CENTURY CASINOS, INC. Forward-Looking Statements, Business Environment and Risk Factors
This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. In addition,Century Casinos, Inc. (together with its subsidiaries, the "Company") may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements as to industry trends and future expectations of the Company and other matters that do not relate strictly to historical facts and are based on certain assumptions by management at the time such statements are made. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled "Risk Factors" under Item 1A in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. References in this item to "we," "our," or "us" are to the Company and its subsidiaries on a consolidated basis unless the context otherwise requires. The term "USD" refers to US dollars, the term "CAD" refers to Canadian dollars, and the term "PLN" refers to Polish zloty. Certain terms used in this Item 2 without definition are defined in Item 1.
Amounts presented in this Item 2 are rounded. As such, rounding differences could occur in period over period changes and percentages reported throughout this Item 2.
EXECUTIVE OVERVIEW Overview Since our inception in 1992, we have been primarily engaged in developing and operating gaming establishments and related lodging, restaurant and entertainment facilities. Our primary source of revenue is from the net proceeds of our gaming machines and tables, with ancillary revenue generated from hotel, restaurant, horse racing (including off-track betting), sports betting, iGaming, bowling and entertainment facilities that are in most instances a part of the casinos. We view each market in which we operate as a separate operating segment and each casino or other operation within those markets as a reporting unit. We aggregate all operating segments into three reportable segments based on the geographical locations in which our casinos operate:United States ,Canada andPoland . We have additional business activities including concession agreements, management agreements, consulting agreements and certain other corporate and management operations that we report as Corporate and Other. ? 30
-------------------------------------------------------------------------------- The table below provides information about the aggregation of our operating segments and reporting units into reportable segments. The reporting units, except for Century Downs Racetrack and Casino and Casinos Poland, are owned, operated and managed through wholly-owned subsidiaries. Our ownership and operation of Century Downs Racetrack and Casino and Casinos Poland are discussed below. The real estate assets at ourWest Virginia andMissouri operating segments are owned by VICI PropCo and leased to us under the Master Lease. The land on which the REC and racetracks at Century Downs and Century Mile are located is leased. Reportable Segment Operating Segment Reporting Unit United States Colorado Century Casino & Hotel - Central City Century Casino & Hotel - Cripple Creek West Virginia Mountaineer Casino, Racetrack & Resort Missouri Century Casino Cape Girardeau Century Casino Caruthersville Canada Edmonton Century Casino & Hotel - Edmonton Century Casino St. Albert Century Mile Racetrack and Casino Calgary Century Downs Racetrack and Casino Century Sports (1) Century Bets! Inc. (1) Poland Poland Casinos Poland
Corporate and Other Corporate and Other Cruise Ships & Other
Corporate Other (2)
(1)We operated Century Sports through February 10, 2022 . We operated Century
Bets! Inc. through August 2021 , when operations were transferred to Century
Mile. For more information about Century Sports and Century Bets! Inc., see Note
1, "Description of Business and Basis of Presentation," to our condensed
consolidated financial statements in Part I, Item 1 of this report.
(2)Our equity investment in Smooth Bourbon is included in the Corporate Other
reporting unit.
In
OnFebruary 10, 2022 , we sold the land and building we owned inCalgary , transferred the lease agreement for the casino premises to the buyer and ceased operatingCentury Sports , a sports bar, bowling and entertainment facility located on the property. Prior to the sale,Century Sports was included in theCalgary operating segment.
We have controlling financial interests through our subsidiary CRM in the following reporting units:
?We have a 66.6% ownership interest in CPL and we consolidate CPL as a majority-owned subsidiary for which we have a controlling financial interest. Polish Airports owns the remaining 33.3% of CPL. We account for and report the 33.3% Polish Airports ownership interest as a non-controlling financial interest. CPL has been in operation since 1989. As ofSeptember 30, 2022 , CPL owned and operated eight casinos throughoutPoland . The following table summarizes information about CPL's casinos as ofSeptember 30, 2022 . City Location License Expiration Number of Slots Number of Tables Warsaw Marriott Hotel September 2028 70 37 Warsaw Hilton Hotel July 2024 69 24 Warsaw LIM Center June 2025 65 4 Bielsko-Biala Hotel President October 2023 51 5 Katowice Park Inn by Radisson October 2023 70 14 Wroclaw Double Tree Hilton Hotel November 2023 70 18 Krakow Dwor Kosciuszko Hotel May 2024 70 5 Lodz Manufaktura Entertainment June 2024 70 10 Complex InSeptember 2022 , CPL transferred the casino license for theWarsaw Marriott Hotel expiring inJuly 2024 to theWarsaw Hilton Hotel , and CPL was granted a new license for theWarsaw Marriott Hotel expiring inSeptember 2028 . 31 -------------------------------------------------------------------------------- Casino licenses are granted for six years. When a casino license expires, the Polish Minister of Finance notifies the public of its availability, and interested parties can submit an application for the casino license. Following approval of a casino license by the Minister of Finance, there is a period in which applicants can appeal the decision. ?We have a 75% ownership interest in CDR, and we consolidate CDR as a majority-owned subsidiary for which we have a controlling financial interest. We account for and report the remaining 25% ownership interest in CDR as a non-controlling financial interest. CDR operates Century Downs Racetrack and Casino, a REC inBalzac , a north metropolitan area ofCalgary, Alberta, Canada . CDR is the only horse racetrack in theCalgary area and is located less than one-mile north of the city limits ofCalgary and 4.5 miles from theCalgary International Airport .
Through our wholly owned subsidiary
We also have a concession agreement for one ship-based casino and had ownership in and a consulting agreement with MCE, which are detailed further under "Corporate and Other" below.
Recent Developments Related to COVID-19
The COVID-19 pandemic negatively impacted our results of operations in the first half of 2021 because of closures of ourCanada andPoland properties during this period. Our casinos varied their operations based on the governmental health and safety requirements in the jurisdictions in which they are located. Currently our operations have no health and safety requirements for entry and few COVID-19 related restrictions. We estimate that net operating revenue for the nine months endedSeptember 30, 2021 was adversely impacted by approximately$35.9 million , and that Adjusted EBITDA for the nine months endedSeptember 30, 2021 was adversely impacted by approximately$13.1 million due to the closures. See "Discussion of Results" below for a discussion of the impact of the closures in theCanada andPoland reportable segments. The duration and impact of the COVID-19 pandemic otherwise remains uncertain. We cannot predict the negative impacts that COVID-19 will have on our consumer demand, workforce, suppliers, contractors and other partners and whether future closures will be required. Such closures have had a material impact on us. The effects of COVID-19, ongoing governmental health and safety requirements and any future closures could have a material impact on us. We will continue to monitor our liquidity and make reductions to marketing and operating expenditures, where possible, if future government mandates or closures are required that would have an adverse impact on us.
Other Projects and Developments
OnAugust 24, 2022 , we entered into a definitive agreement with Lakes Maryland, Golden, and VICI PropCo, pursuant to which we agreed to acquire the operations ofRocky Gap for approximately$56.1 million subject to the conditions and terms set forth therein. Pursuant to a real estate purchase agreement, datedAugust 24, 2022 , by and between Evitts and VICI PropCo Buyer, VICI PropCo Buyer agreed to acquire the real estate assets relating toRocky Gap for approximately$203.9 million , subject to the conditions and terms set forth therein. In connection with the closing of this transaction, one of our subsidiaries and a subsidiary of VICI PropCo will enter into an amendment to the Master Lease to (i) addRocky Gap to the Master Lease, (ii) provide for an initial annual rent forRocky Gap of approximately$15.5 million , and (iii) extend the initialMaster Lease term for 15 years from the date of the amendment (subject to the existing four five-year renewal options).
OnFebruary 22, 2022 , we entered into a definitive agreement withMarnell , pursuant to which we, through a newly formed subsidiary, (i) purchased fromMarnell 50% of the membership interests in PropCo, and (ii) will purchase 100% of the membership interests in OpCo. OpCo owns and operates theNugget Casino Resort inSparks, Nevada , and PropCo owns the real property on which the casino is located. We purchased 50% of the membership interests in PropCo for approximately$95.0 million at the first closing onApril 1, 2022 . We used approximately$29.3 million of cash on hand in connection with the First Closing. Subject to approval from theNevada Gaming Commission , our purchase of 100% of the membership interests in OpCo for approximately$100.0 million (subject to certain adjustments) is expected to close within one year after the First Closing. Following the Second Closing, we will own the operating assets ofNugget Casino Resort and 50% of the membership interests in PropCo. We also have a five-year option to acquire the remaining 50% of the membership interests in PropCo for$105.0 million plus 2% per annum. At the First Closing, PropCo entered into a lease with OpCo for an annual rent of$15.0 million . ? 32
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InJuly 2021 , theMissouri law requiring each casino to be a floating facility was amended to allow casino facilities to be built as a standard building with a container with at least 2,000 gallons of water beneath the facility. A lawsuit was filed by theCity of St. Louis to block the implementation of the omnibus bill that included the amendment to the definition of a floating facility. InJune 2022 , theMissouri governor signed a standalone bill to amend the definition of a floating facility. This legislation provides an opportunity forCentury Casino Caruthersville , the last remaining riverboat casino on open water inMissouri , to move to a non-floating facility. We plan to move the casino from the riverboat to a new land-based casino with a small hotel. We estimate the project will cost$51.9 million . Construction started inOctober 2022 with completion expected in the second half of 2024. We plan to finance the cost of this project with a combination of financing and cash on hand. As ofSeptember 30, 2022 , we have spent$2.1 million on this project.
