Century Casinos, Inc. Announces Fourth Quarter 2016 Results

COLORADO SPRINGS, Colo., March 10, 2017 /PRNewswire/ -- Century Casinos, Inc. (NASDAQ Capital Market®: CNTY) today announced its financial results for the three months and year ended December 31, 2016.

2016 Highlights*

• Net operating revenue was $139.2 million, an increase of 4% from the year ended December 31, 2015.**
• Earnings from operations were $16.2 million, an increase of 2% from the year ended December 31, 2015.**
• Net earnings attributable to Century Casinos, Inc. shareholders were $9.2 million, a decrease of 20% from the year ended December 31, 2015.**
• Adjusted EBITDA*** was $25.8 million, an increase of 13% from the year ended December 31, 2015.**
• Earnings per share were $0.38.
• Book value per share**** at December 31, 2016 was $5.41.

Fourth Quarter 2016 Highlights*

• Net operating revenue was $36.3 million, an increase of 14% from the three months ended December 31, 2015.
• Earnings from operations were $3.7 million, an increase of 109% from the three months ended December 31, 2015.
• Net earnings attributable to Century Casinos, Inc. Shareholders were $2.8 million, an increase of 695% from the three months ended December 31, 2015.
• Adjusted EBITDA** was $6.3 million, an increase of 40% from the three months ended December 31, 2015.
• Earnings per share were $0.12.  

* Amounts presented are rounded. As such, rounding differences could occur in period over period changes and percentages reported.
** See discussion of a correction of 2015 operating results in Supplemental Information below.
*** Adjusted EBITDA and Adjusted EBITDA Margin are Non-GAAP financial measures. See discussion and reconciliation of Non-GAAP financial measures in Supplemental Information below.
**** The Company defines book value per share as total Century Casinos, Inc. shareholders' equity divided by outstanding common shares.

The decrease in net earnings attributable to Century Casinos, Inc. shareholders for the year ended December 31, 2016 primarily related to $4.0 million paid to the Company in the second quarter of 2015 by Norwegian Cruise Line Holdings ("Norwegian") for the termination of the Company's concession agreements with subsidiaries of Norwegian. The $4.0 million was recorded on the Company's consolidated statement of earnings in the second quarter of 2015 under operating revenue net of $0.6 million related to assets that were sold to Norwegian as part of the termination agreement.

In October 2016, the Company's subsidiary, Century Casino St. Albert Inc., acquired 100% of the issued and outstanding shares and related land of entities operating the Apex Casino in suburban Edmonton, Alberta, Canada. Century Casino St. Albert ("CSA"), formerly Apex Casino, is a 34,500 square foot casino facility located on approximately six acres of land that includes 381 slot machines, 12 video lottery terminals, 11 live table games, a restaurant, a bar, a lounge and a banquet facility that can accommodate up to 175 guests. CSA contributed a total of $2.0 million in net operating revenue and $0.3 million in net earnings during the quarter ended December 31, 2016.

In June 2016, the Company began operating the ship-based casinos onboard the Mein Schiff 5, a new 2,500 passenger cruise ship, and the TUI Discovery, a 2,067 passenger cruise ship. Under an agreement with Diamond Cruise International Co., Ltd., the Company began operating the ship-based casino onboard Glory Sea, a 1,200 passenger cruise ship, in July 2016. Glory Sea operates in the Chinese cruise market with four-day trips between China, South Korea and Japan. The Glory Sea casino has 50 slot machines and 17 table games. Under an amended concession agreement with TUI Cruises, the Company also plans to operate the ship-based casino onboard Mein Schiff 6, a new 2,500 passenger cruise ship that is expected to begin operations in the third quarter of 2017.

In September 2016, the Company was selected as the successful applicant by Horse Racing Alberta to own, build and operate a horse racing facility in the Edmonton market area, which the Company will operate as Century Mile. Century Mile will be a one-mile horse racetrack and multi-level racing and entertainment center, which will include a gaming floor with slot machines as well as food and beverage outlets. The proposed location is on Edmonton International Airport land and close to the city of Leduc, just south of Edmonton and positioned off Queen Elizabeth II Highway. The Company estimates that the project will cost approximately CAD 50.0 million and construction will take approximately 15 months to complete. Commencement of construction of this project is subject to, among other things, the Company's obtaining financing and receipt of further regulatory and governmental approvals, including but not limited to approval by the Alberta Gaming and Liquor Commission.

The Company is also working to obtain financing to convert and expand the historic Palace Hotel in Cripple Creek, Colorado. The restoration will include adding 32 hotel rooms, an atrium, a coffee shop and fitness room to the property. The Company estimates the project will cost approximately $6.5 million and be completed in early 2018. Commencement of construction of this project is subject to the Company's obtaining financing.

The consolidated results for the three months and year ended December 31, 2016 and 2015 are as follows:

"2016 was a tremendous year for Century Casinos with net operating revenue and Adjusted EBITDA reaching all-time record levels. The year ended with a strong fourth quarter, with all major operating regions posting solid increases in net operating revenue and Adjusted EBITDA compared to the fourth quarter of 2015: in local currencies, Canada increased 8% and 43%, the United States increased 11% and 38% and Poland increased 23% and 52%, respectively," Erwin Haitzmann and Peter Hoetzinger, Co Chief Executive Officers of Century Casinos, said. "The refurbishment of the VIP rooms at Century Casino & Hotel Edmonton, the acquisition of Century Casino St. Albert and the addition of three ship-based casinos have already generated positive results and will help us grow further," they continued.

