CNTY

Century Casinos Inc. Q1 2007 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2007, for Century Casinos Inc. (CCI), an international casino entertainment company. The company operates properties in the United States (Colorado), Canada (Alberta), South Africa, the Czech Republic, and on international cruise ships. As of May 8, 2007, there were 23,051,067 shares of common stock outstanding.

Key Financial Metrics

Note: Debt figures derived from Balance Sheet current and long-term debt portions. Working capital calculated as Current Assets minus Current Liabilities.

Material Changes vs. Prior Period

• Revenue Growth: Net operating revenue increased 123% year-over-year, driven primarily by the inclusion of new casinos in Central City, Colorado; Newcastle, South Africa; and Edmonton, Canada, which contributed $11.3 million to the total revenue increase.
• Net Earnings Decline: Despite revenue growth, net earnings decreased 9% to $1.54 million. This was primarily due to a $1.7 million increase in net interest charges associated with debt funding new casino construction and a one-time foreign currency gain of $0.8 million in the prior year not fully offsetting current costs.
• Cash Flow: Operating cash flow turned negative, using $0.7 million in Q1 2007 compared to providing $6.4 million in Q1 2006, largely due to changes in working capital timing. Investing activities used $3.9 million, including a $2.0 million acquisition of a Polish entity (G5 Sp. z o.o.).
• Liquidity: Cash and cash equivalents decreased by $18.2 million to $16.8 million. Working capital tightened significantly from $5.2 million to $0.2 million.

Outlook, Risks, and Management Commentary

• Segment Performance:
  • Central City & Edmonton: Revenues are slightly below initial projections, attributed to winter storms in January and lower-than-expected table game returns. Management is reviewing staffing and marketing strategies.
  • Caledon (South Africa): Results in USD were negatively impacted by the deterioration of the South African Rand. In local currency, casino revenue increased 4.9%.
  • Cruise Ships: Revenue declined 16% due to operating on six ships instead of seven. An arbitration regarding the termination of the Silver Cloud concession agreement is pending resolution in May 2007.
• Acquisitions: Completed the acquisition of G5 Sp. z o.o. (33.3% interest in Casinos Poland Ltd.) for approximately $2.8 million. The company also committed $1.1 million toward highway construction in South Africa as a condition for its Caledon license.
• Risks: Significant exposure to foreign currency fluctuations (ZAR, CAD, CZK). Potential inability to secure additional financing for new developments if cash resources are constrained. Competition is increasing in Cripple Creek with a new casino expected to open in late 2007.

Investor Verification Checklist

• Debt Service Capacity: Verify the company's ability to service $64.5 million in total debt given the reduction in working capital to $0.2 million and negative operating cash flow for the quarter.
• New Property Performance: Monitor the trajectory of Central City and Edmonton revenues to determine if they will meet long-term projections or require further cost-cutting.
• Foreign Exchange Impact: Assess the sensitivity of earnings to further depreciation of the South African Rand and Canadian Dollar against the US Dollar.
• Legal Contingencies: Track the outcome of the arbitration regarding the Silver Cloud cruise ship concession, which could impact future revenue streams.
• Capital Expenditures: Review upcoming capital needs for the Newcastle casino expansion and potential slot machine additions in Central City and Edmonton.