Recent Developments Related to
OnOctober 26, 2022 , the MGC approved the relocation of the casino atCentury Casino Caruthersville from the riverboat and the barge to a land-based pavilion until the new land-based casino and hotel are completed. OnOctober 13, 2022 , the riverboat, which had operated since 1994, had to be closed as it was no longer accessible from the barge because of the record low water levels in theMississippi River . Since then, Caruthersville has operated the casino from the barge with 299 slot machines and four table games. The pavilion building will not be affected by water levels and is protected by a flood wall. The pavilion will provide for easier access to the casino for customers and we anticipate it will bring operating efficiencies and cost savings. The casino will be smaller with approximately 400 slot machines and seven table games, compared to 519 slot machines and seven table games on the riverboat and barge. Caruthersville will continue to operate from the barge until the move to the pavilion is complete. We anticipate the move to the pavilion will be completed by the end of 2022 and that there will be no negative impact on results of operations thereafter.
InJuly 2021 , we announced that we had purchased land and a small two-story hotel nearCentury Casino Caruthersville with plans to refurbish the existing hotel's 36 rooms. The hotel opened onOctober 30, 2022 . As ofSeptember 30, 2022 , we have spent$2.7 million on this project and estimate an additional$1.0 million will be spent in the fourth quarter of 2022.
We plan to build a hotel at ourCape Girardeau location. The hotel is planned as a six-story building with 68,000 square feet that will be adjacent to and connected with the existing casino building. The hotel project has been approved by theCity of Cape Girardeau . Additional state and local approvals from other agencies will also be required. Planning, design and preparations for the project are substantially complete. Construction on this project began inSeptember 2022 and is expected to be completed in the first half of 2024. We estimate the project will cost$30.5 million , and we plan to finance this cost with cash on hand. As ofSeptember 30, 2022 , we have spent$1.4 million on this project. Additional Gaming Projects We currently are exploring additional potential gaming projects and acquisition opportunities. Along with the capital needs of potential projects, there are various other risks which, if they materialize, could affect our ability to complete a proposed project or acquisition or could eliminate its feasibility altogether.
Presentation of Foreign Currency Amounts
The average exchange rates to the US dollar used to translate balances during each reported period are as follows:
For the three months For the nine months
ended September 30, ended September 30,
Average Rates 2022 2021 % Change 2022 2021 % Change
Canadian dollar 1.3045 1.2593 1.2823 1.2515
(CAD) (3.6%) (2.5%)
Euros (EUR) 0.9920 0.8482 (17.0%) 0.9403 0.8360 (12.5%)
Polish zloty 4.7025 3.8721 4.3935 3.8013
(PLN) (21.4%) (15.6%)Source: 2022 Xe Currency Converter, 2021 Pacific Exchange Rate Service
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-------------------------------------------------------------------------------- We recognize in our condensed consolidated statements of earnings foreign currency transaction gains or losses resulting from the translation of casino operations and other transactions that are denominated in a currency other than US dollars. Our casinos inCanada andPoland represent a significant portion of our business, and the revenue generated and expenses incurred by these operations are generally denominated in Canadian dollars and Polish zloty. A decrease in the value of these currencies in relation to the value of the US dollar would decrease the earnings from our foreign operations when translated into US dollars. An increase in the value of these currencies in relation to the value of the US dollar would increase the earnings from our foreign operations when translated into US dollars. DISCUSSION OF RESULTS
For the three months For the nine months
ended September 30, % ended September 30, %
Amounts in thousands 2022 2021 Change Change 2022 2021 Change Change
Gaming Revenue $ 93,505 $ 98,366 $ (4,861) (4.9%) $ 277,853 $ 240,694 $ 37,159 15.4%
Pari-mutuel, Sports
Betting and iGaming
Revenue 6,067 6,200 (133) (2.1%) 14,755 13,342 1,413 10.6%
Hotel Revenue 2,619 2,243 376 16.8% 7,234 6,214 1,020 16.4%
Food and Beverage
Revenue 7,031 6,078 953 15.7% 18,095 12,401 5,694 45.9%
Other Revenue 3,330 3,723 (393) (10.6%) 8,839 8,556 283 3.3%
Net Operating Revenue 112,552 116,610 (4,058) (3.5%) 326,776 281,207 45,569 16.2%
Gaming Expenses (46,729) (46,388) 341 0.7% (137,755) (115,557) 22,198 19.2%
Pari-mutuel, Sports
Betting and iGaming
Expenses (6,922) (6,741) 181 2.7% (16,724) (14,031) 2,693 19.2%
Hotel Expenses (754) (640) 114 17.8% (2,088) (1,718) 370 21.5%
Food and Beverage
Expenses (6,257) (5,412) 845 15.6% (16,983) (11,415) 5,568 48.8%
General and
Administrative Expenses (26,179) (24,918) 1,261 5.1% (79,002) (66,337) 12,665 19.1%
Depreciation and
Amortization (6,776) (6,784) (8) (0.1%) (20,350) (20,060) 290 1.4%
Loss on Sale of Assets - - - - (2,154) - 2,154 100.0%
Total Operating Costs
and Expenses (93,617) (90,883) 2,734 3.0% (275,056) (229,118) 45,938 20.0%
Earnings from Equity
Investment 1,071 - 1,071 100.0% 2,134 - 2,134 100.0%
Earnings from
Operations 20,006 25,727 (5,721) (22.2%) 53,854 52,089 1,765 3.4%
Income Tax (Expense)
Benefit (855) (2,593) (1,738) (67.0%) 8,130 (3,813) (11,943) (313.2%)
Non-Controlling
Interest (1,266) (1,153) 113 9.8% (4,752) (86) 4,666 5425.6%
Net Earnings
Attributable to Century
Casinos, Inc.
Shareholders 2,944 11,226 (8,282) (73.8%)
12,018 16,662 (4,644) (27.9%)
Adjusted EBITDA (1)
Earnings Per Share Attributable toCentury Casinos, Inc. Shareholders Basic Earnings Per Share$ 0.10 $ 0.38 $ (0.28) (73.7%)$ 0.40 $ 0.56 $ (0.16) (28.6%) Diluted Earnings Per Share$ 0.09 $ 0.36 $ (0.27) (75.0%)$ 0.38 $ 0.54 $ (0.16) (29.6%) (1)For a discussion of Adjusted EBITDA and reconciliation of Adjusted EBITDA to net earnings attributable toCentury Casinos, Inc. shareholders, see "Non-US GAAP Measures - Adjusted EBITDA" below.
Items impacting comparability of the results include the following:
COVID-19 - Closures of ourCanada andPoland properties due to COVID-19 had a negative impact on our results for the nine months endedSeptember 30, 2021 . See "Executive Overview-Recent Developments Related to COVID-19" above for details regarding the closures.Calgary - InFebruary 2022 , we sold the land and building that we owned inCalgary forCAD 8.0 million ($6.3 million based on the exchange rate onFebruary 10, 2022 ). We recorded a loss on the sale of the land and building ofCAD 2.7 million ($2.2 million based on the average exchange rate for the month endedFebruary 28, 2022 ).
Deferred Financing - We wrote-off approximately
Inflation - We have seen operating expenses, such as utilities, maintenance
costs and food and beverage costs, increase at our properties but the increases
have not been material to date. We are starting to see an impact on customer
visits at some of our properties in the third and fourth quarter believed to be
from economic and inflationary factors, but the decreases have not been material
to date.
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-------------------------------------------------------------------------------- Staffing - We have experienced difficulties attracting and retaining staff at some locations in the US andCanada . As a result, we have had to adjust hours of some food and beverage outlets, the number of table games open and the number of rooms available at some of our hotels. We have been able to make adjustments during non-peak times and have not seen a material impact to our operating results. Valuation Allowance - We released a$10.2 million US valuation allowance, resulting in an income tax benefit of$8.1 million for the nine months endedSeptember 30, 2022 . We recorded income tax expense of$6.8 million inthe United States reportable segment for the three months endedSeptember 30, 2022 . The income tax expense reflects the full nine months endedSeptember 30, 2022 .
Pari-Mutuel
Pari-mutuel revenue includes live racing, export, advanced deposit wagering and off-track betting. Pari-mutuel expense relate to the revenue above and the operation of our racetracks.
