CEO. "We continue to be pleased with the operations of our Caledon casino, despite the closure of the all important N2 highway for half of the quarter. In addition, despite the small decrease in casino revenues at Womacks, we feel that the casino was able to effectively manage their costs and maintain its margins at historical levels."
Peter Hoetzinger, Vice Chairman, Co CEO and President added: "We are pleased with the progress of our expansion projects in Edmonton, Canada and Central City, Colorado. Construction is well under way on both projects and we have secured, or are in the process of securing, financing for the full development of these casinos and related facilities and at this time foresee no delays towards the timely completion of these projects. This is an exciting time for the company as we continue to expand."
Net earnings for the six months ended June 30, 2005 were $1,516,000 or $0.11 per share, compared to $2,051,000 or $0.15 per share, for the same period of 2004. This decrease is primarily due to the previously mentioned corporate and expansion expenditures, as well as increased interest charges on outstanding debt. For the six months ended June 30, 2004, the Company reported a 6.6% increase in net operating revenue to $18,136,000 from $17,012,000 in 2004. EBITDA for the six month period was $4,332,000 in 2005 compared to $4,944,000 in 2004.
Caledon
Three months ended June 30, 2005 vs. 2004
Caledon's casino revenue increased by 9.4% to $3,223,000 compared to $2,946,000 reported in the second quarter 2004. Casino revenues were negatively impacted by the closure of the N2 highway for 47 days of the second quarter due to heavy flooding. Local management conservatively estimates the loss in revenue in the $300,000 to $400,000 range. In addition, casino revenue was negatively impacted by the introduction of new currency notes in South Africa. The bill validator software has been changed to accommodate the new notes, but the whole casino industry suffered by having validators that accept new notes, but not the old notes and vice versa, which resulted in a bill rejection rate of 80%. We are continuously upgrading the software as new versions become available and are now down to a 30% rejection rate.
Improvement in the Rand versus the dollar when comparing the second quarter of last year to the current year has had a positive impact on the reported revenues and a negative impact on expenses. Caledon casino revenue in Rand increased by 6.9% to R20, 651,000 compared to R19, 326,000 in the second quarter of 2004. This increase is attributable to successful marketing efforts and efficient casino management. Casino costs have increased $87,000 or 7.1%, which is in line with higher revenues. General and administrative expense for Caledon increased $163,000, or 32.7%, in this quarter when compared to 2004, due primarily to the implementation of management agreements signed during the fourth quarter of 2004, in addition to expenditures for legal and tax advisory services. Depreciation expense increased $118,000 period over period as additional assets were capitalized. Earnings from operations for Caledon in the second quarter of 2005 were $743,000 compared to $761,000 in the second quarter of 2004.
Six months ended June 30, 2005 vs. 2004
Caledon's casino revenue increased by 25.8% during the first six months of 2005 to $7,201,000 compared to $5,724,000 in 2004. Excluding the effect of the change in the Rand/Dollar conversion rate from year to year, Caledon's casino revenue increased by 16.0%. Casino costs increased by $447,000, or 19.2% during the first six months of 2005 compared to 2004. General and administrative expense was $1,243,000 in 2005 and $971,000 in 2004. Excluding the effect in the Rand/Dollar conversion rate, general and administrative expense increased 19.2%. Operating margins for Caledon, excluding the effect in the Rand/Dollar conversation rate, improved to 28.8% for the six months ended June 30, 2005 from 23.8% for the same period in 2004.
Womacks
Three months ended June 30, 2005 vs. 2004
Casino revenue reported by Womacks was $4,789,000 for the quarter compared to $5,071,000 reported for 2004. The Company attributes a majority of this decrease to a reduction in Womack's market share in Cripple Creek, Colorado. Despite the decrease in revenues from the second quarter of 2004 to the same period in 2005, operating margins have remained relatively flat over the same period. Other revenue, net of promotional allowances, increased by $173,000 at Womacks when comparing the second quarter of 2005 to the second quarter of 2004. This increase in other revenue is primarily attributable to a decrease in the redemption of coupons. Food and beverage operating margins have improved slightly from the second quarter of 2004 to the same period in 2005. However, as management expected to see food and beverage revenues increase for the period due to the opening of an additional restaurant in May 2004, the Company made the decision to close the "Cut Above Buffet" in July 2005. General and administrative expense decreased $19,000, or 2% in this quarter when compared to 2004. Depreciation was $430,000 compared to $368,000 in the same period 2004 as a result of the additions to gaming equipment in 2004. Net earnings reported for Womacks in the second quarter of 2005 were $888,000 compared to $948,000 in the second quarter of 2004.
Six months ended June 30, 2005 vs. 2004
Womacks' casino revenue was $9,261,000 for the first six months of 2005 compared to $9,946,000 for the first six months of 2004. This decrease is due to a reduction in Womack's market share in Cripple Creek and an increase in the redemption of coupons that has not resulted in any significant increase in gaming revenue. Casino expenses decreased slightly from $3,278,000 in 2004 to $3,249,000 in 2005. General and administrative expenses remained flat for the period, increasing by less than 0.5%.
Cruise Ships
Three months ended June 30, 2005 vs. 2004
Net operating revenue from casinos the Company operates aboard cruise ships decreased $58,000, or 7.0%, to $775,000 in the second quarter of 2005 from $833,000 in the second quarter of 2004. Cruise ship casino expenses decreased from $535,000 to $519,000 when comparing the second quarter of 2005 and 2004. The Company operated casinos aboard seven ships during the second quarter of 2005. The decreases are primarily due to one ship, the "Nautica," being out of service for the current period. Depreciation expense increased to $36,000 for the second quarter of 2005 from $25,000 in 2004, as a result of the first quarter 2005 increase in number of gaming devices on certain ships. Net earnings for the cruise ships were $213,000 in the second quarter of 2005 compared to $265,000 in the second quarter of 2004.
