CNTY

Century Casinos Inc. Q1 2003 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2003. Century Casinos, Inc. operates casino facilities in Cripple Creek, Colorado; Caledon, South Africa; and on luxury cruise vessels. The company also manages Casino Millennium in Prague, Czech Republic, and is pursuing a 50% ownership interest in that entity. As of May 6, 2003, there were 13,540,264 shares of common stock outstanding.

Key Financial Metrics

Note: Debt figures derived from Balance Sheet current portion of long-term debt ($1,700) and Long-Term Debt ($17,483).

Material Changes vs. Prior Period

• Revenue Growth: Net operating revenue increased 7.1% to $7.38 million, driven primarily by a 56.9% surge in the South African segment and a 214.3% increase in Cruise Ship revenue.
• Profit Decline: Despite revenue growth, Net Earnings decreased 18.4% to $755,000. This was largely due to a 25.1% drop in operating earnings from the core Colorado segment and increased interest expenses.
• Colorado Segment: Operating earnings fell to $1.52 million from $2.03 million. Management attributed this to construction distractions, limited parking access, and poor weather conditions in March 2003.
• South Africa Segment: Net earnings surged to $156,000 from $25,000. This was aided by a favorable exchange rate (Rand strengthened against the USD) and increased casino traffic.
• Investing Activities: Cash used in investing activities increased significantly to $1.79 million (from $978,000), primarily due to the $1.26 million acquisition of the remaining 35% interest in Century Casinos Caledon (Pty) Ltd.

Outlook, Risks, and Management Commentary

• Expansion Projects: The Womacks Casino expansion in Colorado is nearing completion (expected Q2 2003) with a total cost of approximately $2.0 million. Two new cruise ship casinos with Oceania Cruises are scheduled to open in Q2 and Q3 2003.
• Prague Acquisition: The company expects to complete its 50% acquisition of Casino Millennium in 2003 by contributing assets valued at $852,000. Management fees from this property were $0 in Q1 2003 due to cash flow uncertainties following the 2002 Prague floods.
• Legal Contingency (South Africa): A significant risk involves the West Rand casino license application. The High Court of South Africa overturned the license award in September 2002. Silverstar Development Ltd. (a consortium partner) initiated legal action in March 2003 to compel the award of the license. The outcome is uncertain, and the company's funding commitment is currently on hold pending progress.
• Liquidity: The company maintains a $26 million revolving credit facility with Wells Fargo, with approximately $11.6 million available as of March 31, 2003. Management believes current cash and borrowing capacity are sufficient for operations and capital expenditures.
• Stock Repurchase: The company repurchased 14,900 shares in Q1 2003. Subsequent to the quarter end, a director exercised options and the company repurchased additional shares, reducing treasury stock.

Investor Verification Checklist

• Colorado Performance: Verify if the completion of the Womacks expansion and improved parking access in Q2 2003 reverses the revenue decline seen in Q1.
• West Rand License: Monitor the status of the High Court of South Africa litigation regarding the West Rand casino license, as this impacts future growth in the region.
• Prague Integration: Confirm the timeline and financial impact of the finalization of the 50% ownership stake in Casino Millennium.
• Cruise Ship Revenue: Assess the revenue contribution from the new Oceania Cruises vessels once they commence operations in Q2/Q3 2003.
• Debt Covenants: Review compliance with financial covenants on the Wells Fargo Revolving Credit Facility and the ABSA loan in South Africa.