Results of Operations
Net operating revenue decreased by($4.1) million , or (3.5%), and increased by$45.6 million , or 16.2%, for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Following is a breakout of net operating revenue by segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 : ?United States decreased by($3.2) million , or (4.3%), and by($8.7) million , or (4.0%). ?Canada decreased by($1.3) million , or (6.1%), and increased by$25.1 million , or 83.5%. ?Poland increased by$0.6 million , or 2.8%, and by$29.5 million , or 82.6%. ?Corporate and Other decreased by($0.2) million , or (81.4%), and by($0.3) million , or (71.3%). Operating costs and expenses increased by$2.7 million , or 3.0%, and by$45.9 million , or 20.0%, for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Following is a breakout of operating costs and expenses by segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 : ?United States remained constant and increased by$2.4 million , or 1.5%. ?Canada increased by$1.6 million , or 10.9%, and by$18.6 million , or 67.2%. ?Poland increased by$0.6 million , or 3.0%, and by$20.3 million , or 53.1%. ?Corporate and Other increased by$0.6 million , or 17.4%, and by$4.6 million , or 53.0%. Earnings from operations decreased by($5.7) million , or (22.2%), and increased by$1.8 million , or 3.4%, for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Following is a breakout of earnings from operations by segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 : ?United States decreased by($3.2) million , or (16.2%), and by($11.1) million , or (18.3%). ?Canada decreased by($2.9) million , or (42.5%), and increased by$6.5 million , or 275.5%. ?Poland remained constant and increased by$9.2 million , or 364.0%. ?Corporate and Other increased by$0.3 million , or 9.9%, and decreased by($2.8) million , or (34.1%). Net earnings decreased by($8.3) million , or (73.8%), and by($4.6) million , or (27.9%), for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Items deducted from or added to earnings from operations to arrive at net earnings attributable toCentury Casinos, Inc. shareholders include interest income, interest expense, gains (losses) on foreign currency transactions and other, income tax expense (benefit) and non-controlling interest. Items that impacted net earnings attributable toCentury Casinos, Inc. shareholders for the nine months endedSeptember 30, 2022 included a write-off of$7.3 million in deferred financing costs to interest expense related to the prepayment of the Macquarie Credit Agreement and the release of a$10.2 million US valuation allowance, resulting in an income tax benefit. ? 35
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Non-US GAAP Measures - Adjusted EBITDA
We define Adjusted EBITDA as net earnings (loss) attributable toCentury Casinos, Inc. shareholders before interest expense (income), net, income taxes (benefit), depreciation, amortization, non-controlling interest earnings (losses) and transactions, pre-opening expenses, acquisition costs, non-cash stock-based compensation charges, asset impairment costs, loss (gain) on disposition of fixed assets, discontinued operations, (gain) loss on foreign currency transactions, cost recovery income and other, gain on business combination and certain other one-time transactions. Expense related to the Master Lease is included in the interest expense (income), net line item. Intercompany transactions consisting primarily of management and royalty fees and interest, along with their related tax effects, are excluded from the presentation of net earnings (loss) attributable toCentury Casinos, Inc. shareholders and Adjusted EBITDA reported for each segment. Non-cash stock-based compensation expense is presented under Corporate and Other in the tables below as the expense is not allocated to reportable segments when reviewed by our chief operating decision makers. Not all of the aforementioned items occur in each reporting period, but have been included in the definition based on historical activity. These adjustments have no effect on the consolidated results as reported under US generally accepted accounting principles ("US GAAP"). Adjusted EBITDA is not considered a measure of performance recognized under US GAAP. Management believes that Adjusted EBITDA is a valuable measure of the relative performance of the Company and its properties. The gaming industry commonly uses Adjusted EBITDA as a method of arriving at the economic value of a casino operation. Management uses Adjusted EBITDA to evaluate and forecast the operating performance of the Company and its properties as well as to compare results of current periods to prior periods. Management believes that presenting Adjusted EBITDA to investors provides them with information used by management for financial and operational decision-making in order to understand the Company's operating performance and evaluate the methodology used by management to evaluate and measure such performance. Management believes that using Adjusted EBITDA is a useful way to compare the relative operating performance of separate reportable segments by eliminating the above-mentioned items associated with the varying levels of capital expenditures for infrastructure required to generate revenue, and the often high cost of acquiring existing operations. Our computation of Adjusted EBITDA may be different from, and therefore may not be comparable to, similar measures used by other companies within the gaming industry.
The reconciliation of Adjusted EBITDA to net earnings (loss) attributable to
For the three months ended September 30, 2022
United Corporate
Amounts in thousands States Canada Poland and Other Total
Net earnings (loss)
attributable to Century
Casinos, Inc. shareholders $ 2,372 $ 2,623 $ 2,032 $ (4,083) $ 2,944
Interest expense (income),
net (1) 7,201 581 (519) 8,087 15,350
Income taxes (benefit) 6,767 522 465 (6,899) 855
Depreciation and
amortization 4,892 1,180 623 81 6,776
Net earnings attributable to
non-controlling interests - 250 1,016 - 1,266
Non-cash stock-based
compensation - - - 953 953
Gain on foreign currency
transactions, cost recovery
income and other - (71) (333) (5) (409)
Loss on disposition of fixed
assets 11 - 27 - 38
Acquisition costs - - - 295 295
Adjusted EBITDA $ 21,243 $ 5,085 $ 3,311 $ (1,571) $ 28,068
(1)Expense of $7.2 million related to the Master Lease is included in interest
expense (income), net in the United States segment. Expense of $0.6 million
related to the CDR land lease is included in interest expense (income), net in
the Canada segment. Cash payments related to the Master Lease and CDR land lease
were $8.5 million and $0.5 million , respectively, for the period presented.
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For the three months ended September 30, 2021
United Corporate
Amounts in thousands States Canada Poland and Other Total
Net earnings (loss)
attributable to Century
Casinos, Inc. shareholders $ 12,389 $ 5,308 $ 1,437 $ (7,908) $ 11,226
Interest expense (income),
net (1) 7,121 560 (355) 3,294 10,620
Income taxes - 499 674 1,420 2,593
Depreciation and
amortization 4,699 1,217 760 108 6,784
Net earnings attributable to
non-controlling interests - 435 718 - 1,153
Non-cash stock-based
compensation - - - 986 986
Gain on foreign currency
transactions and cost
recovery income - (57) (232) (24) (313)
Loss on disposition of fixed
assets - 4 3 - 7
Adjusted EBITDA $ 24,209 $ 7,966 $ 3,005 $ (2,124) $ 33,056
(1)Expense of $7.1 million related to the Master Lease is included in interest
expense (income), net in the United States segment. Expense of $0.5 million
related to the CDR land lease is included in interest expense (income), net in
the Canada segment. Cash payments related to the Master Lease and CDR land lease
were $6.3 million and $0.4 million , respectively, for the period presented.
For the nine months ended September 30, 2022
United Corporate
Amounts in thousands States Canada Poland and Other Total
Net earnings (loss)
attributable to Century
Casinos, Inc. shareholders $ 21,409 $ 4,797 $ 4,285 $ (18,473) $ 12,018
Interest expense (income),
net (1) 21,310 1,733 (586) 25,482 47,939
Income taxes (benefit) 6,767 1,718 1,538 (18,153) (8,130)
Depreciation and
amortization 14,418 3,632 1,979 321 20,350
Net earnings attributable to
non-controlling interests - 2,608 2,144 - 4,752
Non-cash stock-based
compensation - - - 2,638 2,638
(Gain) loss on foreign
currency transactions, cost
recovery income and other
(2) (1) 138 (712) (8) (583)
Loss (gain) on disposition
of fixed assets 33 23 31 (124) (37)
Acquisition costs - - - 2,724 2,724
Adjusted EBITDA $ 63,936 $ 14,649 $ 8,679 $ (5,593) $ 81,671
(1)Expense of $21.3 million related to the Master Lease is included in interest
expense (income), net in the United States segment. Expense of $1.7 million
related to the CDR land lease is included in interest expense (income), net in
the Canada segment. Cash payments related to the Master Lease and CDR land lease
were $19.1 million and $1.6 million , respectively, for the period presented.
Expense of $7.3 million related to the write-off of deferred financing costs in
connection with the prepayment of the Macquarie Term Loan is included in
interest expense (income), net in the Corporate and Other segment.
(2)Loss of $2.2 million related to the sale of the land and building in Calgary
in February 2022 is included in the Canada segment.