Consolidated Results*

The table below shows the Company's operating segments that are included in each of the Company's reportable segments as of December 31, 2016:

The Company's net operating revenue increased by $4.3 million, or 14%, and by $5.5 million, or 4%, for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015. Following is a summary of the changes in net operating revenue by segment for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015:

The Company's earnings from operations increased by $1.9 million, or 109%, and by $0.4 million, or 2%, for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015.  Following is a summary of the changes in earnings from operations by segment for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015:

Net earnings (loss) attributable to Century Casinos, Inc. shareholders increased by $2.4 million, or 695%, and decreased by ($2.3) million, or (20%), for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015. Following is a summary of the changes in net earnings (loss) attributable to Century Casinos, Inc. shareholders by segment for the three months and year ended December 31, 2016, compared to the three months and year ended December 31, 2015:

Items deducted from or added to earnings from operations to arrive at net earnings (loss) attributable to Century Casinos, Inc. shareholders include interest income, interest expense, gains (losses) on foreign currency transactions and other, income tax expense and non-controlling interests.

Segment Results (in thousands)*

The following are segment results for net operating revenue, earnings from operations, net earnings (loss) attributable to Century Casinos, Inc. shareholders and Adjusted EBITDA**.

* Amounts presented are rounded. As such, rounding differences could occur in period over period changes and percentages reported.
*** Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP financial measures. See discussion and reconciliation of Non-GAAP financial measures in Supplemental Information below.

Balance Sheet and Liquidity

As of December 31, 2016, the Company had $38.8 million in cash and cash equivalents and $55.6 million in outstanding debt on its balance sheet compared to $29.4 million in cash and cash equivalents and $36.5 million in outstanding debt at December 31, 2015. The $55.6 million in outstanding debt as of December 31, 2016 includes $40.5 million related to the Company's Bank of Montreal credit agreement, $0.8 million related to capital leases for Century Resorts Alberta, CSA and Century Downs Racetrack and Casino ("CDR"), $14.5 million related to a long-term land lease for CDR and $0.2 million related to Casinos Poland, Ltd., net of $0.4 million in deferred financing costs. The increase in outstanding debt related primarily to debt incurred in connection with the purchase of the Apex Casino.

Conference Call Information

Today the Company will post a copy of its annual report on Form 10-K filed with the SEC for the year ended December 31, 2016 on its website at http://corporate.cnty.com/investor-relations/sec-filings. The Company will also post a presentation on the fourth quarter results on its website at http://corporate.cnty.com/investor-relations/presentations-and-interviews.

Century Casinos will host its fourth quarter 2016 earnings conference call today at 8:00 am MST; 4:00 pm CET, respectively. U.S. domestic participants should dial 1-844-244-9160. For all international participants, please use 330-931-4670 to dial-in. Participants may listen to the call live at https://centurycasinos.adobeconnect.com/earningsrelease or obtain a recording of the call on the Company's website until March 31, 2017 at http://corporate.cnty.com/investor-relations/sec-filings.

The Company erroneously recognized pari-mutuel revenue totaling $0.7 million in its statement of earnings for the year ended December 31, 2015 and a corresponding account receivable in the same amount on its balance sheet as of December 31, 2015. This error also affected the Company's taxes payable and specific components of equity as of December 31, 2015 and its income tax provision, net earnings attributable to non-controlling interests and consolidated statement of cash flows for the year then ended.

The prior period amounts within the Company's consolidated financial statements have been revised to reflect the correct balances in the Company's Annual Report on Form 10-K filed today. Information in this release also reflects these changes. The information below presents the impact of these corrections on the Company's 2015 consolidated balance sheet and consolidated statement of income (loss) as previously reported in the Company's consolidated financial statements.

*  The impact of foreign exchange rates is highly variable and difficult to predict.  The Company uses a Constant Currency basis to show the impact from foreign exchange rates on current period revenue compared to prior period revenue using the prior period's foreign exchange rates. In order to properly understand the underlying business trends and performance of the Company's ongoing operations, management believes that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from the Company's net operating revenue, earnings from operations, net earnings (loss) attributable to Century Casinos, Inc. shareholders and Adjusted EBITDA. Constant currency results are calculated by dividing the current quarter or year to date local currency segment results by the prior year's average exchange rate for the quarter or year and comparing them to actual U.S. dollar results for the prior quarter or year. The prior year's average exchange rate is reported in Item 1 of the Company's Annual Report on Form 10-K. The average exchange rates for the three months ended December 31, 2016 and 2015 are presented below.

**  The Company defines Adjusted EBITDA as net earnings (loss) attributable to Century 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, (gain) loss on disposition of fixed assets, discontinued operations, (gain) loss on foreign currency transactions and other, gain on business combination and certain other one-time items. 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) and Adjusted EBITDA reported for each segment. 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 accounting principles generally accepted in the United States of America ("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 compare the relative operating performance of separate operating units 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. Adjusted EBITDA is used by the Company's lending institution to gauge operating performance. The Company's 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. Please see the reconciliation of Adjusted EBITDA to net earnings (loss) attributable to Century Casinos, Inc. shareholders above.

*** The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by net operating revenue. Adjusted EBITDA margin is a non-GAAP measure. Management uses this margin as one of several measures to evaluate the efficiency of the Company's casino operations.

**** The table below presents the Company's operating results and constant currency* results for the year ended December 31, 2016 compared to the year ended December 31, 2015 without the impact of the $3.4 million in earnings received from the termination agreement with Norwegian (the "Termination Agreement") in the second quarter of 2015. Earnings from the Termination Agreement did not impact Adjusted EBITDA**.