Six months ended June 30, 2005 vs. 2004
Net operating revenue was $1,326,000 for the first six months of 2005 compared to $1,204,000 for the first six months of 2004, an increase of 10.1%. Casino expenses increased from $864,000 in 2004 to $975,000 in 2005, which is in line with the increase in revenue. Net earnings increased 7.3% to $380,000 for the six months ended June 30, 2005.
The Company will post a slide show presentation of the Results of Operations for the second quarter of 2005 on its web site at http://www.centurycasinos.com on Thursday, August 4, 2005.
About Century Casinos, Inc:
Century Casinos is an international casino company that owns and operates Womacks Casino and Hotel in Cripple Creek, Colorado; owns and operates The Caledon Hotel, Spa & Casino near Cape Town, South Africa; operates the casinos aboard the ultra-luxury vessels of Silversea Cruises, The World of ResidenSea, and Oceania Cruises; owns 50% of, and provides technical casino services to the Casino Millennium in the Marriott Hotel in Prague, Czech Republic; and owns a majority interest in, and has begun construction on, casino and hotel developments in Central City, Colorado and Edmonton, Canada. The Company continues to pursue other international projects in various stages of development.
The address for the U.S. offices is 1263 A Lake Plaza Dr, Colorado Springs, CO, 80906. Telephone: (719) 527-8300. Fax: (719) 527-8301. E-Mail: investor@cnty.com. For more information about Century Casinos, visit the Company's web site at http://www.centurycasinos.com. Century Casinos' common stock trades on The NASDAQ Stock Market(R) under the symbol CNTY.
This release may contain forward-looking statements that involve risks and uncertainties. Among the other important factors which could cause actual results to differ materially from those in the forward-looking statements are economic, competitive, and governmental factors affecting the company's operations, markets, services and prices, as well as other factors detailed in the Company's filings with the Securities and Exchange Commission, including its recent filings on Forms 10-K, 10-Q, and 8K. Century Casinos disclaims any obligation to revise or update any forward-looking statement that may be made from time to time by it or on its behalf.
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Amounts in thousands, except for share information
For The Three Months Ended
June 30,
2005 2004
Operating Revenue:
Casino $8,737 $8,808
Hotel, food and beverage 941 965
Other 155 107
9,833 9,880
Less promotional allowances 925 1,032
Net operating revenue 8,908 8,848
Operating Costs and Expenses:
Casino 3,461 3,421
Hotel, food and beverage 587 724
General and administrative 3,033 2,153
Depreciation 938 731
Total operating costs
and expenses 8,019 7,029
(Loss) earnings from
unconsolidated subsidiary (12) 39
Earnings from Operations 877 1,858
Non-Operating Income (Expense):
Interest expense (566) (390)
Other income, net 111 45
Non-operating items from
unconsolidated subsidiary (3) (3)
Non-operating expense, net (458) (348)
Earnings before Income
Taxes & Minority Interest 419 1,510
(Benefit) provision for
income taxes (10) 347
Earnings before Minority Interest 429 1,163
Minority interest in
subsidiary loss (earnings) 80 (16)
Net Earnings $509 $1,147
Earnings Per Share:
Basic $0.04 $0.08
Diluted $0.03 $0.07
For The Three Months Ended
June 30,
2005 2004
Reconciliation to EBITDA*
Net Earnings $509 $1,147
Interest income (107) (45)
Interest expense 566 390
Income taxes (10) 347
Depreciation 938 731
EBITDA* $1,896 $2,570
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Amounts in thousands, except for share information
For The Six Months Ended
June 30,
2005 2004
Operating Revenue:
Casino $17,788 $16,874
Hotel, food and beverage 2,169 1,939
Other 371 306
20,328 19,119
Less promotional allowances 2,192 2,10
Net operating revenue 18,136 17,012
Operating Costs and Expenses:
Casino 7,002 6,473
Hotel, food and beverage 1,355 1,402
General and administrative 5,475 4,206
Property write-downs
and other write-off,
net of recoveries (30) --
Depreciation 1,790 1,382
Total operating costs
and expenses 15,592 13,463
(Loss) earnings from
unconsolidated subsidiary (109) 51
Earnings from Operations 2,435 3,600
Non-Operating Income (Expense):
Interest expense (1,034) (812)
Other income, net 159 92
Non-operating items from
unconsolidated subsidiary (4) (8)
Non-operating expense, net (879) (728)
Earnings before Income
Taxes & Minority Interest 1,556 2,872
Provision for income taxes 146 790
Earnings before Minority
Interest 1,410 2,082
Minority interest in
subsidiary loss (earnings) 106 (31)
Net Earnings $1,516 $2,051
Earnings Per Share:
Basic $0.11 $0.15
Diluted $0.09 $0.13
For The Six Months Ended
June 30,
2005 2004
Reconciliation to EBITDA*
Net Earnings $1,516 $2,051
Interest income (154) (91)
Interest expense 1,034 812
Income taxes 146 790
Depreciation 1,790 1,382
EBITDA* $4,332 $4,944
CENTURY CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Amounts in thousands
June 30, 2005 December 31, 2004
Assets
Current Assets $8,488 $10,175
Other Assets 62,704 61,029
Total Assets $71,192 $71,204
Liabilities and
Shareholder's Equity
Current Liabilities $7,889 $8,267
Non-Current Liabilities 24,241 22,558
Shareholders' Equity 39,062 40,379
Total Liabilities and
Shareholders' Equity $71,192 $71,204
* EBITDA (Earnings before interest, taxes, depreciation and amortization)
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 income, 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.