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For the nine months ended September 30, 2021
United Corporate
Amounts in thousands States Canada Poland and Other Total
Net earnings (loss)
attributable to Century
Casinos, Inc. shareholders $ 39,486 $ 265 $ (1,432) $ (21,657) $ 16,662
Interest expense (income),
net (1) 21,083 1,263 (341) 9,825 31,830
Income taxes (benefit) - 661 (216) 3,368 3,813
Depreciation and
amortization 13,734 3,689 2,320 317 20,060
Net earnings (loss)
attributable to
non-controlling interests - 802 (716) - 86
Non-cash stock-based
compensation - - - 1,568 1,568
Gain on foreign currency
transactions, cost recovery
income and other - (604) (221) (436) (1,261)
Loss (gain) on disposition
of fixed assets 282 36 3 (39) 282
Adjusted EBITDA $ 74,585 $ 6,112 $ (603) $ (7,054) $ 73,040
(1)Expense of $21.1 million related to the Master Lease is included in interest
expense (income), net in the United States segment. Expense of $1.2 million
related to the CDR land lease is included in interest expense (income), net in
the Canada segment. Cash payments related to the Master Lease and CDR land lease
were $16.8 million and $1.3 million , respectively, for the period presented.
Non-US GAAP Measures - Net Debt
We define Net Debt as total long-term debt (including current portion) plus
deferred financing costs minus cash and cash equivalents. Net Debt is not
considered a liquidity measure recognized under US GAAP. Management believes
that Net Debt is a valuable measure of our overall financial situation. Net Debt
provides investors with an indication of our ability to pay off all of our
long-term debt if it became due simultaneously. The reconciliation of Net Debt
is presented below.
Amounts in thousands September 30, 2022 September 30, 2021
Total long-term debt, including current
portion $ 349,766 $ 182,445
Deferred financing costs 17,510 8,086
Total principal $ 367,276 $ 190,531
Less: Cash and cash equivalents $ 99,257 $ 100,759
Net Debt $ 268,019 $ 89,772
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Reportable Segments
The following discussion provides further detail of consolidated results by reportable segment.
For the three months For the nine months
ended September 30, % ended September 30, %
Amounts in thousands 2022 2021 Change Change
2022 2021 Change Change
Gaming Revenue $ 60,150 $ 64,569 $ (4,419) (6.8%) $ 179,524 $ 190,159 $ (10,635) (5.6%)
Pari-mutuel, Sports
Betting and iGaming
Revenue 2,965 2,617 348 13.3% 6,300 5,825 475 8.2%
Hotel Revenue 2,485 2,243 242 10.8% 6,895 6,214 681 11.0%
Food and Beverage
Revenue 3,319 2,950 369 12.5% 9,314 8,676 638 7.4%
Other Revenue 1,799 1,518 281 18.5% 4,242 4,095 147 3.6%
Net Operating Revenue 70,718 73,897 (3,179) (4.3%) 206,275 214,969 (8,694) (4.0%)
Gaming Expenses (30,351) (31,729) (1,378) (4.3%) (89,781) (90,610) (829) (0.9%)
Pari-mutuel, Sports
Betting and iGaming
Expenses (2,257) (2,180) 77 3.5% (4,554) (4,642) (88) (1.9%)
Hotel Expenses (680) (632) 48 7.6% (1,902) (1,707) 195 11.4%
Food and Beverage
Expenses (2,775) (2,511) 264 10.5% (7,910) (7,307) 603 8.3%
General and
Administrative
Expenses (13,423) (12,636) 787 6.2% (38,225) (36,400) 1,825 5.0%
Depreciation and
Amortization (4,892) (4,699) 193 4.1% (14,418) (13,734) 684 5.0%
Total Operating Costs
and Expenses (54,378) (54,387) (9) - (156,790) (154,400) 2,390 1.5%
Earnings from
Operations 16,340 19,510 (3,170) (16.2%) 49,485 60,569 (11,084) (18.3%)
Income Tax Expense (6,767) - 6,767 100.0% (6,767) - 6,767 100.0% Net Earnings Attributable toCentury Casinos, Inc. Shareholders 2,372 12,389 (10,017) (80.9%)
21,409 39,486 (18,077) (45.8%)
Adjusted EBITDA
Sports wagering inColorado became legal onMay 1, 2020 . We have partnered with sports betting operators that will conduct sports wagering under each of the threeColorado master licenses for sports wagering held by ourColorado subsidiaries. One of these mobile sports betting apps launched inJuly 2020 , a second launched inAugust 2021 , and the third sports betting app launched inSeptember 2022 . Each agreement with the sports betting operators provides for a share of net gaming revenue and a minimum revenue guarantee each year.
New table games and unlimited betting began in
InDecember 2020 , we entered into an agreement with an iGaming partner to utilize our license with the state ofWest Virginia to operate an internet and mobile interactive gaming application. The iGaming app launched inApril 2021 . The agreement provides for a share of net gaming revenue. We recorded income tax expense of$6.8 million in the third quarter of 2022 due to the release of the US valuation allowance. The income tax expense reflects the full nine months endedSeptember 30, 2022 . The table below provides results by operating segment withinthe United States reportable segment. For the three months For the nine months ended September 30, % ended September 30, % Amounts in millions 2022 2021 Change Change 2022 2021 Change Change Net Operating Revenue Colorado$ 13.5 $ 12.5 $ 1.0 8.1%$ 35.4 $ 34.0 $ 1.4 4.2% West Virginia 30.4 31.7 (1.3) (4.2%) 86.4 86.2 0.2 0.1% Missouri 26.8 29.7 (2.9) (9.6%) 84.5 94.8 (10.3) (10.8%) Total United States 70.7 73.9 (3.2) (4.3%)
206.3 215.0 (8.7) (4.0%)
Operating Costs and Expenses (1) Colorado$ 8.2 $ 7.6 $ 0.6 7.9%$ 22.4 $ 21.1 $ 1.3 6.2% West Virginia 25.1 25.9 (0.8) (3.1%) 71.9 70.6 1.3 1.8% Missouri 16.2 16.3 (0.1) (0.6%) 48.1 49.0 (0.9) (1.8%) Total United States 49.5 49.8 (0.3) (0.6%)
142.4 140.7 1.7 1.2%
(1)Operating costs and expenses are calculated as total operating costs and expenses less depreciation and amortization.
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39
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Three Months Ended
Colorado - Gaming revenue atCripple Creek andCentral City increased by$0.8 million , or 7.1%, primarily due to increased slot revenue at both properties. In addition, atCentral City food and beverage revenue increased by$0.1 million , or 33.1%, primarily due to increased customer visits. COVID-19 restrictions were lifted on restaurants during the third quarter of 2021, but we saw a slow increase in visits during 2021. Operating expenses increased by$0.6 million , or 7.9%, due to increased payroll costs and gaming-related expenses.West Virginia - Net operating revenue decreased due to decreased gaming revenue of($2.3) million , or (9.2%), due to lower customer volumes believed to be from economic and inflationary factors. The decreased gaming revenue was offset by increased revenue in all other revenue categories due to the lack of COVID-19 restrictions in 2022. Operating expenses decreased by($0.8) million , or (3.1%), due to decreased payroll costs and gaming-related expenses.Missouri - Gaming revenue at Caruthersville andCape Girardeau decreased by($2.9) million , or (10.0%), due to lower customer volumes believed to be from economic and inflationary factors and decreased table game offerings due to staffing issues. Operating expenses at Caruthersville decreased by($0.1) million , or (0.6%), due to decreased gaming-related expenses offset by increased payroll costs and expenses related to low water levels in theMississippi River beginning inAugust 2022 .
Nine Months Ended
2021 COVID-19 Restrictions
Colorado - Table games were closed inJanuary 2021 at both properties. InCentral City , there were restrictions on the number of slot machines open during the first quarter of 2021 with approximately 66% of the slot floor open due to a county variance requiring every other machine to be powered off.West Virginia - During the first quarter of 2021, approximately 85% of the gaming floor was open with machines limited to six feet apart or with barriers, casino hours of operation were reduced and there were capacity restrictions within the casino. In addition, during the first quarter of 2021, food and beverage outlets were operating with reduced hours and capacity, the hotel was operating at reduced capacity and the convention spaces were closed.Missouri - During the first quarter of 2021, the casinos were operating with reduced hours, and there were state-wide smoking restrictions throughMay 2021 . During the first and second quarters of 2021, gaming revenue was positively impacted by federal stimulus payments.
2022 Results - Our United States properties operated with very few COVID-19 restrictions. We continue to adjust the operation of amenities at our properties based on staffing and varying levels of demand.
Colorado - The increase in net operating revenue was primarily due to a second sports betting app that launched inAugust 2021 and a third sports betting app that launched inSeptember 2022 . Gaming revenue increased by$0.9 million , or 2.9%, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 , primarily due to increased revenue in the third quarter of 2022.Colorado's operating costs and expenses have increased due to increased payroll resulting from table game operations, no restrictions on food and beverage outlets as well as increased gaming-related expenses.West Virginia - Net operating revenue increased by$0.2 million , or 0.1%, due to increased revenue in all categories due to the lack of COVID-19 restrictions in 2022. These increases were offset by decreased gaming revenue in the third quarter due to lower customer volumes believed to be from economic and inflationary factors.West Virginia's operating costs and expenses have increased due to gaming-related expenses, marketing expenses and general and administrative expenses, offset by decreased payroll costs. InMarch 2022 , weekend operating hours increased to 24 hours per day.Missouri - Gaming revenue decreased($10.3) million , or (11.2%), compared to the nine months endedSeptember 30, 2021 . The decrease in gaming revenue was due to the positive impact of the stimulus payments in 2021 as well as the third quarter of 2022 decreases due to lower customer volumes believed to be from economic and inflationary factors and decreased table game offerings due to staffing issues. Operating costs and expenses decreased due to decreased gaming-related expenses offset by minimum wage increases inMissouri and expenses at Caruthersville related to low water levels in theMississippi River beginning inAugust 2022 We continue to follow any government and local health board mandates related to COVID-19 and will adjust operations if there are any future COVID-19 related impacts.
A reconciliation of net earnings attributable to
40--------------------------------------------------------------------------------
Canada For the three months For the nine months ended September 30, % ended September 30, % Amounts in thousands 2022 2021 Change Change 2022 2021 Change Change Gaming Revenue$ 11,841 $ 12,917 $ (1,076) (8.3%)$ 33,728 $ 15,937 $ 17,791 111.6% Pari-mutuel, Sports Betting and iGaming Revenue 3,102 3,583 (481) (13.4%) 8,455 7,517 938 12.5% Hotel Revenue 134 - 134 100.0% 339 - 339 100.0% Food and Beverage Revenue 3,509 2,962 547 18.5% 8,171 3,504 4,667 133.2% Other Revenue 1,479 1,906 (427) (22.4%) 4,412 3,073 1,339 43.6% Net Operating Revenue 20,065 21,368 (1,303) (6.1%) 55,105 30,031 25,074 83.5% Gaming Expenses (2,831) (2,045) 786 38.4% (7,482) (2,500) 4,982 199.3% Pari-mutuel, Sports Betting and iGaming Expenses (4,665) (4,561) 104 2.3% (12,170) (9,389) 2,781 29.6% Hotel Expenses (74) (8) 66 825.0% (186) (11) 175 1590.9% Food and Beverage Expenses (2,741) (2,224) 517 23.2% (6,804) (2,791) 4,013 143.8% General and Administrative Expenses (4,669) (4,520) 149 3.3% (13,837) (9,297) 4,540 48.8% Depreciation and Amortization (1,180) (1,217) (37) (3.0%) (3,632) (3,689) (57) (1.5%) Loss on Sale of Assets - - - - (2,154) - 2,154 100.0% Total Operating Costs and Expenses (16,160) (14,575) 1,585 10.9% (46,265) (27,677) 18,588 67.2% Earnings from Operations 3,905 6,793 (2,888) (42.5%) 8,840 2,354 6,486 275.5% Income Tax Expense (522) (499) 23 4.6% (1,718) (661) 1,057 159.9% Non-Controlling Interest (250) (435) (185) (42.5%) (2,608) (802) 1,806 225.2% Net Earnings Attributable toCentury Casinos, Inc. Shareholders 2,623 5,308 (2,685) (50.6%) 4,797 265 4,532 1710.2% Adjusted EBITDA$ 5,085 $ 7,966 $ (2,881) (36.2%)$ 14,649 $ 6,112 $ 8,537 139.7% InFebruary 2022 , we sold the land and building we owned inCalgary , transferred the lease agreement for the casino premises to the buyer and ceased operatingCentury Sports , which impacts comparability of theCalgary operating segment in 2022. Results in US dollars were impacted by a (3.6%) and a (2.5%) decrease in the average exchange rate between the US dollar and Canadian dollar for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 , respectively.
The table below provides the
Closure Date Reopen DateDecember 13, 2020 June 10, 2021 ? 41
-------------------------------------------------------------------------------- The results below are presented to illustrate the estimated impact of COVID-19 on net operating revenue in theCanada segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Amounts in millions Q1 Q2 Jul Aug Sep Q3 YTDEdmonton - CAD 2022 13.6 16.8 5.8 6.1 5.9 17.8 48.2 2021 1.3 5.1 6.1 6.2 5.5 17.8 24.2 2022/2021 12.3 11.7 (0.3) (0.1) 0.4 - 24.0 926.4% 230.1% (4.9%) (1.6%) 7.3% - 99.0%
2022 10.7 13.2 4.5 4.8 4.4 13.7 37.6
2021 1.0 4.2 4.9 4.9 4.4 14.2 19.4
2022/2021 9.7 9.0 (0.4) (0.1) - (0.5) 18.2
923.5% 216.8% (8.2%) (2.0%) - (3.4%) 94.1%
Amounts in millions Q1 Q2 Jul Aug Sep Q3 YTD
Calgary - CAD
2022 6.7 7.5 2.7 3.1 2.5 8.3 22.5
2021 1.2 3.1 3.1 3.3 2.7 9.1 13.4
2022/2021 5.5 4.4 (0.4) (0.2) (0.2) (0.8) 9.1
449.4% 144.5% (12.9%) (6.1%) (7.4%) (8.3%) 68.4%
2022 5.3 5.8 2.1 2.4 1.9 6.4 17.5
2021 1.0 2.5 2.4 2.6 2.1 7.1 10.6
2022/2021 4.3 3.3 (0.3) (0.2) (0.2) (0.7) 6.9
447.1% 134.9% (12.5%) (7.7%) (9.5%) (11.5%) 64.3%
The results below are presented to illustrate the estimated impact of COVID-19
on operating expenses in the Canada segment for the three and nine months ended
September 30, 2022 compared to the three and nine months ended September 30,
2021 , excluding depreciation and amortization expense and loss on sale of
assets.
Amounts in millions Q1 Q2 Jul Aug Sep Q3 YTD
Edmonton - CAD
2022 11.2 13.0 4.6 5.0 4.7 14.3 38.5
2021 3.7 4.9 3.6 4.1 4.4 12.1 20.7
2022/2021 7.5 8.1 1.0 0.9 0.3 2.2 17.8
202.7% 165.3% 27.8% 22.0% 6.8% 18.2% 86.0%
2022 8.9 10.2 3.5 3.9 3.5 10.9 30.0
2021 3.0 3.9 2.9 3.2 3.5 9.6 16.5
2022/2021 5.9 6.3 0.6 0.7 - 1.3 13.5
196.7% 161.5% 20.7% 21.9% - 13.5% 81.8%
Amounts in millions Q1 Q2
2022 4.0 4.2 1.5 2.3 1.5 5.3 13.5
2021 2.1 2.6 1.5 1.7 1.5 4.7 9.4
2022/2021 1.9 1.6 - 0.6 - 0.6 4.1
90.5% 61.5% - 35.3% - 12.8% 43.6%
2022 3.2 3.3 1.2 1.8 1.1 4.1 10.6
2021 1.7 2.0 1.2 1.4 1.2 3.8 7.5
2022/2021 1.5 1.3 - 0.4 (0.1) 0.3 3.1
88.2% 65.0% - 28.6% (8.3%) 7.9% 41.3%
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Net operating revenue for the nine months ended
First and Second Quarter 2021 - During the first five months of 2021, our revenue in theCanada segment was primarily from advance deposit wagering on horse races. InMarch 2021 , we reopened some restaurants within our casinos. We reopened our casinos onJune 10, 2021 . Operating expenses were reduced by wage subsidies provided by the Canadian government through theCanada Emergency Wage Subsidy ("CEWS") that was enacted inApril 2020 as a result of COVID-19 to help employers offset a portion of their employee wages for a limited period. During the first six months of 2021, the qualified government wage subsidies reduced operating expenses byCAD 2.7 million ($2.2 million based on the average exchange rate for the nine months endedSeptember 30, 2021 ).
During the Canadian closures, we suspended marketing initiatives, furloughed
employees and reduced operating costs and expenses as much as possible. We
believe that we have captured operating synergies, labor savings and cost
savings following the reopening of our
First and Second Quarter 2022 - Through earlyFebruary 2022 , we required customers to provide proof of vaccination, a negative rapid test result or an original medical exception letter for entry to comply with a government mandate. In accordance with a government mandate, all customers and employees were required to wear masks while indoors through earlyMarch 2022 . Since the lifting of these restrictions, we have seen a positive impact in the number of customers coming to our casinos and in operating results.
Three Months Ended
During the three months endedSeptember 30, 2021 , operating expenses were reduced byCAD 0.4 million ($0.3 million based on the average exchange rate for the three months endedSeptember 30, 2021 ) due to wage subsidies provided by the Canadian government through CEWS. In CAD In USDEdmonton - Net operating revenueEdmonton - Net operating revenue decreased byCAD (0.5) million , or decreased by($0.6) million , or (10.6%). (7.4%), due to decreased gaming Operating costs and expenses increased revenue. The gaming floor fully by$0.4 million , or 13.5%. reopened in the third quarter of 2021, and there was a post-COVID increase in revenue that has since leveled off. Decreased gaming revenue was offset by increased hotel and food and beverage revenue. Restaurants and hotels were still operating with COVID-19 restrictions in the third quarter of 2021. Operating costs and expenses increased byCAD 0.6 million , or 17.5%, due to increased payroll costs and general and administrative expenses.St. Albert - Net operating revenueSt. Albert - Net operating revenue decreased byCAD (0.3) million , or decreased by($0.3) million , or (11.8%). (8.6%), due to decreased gaming Operating costs and expenses increased revenue. The gaming floor fully by$0.2 million , or 13.2%. reopened in the third quarter of 2021, and there was a post-COVID increase in revenue that has since leveled off. Decreased gaming revenue was offset by increased food and beverage revenue. Restaurants were still operating with COVID-19 restrictions in the third quarter of 2021. Operating costs and expenses increased byCAD 0.3 million , or 17.2%, primarily due to increased payroll costs. Century Mile - Net operating revenue Century Mile - Net operating revenue increasedCAD 0.8 million , or 9.0%, increased by$0.4 million , or 5.3%. primarily due to increased gaming and Operating costs and expenses increased food and beverage revenue. The by$0.7 million , or 12.8%. increase was offset by decreased pari-mutuel revenue due to a decrease in advance deposit wagering. Operating costs and expenses increased byCAD 1.2 million , or 16.8%, due to increased payroll costs, marketing expenses and general and administrative expenses. ? 43
-------------------------------------------------------------------------------- Century Downs - Net operating revenue Century Downs - Net operating revenue increasedCAD 0.3 million , or 3.7%, remained constant. Operating costs and primarily due to increased food and expenses increased by$1.0 million , or beverage revenue. The increased food 34.4%. and beverage revenue was due to restaurants still operating under COVID-19 restrictions in the third quarter of 2021. Operating costs and expenses increased byCAD 1.5 million , or 38.9%, due to increased payroll costs, marketing expenses and general and administrative fees. Operating costs and expenses also increased due to hosting theWorld Professional Chuckwagon Association World Finals in the third quarter of 2022. We continue to follow any government and local health board mandates related to COVID-19 and will adjust operations if there are any future COVID-19 related impacts.
A reconciliation of net earnings attributable to
Poland For the three months For the nine months ended September 30, % ended September 30, % Amounts in thousands 2022 2021 Change Change 2022 2021 Change Change Gaming Revenue$ 21,478 $ 20,811 $ 667 3.2%$ 64,481 $ 34,514 $ 29,967 86.8%Food and Beverage Revenue 203 166 37 22.3% 610 221 389 176.0% Other Revenue 52 174 (122) (70.1%) 174 1,016 (842) (82.9%) Net Operating Revenue 21,733 21,151 582 2.8% 65,265 35,751 29,514 82.6% Gaming Expenses (13,518) (12,565) 953 7.6% (40,405) (22,385) 18,020 80.5% Food and Beverage Expenses (741) (677) 64 9.5% (2,269) (1,317) 952 72.3% General and Administrative Expenses (4,190) (4,507) (317) (7.0%) (13,943) (12,255) 1,688 13.8% Depreciation and Amortization (623) (760) (137) (18.0%) (1,979) (2,320) (341) (14.7%) Total Operating Costs and Expenses (19,072) (18,509) 563 3.0% (58,596) (38,277) 20,319 53.1% Earnings (Loss) from Operations 2,661 2,642 19 0.7% 6,669 (2,526) 9,195 364.0% Income Tax (Expense) Benefit (465) (674) (209) (31.0%) (1,538) 216 1,754 812.0% Non-Controlling Interest (1,016) (718) 298 41.5% (2,144) 716 2,860 399.4% Net Earnings (Loss) Attributable toCentury Casinos, Inc. Shareholders 2,032 1,437 595 41.4% 4,285 (1,432) 5,717 399.2% Adjusted EBITDA$ 3,311 $ 3,005 $ 306 10.2%$ 8,679 $ (603) $ 9,282 1539.3% InPoland , casino gaming licenses are granted for a term of six years. These licenses are not renewable. Before a gaming license expires, there is a public notification of the available license and any gaming company can apply for a new license for that city. CPL was awarded a casino gaming license in theWarsaw market which it is currently using at the casino in theWarsaw Marriott . InSeptember 2022 , CPL transferred the casino license for theWarsaw Marriott Hotel expiring inJuly 2024 to theWarsaw Hilton Hotel , and CPL was granted a new license for theWarsaw Marriott Hotel expiring inSeptember 2028 . The next license expiration for a CPL casino occurs inOctober 2023 in Bielsko-Biala andKatowice andNovember 2023 in Wroclaw. Results in US dollars were impacted by a (21.4%) and (15.6%) decrease in the average exchange rate between the US dollar and Polish zloty for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 .
The table below provides the closure and reopen dates for casinos in
Closure Date Reopen DateDecember 29, 2020 February 12, 2021 March 20, 2021 May 28, 2021 ? 44
-------------------------------------------------------------------------------- The results below are presented to illustrate the estimated impact of COVID-19 on net operating revenue in thePoland segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 . Amounts in millions Q1 Q2 Jul Aug Sep Q3 YTD PLN 2022 90.2 94.6 34.2 34.0 34.0 102.2 287.0 2021 22.4 32.4 25.5 28.8 27.7 82.0 136.8 2022/2021 67.8 62.2 8.7 5.2 6.3 20.2 150.2 303.4% 191.4% 34.1% 18.1% 22.7% 24.8% 109.9% USD 2022 21.8 21.7 7.3 7.3 7.2 21.8 65.3 2021 5.9 8.7 6.6 7.4 7.2 21.2 35.8 2022/2021 15.9 13.0 0.7 (0.1) - 0.6 29.5 269.3% 149.8% 10.6% (1.4%) - 2.8% 82.6% The results below are presented to illustrate the estimated impact of COVID-19 on operating expenses in thePoland segment for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 excluding depreciation and amortization expense. Amounts in millions Q1 Q2 Jul Aug Sep Q3 YTD PLN 2022 79.1 82.8 27.6 29.0 30.2 86.8 248.7 2021 32.0 36.5 21.9 24.2 22.6 68.7 137.2 2022/2021 47.1 46.3 5.7 4.8 7.6 18.1 111.5 147.2% 126.8% 26.0% 19.8% 33.6% 26.3% 81.3% USD 2022 19.2 19.0 5.9 6.2 6.3 18.4 56.6 2021 8.5 9.7 5.7 6.2 5.9 17.8 36.0 2022/2021 10.7 9.3 0.2 - 0.4 0.6 20.6 125.9% 95.9% 3.5% - 6.8% 3.4% 57.2% First and Second Quarter 2021 - Net operating revenue was negatively impacted by temporary closures and reduced tourism inWarsaw due to COVID-19. The casinos inPoland reopened onMay 28, 2021 . During the closures of ourPoland casinos, we reduced operating costs and expenses as much as possible. First and Second Quarter 2022 - Travel and hotel occupancy inPoland have increased since most COVID-19 travel restrictions have been lifted. We have not seen a material negative impact on our operations as a result of the war inUkraine . AlthoughPoland bordersUkraine , our casinos are not located near the border. However, continued conflict in that region could have a negative impact on our results of operations.
Three Months Ended
In PLN In USD Net operating revenue increased by PLN Net operating revenue increased by 20.3 million, or 24.8%, due primarily to$0.6 million , or 2.8%. Operating increased gaming revenue. Gaming revenue costs and expenses increased by$0.6 increased as COVID-19 travel million, or 3.4%. restrictions lessened. Operating costs and expenses increased by PLN 18.1 million, or 26.3%, due to increased gaming-related expenses, including gaming tax expense, payroll costs and marketing expenses. We continue to follow any government and local health board mandates related to COVID-19 and will adjust operations if there are any future COVID-19 related impacts.
A reconciliation of net earnings (loss) attributable to
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45
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Corporate and Other
For the three months For the nine months
ended September 30, % ended September 30, %
Amounts in thousands 2022 2021 Change Change 2022 2021 Change Change
Gaming Revenue $ 36 $ 69 $ (33) (47.8%) $ 120 $ 84 $ 36 42.9%
Other Revenue - 125 (125) (100.0%) 11 372 (361) (97.0%)
Net Operating Revenue 36 194 (158) (81.4%) 131 456 (325) (71.3%)
Gaming Expenses (29) (49) (20) (40.8%) (87) (62) 25 40.3%
General and
Administrative
Expenses (3,897) (3,255) 642 19.7% (12,997) (8,385) 4,612 55.0%
Depreciation and
Amortization (81) (108) (27) (25.0%) (321) (317) 4 1.3%
Total Operating Costs
and Expenses (4,007) (3,412) 595 17.4% (13,405) (8,764) 4,641 53.0%
Earnings from Equity
Investment 1,071 - 1,071 100.0% 2,134 - 2,134 100.0%
Loss from Operations (2,900) (3,218) 318 9.9% (11,140) (8,308) (2,832) (34.1%)
Income Tax Benefit
(Expense) 6,899 (1,420) (8,319) (585.8%) 18,153 (3,368) (21,521) (639.0%)
Net Loss Attributable
to Century Casinos,
Inc. Shareholders (4,083) (7,908) 3,825 48.4% (18,473) (21,657) 3,184 14.7%
Adjusted EBITDA $ (1,571) $ (2,124) $ 553 26.0% $ (5,593) $ (7,054) $ 1,461 20.7%
The following operations and agreements make up the reporting unit Cruise Ships & Other in the Corporate and Other reportable segment:
?As ofSeptember 30, 2022 , we had a concession agreement withTUI Cruises for one ship-based casino that ends in the second quarter of 2023. The table below illustrates the ships operating during the three and nine months endedSeptember 30, 2022 and 2021. Ship Operated From Operated To
?Through our subsidiary CRM, we had a 7.5% ownership interest in MCE that was sold inNovember 2021 for nominal consideration. In addition, the consulting services agreement under which CRM provided advice to MCE on casino matters was terminated inNovember 2021 . See Note 1, "Description of Business and Basis of Presentation," to our condensed consolidated financial statements in Part I, Item 1 of this report for additional information related to MCE.
?Our corporate reporting units include certain corporate and management operations.
Three Months EndedSeptember 30, 2022 and 2021 The following discussion highlights results for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . Revenue Highlights
Non-Corporate Reporting Units - Net operating revenue decreased due to
termination of the MCE consulting services agreement in
Operating Expense Highlights
Non-Corporate Reporting Units - Total operating costs and expenses remained constant.
Corporate Reporting Units - Total operating costs and expenses excluding
depreciation and amortization expense, increased by
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46
-------------------------------------------------------------------------------- Nine Months EndedSeptember 30, 2022 and 2021 The following discussion highlights results for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . Revenue Highlights
Non-Corporate Reporting Units - Net operating revenue decreased due to
termination of the MCE consulting services agreement in
Operating Expense Highlights
Non-Corporate Reporting Units - Total operating costs and expenses decreased due to the sale of gaming equipment during the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 .
Corporate Reporting Units - Total operating costs and expenses excluding
depreciation and amortization expense, increased by
A reconciliation of net loss attributable toCentury Casinos, Inc. shareholders to Adjusted EBITDA can be found in the "Non-US GAAP Measures - Adjusted EBITDA" discussion above.
Non-Operating Income (Expense)
Non-operating income (expense) was as follows:
For the three months For the nine months
ended September 30, % ended September 30, %
Amounts in
thousands 2022 2021 $ Change Change 2022 2021 $ Change Change
Interest Income $ 574 $ 164 $ 410 250.0% $ 699 $ 164 $ 535 326.2%
Interest Expense (15,924) (10,784) 5,140 47.7% (48,638) (31,994) 16,644 52.0%
Gain (Loss) on
Foreign Currency
Transactions, Cost
Recovery Income
and Other 409 (135) 544 403.0% 2,725 302 2,423 802.3%
Non-Operating
(Expense) Income $ (14,941) $ (10,755) $ 4,186 38.9% $ (45,214)$ (31,528) $ 13,686 43.4% Interest income
Interest income is directly related to interest earned on our cash reserves and the Acquisition Escrow.
Interest expense Interest expense is directly related to interest owed on our borrowings under our Goldman Credit Agreement, Macquarie Credit Agreement, our financing obligation with VICI PropCo, our CPL and CRM borrowings, our capital lease agreements and interest expense related to the CDR land lease. We wrote off approximately$7.3 million of deferred financing costs to interest expense in the nine months endedSeptember 30, 2022 in connection with the prepayment of the Macquarie Term Loan.
Gain (loss) on foreign currency transactions, cost recovery income and other
Cost recovery income of$1.9 million was received by CDR for the nine months endedSeptember 30, 2022 related to infrastructure built during the development of the Century Downs REC project. The distribution to CDR's non-controlling shareholders through non-controlling interest is part of a credit agreement between CRM and CDR. Cost recovery income of$0.7 million was received by CDR for the nine months endedSeptember 30, 2021 .
Taxes
Income tax expense is recorded relative to the jurisdictions that recognize book earnings. During the nine months endedSeptember 30, 2022 , we recognized income tax benefit of($8.1) million on pre-tax income of$8.6 million , representing an effective income tax rate of (94.1%), compared to income tax expense of$3.8 million on pre-tax income of$20.6 million , representing an effective income tax rate of 18.5% for the same period in 2021. For further discussion of our effective income tax rates and an analysis of our effective income tax rate compared to the US federal statutory income tax rate, see Note 8, "Income Taxes," to our condensed consolidated financial statements included in Part I, Item 1 of this report. ? 47
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LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive, and we rely heavily on the ability of our casinos to generate operating cash flow. We use the cash flows that we generate to maintain operations, fund reinvestment in existing properties for both refurbishment and expansion projects, repay third party debt, and pursue additional growth via new development and acquisition opportunities. When necessary and available, we supplement the cash flows generated by our operations with either cash on hand or funds provided by bank borrowings or other debt or equity financing activities.
Cash Flows - Summary
Our cash flows; cash, cash equivalents and restricted cash; and working capital
consisted of the following:
For the nine months
ended September 30,
Amounts in thousands 2022 2021
Net cash provided by operating activities $ 36,688 $ 48,681
Net cash used in investing activities (100,892)
(7,373)
Net cash provided by (used in) financing activities 158,443 (3,327)
Cash, cash equivalents and restricted cash (1)
$ 65,181 $ 69,506 (1)Cash, cash equivalents and restricted cash as ofSeptember 30, 2022 includes$100.1 million related to the Acquisition Escrow. (2)Working capital is defined as current assets, excluding restricted cash, minus current liabilities.
Operating Activities
Our cash flows from operations have historically been positive and sufficient to fund ordinary operations. Trends in our operating cash flows tend to follow trends in earnings from operations, excluding non-cash charges. Please refer to the condensed consolidated statements of cash flows in Part I, Item 1 of this Form 10-Q and to management's discussion of the results of operations above in this Item 2 for a discussion of earnings from operations.
Investing Activities
Net cash used in investing activities for the nine months endedSeptember 30, 2022 consisted of$95.0 million for the purchase of the 50% equity interest in Smooth Bourbon,$0.4 million for the purchase of a casino license inPoland ,$1.6 million for slot machine purchases,$0.2 million in gaming-related purchases,$0.1 million for outdoor pool and patio furniture and$0.1 million for hotel carpet inWest Virginia ,$0.9 million for our hotel remodel inCape Girardeau ,$1.3 million for our casino project inCaruthersville ,$1.9 million for our stand-alone hotel project inCaruthersville ,$1.5 million for slot machine purchases at ourMissouri properties,$0.4 million for slot machine purchases,$0.2 million in gaming-related purchases and$0.2 million in camera upgrades at ourColorado properties,$0.6 million for employee housing inCripple Creek ,$0.7 million in slot machine and table game purchases inPoland ,$0.2 million for carpet at Century Downs and$3.0 million in other fixed asset additions at our properties, offset by$6.3 million in proceeds from the sale of the land and building inCalgary ,$1.0 million in dividends from Smooth Bourbon and$0.1 million in proceeds from the disposition of assets. Net cash used in investing activities for the nine months endedSeptember 30, 2021 consisted of$0.6 million for slot machine purchases,$0.2 million in energy efficiency upgrades, and$0.7 million in gaming floor upgrades at ourWest Virginia property;$1.0 million for slot machine purchases,$0.4 million in other gaming equipment,$0.4 million in restaurant rebranding,$0.9 million in hotel renovations and$0.2 million in surveillance equipment at ourMissouri properties;$0.2 million in building and improvements,$0.1 million for slot machine purchases, and$0.6 million in server upgrades at ourColorado properties; and$2.1 million in other fixed asset additions at our properties and$0.1 million in working capital adjustments paid to the buyer ofCentury Casino Calgary , offset by less than$0.1 million in proceeds from theCentury Casino Calgary sale earn out and less than$0.1 million in proceeds from the sale of fixed assets. Financing Activities Net cash provided by financing activities for the nine months endedSeptember 30, 2022 consisted of$179.9 million in proceeds from borrowings net of principal payments and$0.3 million in proceeds from the exercise of stock options, offset by$18.9 million in payments of deferred financing costs,$0.4 million to repurchase shares to satisfy tax withholding related to our performance stock unit awards and$2.4 million in distributions to non-controlling interests in CDR and CPL. Net cash used in financing activities for the nine months endedSeptember 30, 2021 consisted of$2.9 million in principal payments on borrowings and a$0.7 million distribution to non-controlling interest in CDR, offset by$0.2 million in proceeds from the exercise of stock options. 48
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Borrowings and Repayments of Long-Term Debt and Lease Agreements
As ofSeptember 30, 2022 , our total debt under bank borrowings and other agreements net of$17.5 million related to deferred financing costs was$349.8 million , of which$344.4 million was long-term debt and$5.3 million was the current portion of long-term debt. The current portion relates to payments due within one year under our Goldman Credit Agreement and the UniCredit Term Loans. OnApril 1, 2022 , we entered into the Goldman Credit Agreement which provides for a$350.0 million term loan and a$30.0 million revolving line of credit. We drew the$350.0 million under the Goldman Term Loan onApril 1, 2022 and used the proceeds as well as approximately$29.3 million of cash on hand to fund the PropCo Acquisition, repay the$166.2 million outstanding on the Macquarie Credit Agreement, fund$100.0 million of Acquisition Escrow for the Nugget Acquisition and for related fees and expenses. For a description of our debt agreements, see Note 5, "Long-Term Debt" to our condensed consolidated financial statements included in Part I, Item 1 of this report. Net Debt was$268.0 million as ofSeptember 30, 2022 compared to$89.8 million as ofSeptember 30, 2021 . The increase in Net Debt was primarily due to a$167.3 million increase in long-term debt. For the definition and reconciliation of Net Debt to the most directly comparable US GAAP measure, see "Non-US GAAP Measures - Net Debt" above.
The following table lists the amount of remaining 2022 maturities of our debt:
Amounts in thousands
Century Downs
Goldman Credit Agreement (1) UniCredit Term Loans ?Land Lease Total
$ 875 $ 464 $ - $ 1,339
(1)The Term Loan under the Goldman Credit Agreement requires scheduled quarterly
payments of $875,000 , equal to 0.25% of the original aggregate principal amount
of the Term Loan, with the balance due at maturity.
The following table lists the amount of remaining 2022 payments due under our
operating and finance lease agreements and our
Amounts in thousands
Operating Leases Finance Leases
1,215 $ 49 $ 4,250 Common Stock Repurchase Program
SinceMarch 2000 , we have had a discretionary program to repurchase our outstanding common stock. The total amount remaining under the repurchase program was$14.7 million as ofSeptember 30, 2022 . We did not repurchase any common stock during the nine months endedSeptember 30, 2022 . The repurchase program has no set expiration or termination date.
Potential Sources of Liquidity and Short-Term Liquidity
Historically, our primary source of liquidity and capital resources has been cash flow from operations. As ofSeptember 30, 2022 , we had$99.3 million in cash and cash equivalents compared to$107.8 million in cash and cash equivalents atDecember 31, 2021 . We also have$100.1 million of restricted cash in the Acquisition Escrow to fund the purchase price for the OpCo Acquisition. When necessary and available, we supplement the cash flows generated by our operations with funds provided by bank borrowings or other debt or equity financing activities. As ofSeptember 30, 2022 , we had$30.0 million available on our Revolving Facility. In addition, we have generated cash from sales of existing casino operations and proceeds from the issuance of equity securities upon the exercise of stock options.
Impact of COVID-19
The duration and impact of the COVID-19 pandemic remains uncertain. We cannot
predict the negative impacts that COVID-19 will have on our consumer demand,
workforce, suppliers, contractors and other partners, and, whether future
closures will be required. While the severity and duration of such business
impacts cannot currently be estimated, the effects of COVID-19, governmental
health and safety requirements and any future closures are expected to have a
material impact on our business. We will continue to monitor our liquidity and
make reductions to marketing and operating expenditures, where possible, if
future government mandates or closures are required that would have an adverse
impact on us.
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Planned Projects, the Nugget Acquisition, the Rocky Gap Acquisition and Sources of Liquidity
Planned capital expenditures for the remainder of 2022 include approximately$1.7 million in gaming equipment, renovations to various properties and security system upgrades. We refurbished a hotel nearCentury Casino Caruthersville that opened onOctober 30, 2022 . As ofSeptember 30, 2022 , we have spent$2.7 million on this project and estimate an additional$1.0 million will be spent in the fourth quarter of 2022. We funded this project with cash on hand. We plan to move ourCentury Casino Caruthersville riverboat casino to a new land-based casino with a small hotel adjacent to and connected with the existing building. Construction began inOctober 2022 with completion expected in the second half of 2024. We estimate this project will cost$51.9 million and we plan to fund the cost of this project with a combination of financing and cash on hand. As ofSeptember 30, 2022 , we have spent approximately$2.1 million on this project and estimate$2.5 million of capital expenditures related to this project in the fourth quarter of 2022. We plan to build a hotel at ourCape Girardeau location. Planning, design and preparations for the project are substantially complete. Construction began inSeptember 2022 and is expected to be completed in the first half of 2024. We estimate this project will cost approximately$30.5 million and we plan to fund the project with cash on hand. As ofSeptember 30, 2022 , we have spent approximately$1.4 million on this project and estimate$2.9 million of capital expenditures related to this project in the fourth quarter of 2022. InFebruary 2022 , we entered into a definitive agreement to purchase (i) 50% of the membership interests in PropCo, and (ii) 100% of the membership interests of OpCo. OpCo owns and operates theNugget Casino Resort inSparks, Nevada , and PropCo owns the real property on which the casino is located. At the First Closing, onApril 1, 2022 , we purchased 50% of the membership interests in PropCo for approximately$95.0 million and PropCo entered into a lease with OpCo for an annual rent of$15.0 million . We used approximately$29.3 million of cash on hand in connection with the First Closing. Subject to approval from theNevada Gaming Commission , our purchase of 100% of the membership interests in OpCo for approximately$100.0 million (subject to certain adjustments) is expected to close within one year after the First Closing, at which point we will own the operating assets ofNugget Casino Resort and 50% of the membership interests in PropCo. We also have a five-year option to acquire the remaining 50% of the membership interests in PropCo for$105.0 million plus 2% per annum. As stated above, in connection with the Nugget Acquisition we have entered into the Goldman Credit Agreement for (i)$350.0 million in senior secured term loan debt financing to refinance our existing debt under the Macquarie Credit Agreement, fund the Nugget Acquisition, and to pay related expenses, and (ii) a$30.0 million senior secured revolving credit facility. The purchase price for the OpCo Acquisition will be paid from$100.0 million of proceeds of the Goldman Term Loan that were borrowed and deposited in the Acquisition Escrow on the First Closing date. Based on our current interest and Term Loan payment requirements under the Goldman Credit Agreement, we expect that our annual debt service payments will increase by$19.2 million compared to the year endedDecember 31, 2021 . OnAugust 24, 2022 , we entered into a definitive agreement with Lakes Maryland, Golden, and VICI PropCo, pursuant to which we agreed to acquire the operations ofRocky Gap for approximately$56.1 million subject to the conditions and terms set forth therein. Pursuant to a real estate purchase agreement, datedAugust 24, 2022 , by and between Evitts and an affiliate of VICI PropCo, VICI PropCo agreed to acquire the real estate assets relating toRocky Gap for approximately$203.9 million , subject to the conditions and terms set forth therein. In connection with the closing of this transaction, one of our subsidiaries and a subsidiary of VICI PropCo will enter into an amendment the Master Lease to (i) addRocky Gap to the Master Lease, (ii) provide for an initial annual rent forRocky Gap of approximately$15.5 million , and (iii) extend the initialMaster Lease term for 15 years from the date of the amendment (subject to the existing four five-year renewal options). We plan to fund the acquisition with cash on hand. We may be required to raise additional capital to address our liquidity and capital needs. We have a shelf registration statement with theSEC that became effective inJuly 2020 under which we may issue, from time to time, up to$100 million of common stock, preferred stock, debt securities and other securities. If necessary, we may seek to obtain further term loans, mortgages or lines of credit with commercial banks or other debt or equity financings to supplement our working capital and investing requirements. Our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. A financing transaction may not be available on terms acceptable to us, or at all, and a financing transaction may be dilutive to our current stockholders. The failure to raise the funds necessary to fund our debt service and rent obligations and finance our operations and other capital requirements could have a material and adverse effect on our business, financial condition and liquidity. 50
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In addition, we expect our US domestic cash resources will be sufficient to fund our US operating activities and cash commitments for investing and financing activities. While we currently do not have an intent nor foresee a need to repatriate funds, we could require more capital in the US than is generated by our US operations for operations, capital expenditures or significant discretionary activities such as acquisitions of businesses and share repurchases. If so, we could elect to repatriate earnings from foreign jurisdictions in the form of a cash dividend, which would generally be exempt from taxation with the exception of the adverse impact of withholding taxes. We also could elect to raise capital in the US through debt or equity issuances. We estimate that approximately$34.4 million of our total$99.3 million in cash and cash equivalents atSeptember 30, 2022 is held by our foreign subsidiaries and is not available to fund US operations unless repatriated.
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