Century Casinos Inc (CNTY) 2009 Q4 法說會逐字稿

Welcome to Century Casinos Q4 and year end 2009 earnings conference call. This call will be recorded. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session.

I would like to introduce your host for today's call Mr. Peter Hoetzinger. Mr. Hoetzinger, you may begin.

Thank you, Operator. And welcome everyone to our fourth quarter and year-end 2009 earnings conference call. Joining me on the call today are my Co-Ceo and Chairman of the Company Erwin Haitzmann, as well as Larry Hannappel, Senior VP and Chief Operating Officer North America, and Ray Sienko, our Chief Accounting Officer.

Before we begin, I need to remind you that in our remarks today we will be discussing forward-looking information which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. The Company undertakes to obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings and encourage you to review these filings.

In addition, throughout our call, we may refer to several non-GAAP financial measures, including but not limited to adjusted EBITDA. Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our new release or in the Q0-Q or 10-K filings, all of which are available in the investor section of our web site at www.CNTY.com.

I will now present, after a brief review of the full year '09, the results of the fourth quarter After 2008, in which we didn't have a single quarter with either revenue or EBITDA increase, 2009 started off in the right direction in January with the cities of Central City and Cripple Creek approving higher gaming limits, extended opening hours and additional games in Colorado. These new rules came into effect on July 2 and certainly had and still have a positive impact on gaming revenue at our Colorado casinos. But unfortunately that positive effect has been diluted due to poor economic conditions. In February, in an effort to further streamline our operations and concentrate on larger units we closed on the sale of our casino in Prague, Czech Republic with a small profit.

March saw the introduction of the Yuk Yuk's Comedy Club at our largest property, the Century Casino in Edmonton Canada. In May we opened a casino on on Mein Schiff, a joint cruise ship operation of the German company tour company TUI and Royal Caribbean Cruises. The casino is profitable and we look forward to their second vessel which is also part of our contract, going into operation next year.

One of the highlights of the year certainly was the conclusion of the sale of our South African casinos in June. In total we received $48 million, which, based on the casino's recent results, equaled around nine times EBITDA. Our South African investments, its operations and the sale of it were a great success for our Company, demonstrating our ability to choose liquidity in foreign markets, invest and develop with foresight, operate efficiently, and if the opportunity presents itself, sell at a very attractive price even in difficult economic times.

At the end of the year, in December, we announced the acquisition of the Silver Dollar Casino in Calgary, Canada. We closed the transaction only about a month later for a total consideration of $11.5 million, which we paid out of cash on hand. The Silver Dollar is a 93,000 square foot casino facility, located on seven acres of land in the city of Calgary. The casino includes 529 gaming machines, 16 table games, two restaurants, a bar and lounge area, a 5,000 square foot showroom an 18,000 square foot convention center and a 30-lane bowling alley.

When looking at the financial results of our operations the year ended well for us. Q4 '09 is the first quarter since the end of 2007 that showed an increase in revenues. And the 13% increase in adjusted EBITDA is also the biggest increase since '07. In the quarter, we generated net operating revenues of $12.1 million, up 4% from the same quarter a year-ago, and adjusted EBITDA increased, as mentioned, by 13% to $1.7 million.

Let's now discuss the results of our operations, property by property in local currency. Beginning with Colorado. Cripple creek and Central City and Black Hawk are the only three Colorado cities, exclusive of Indian gaming operations in southwestern Colorado, where casino gaming is legal. As of December 31 '09 there were 16 active casino licenses operating in Cripple Creek, six in Central City and 18 in Black Hawk. Revenue at our Womacks Casino in Cripple Creek, a property we have owned and operated since the mid '90s, was down 1%, EBITDA was down 15%. The reason for the small decline in revenue was the lower hold percentage during the quarter. Point in was actually up 4%, which is encouraging. The decrease in EBITDA is primarily due to an increase in payroll as the casino is now open 24 hours. The casino is debt-free, and small CapEx projects, such as new slot machines, some slot conversions and construction of a smoking patio area, will be done out of the property's own cash flow.

At our Century Casino and hotel in Central City, revenue for the quarter fell 4% to $3.6 million, but EBITDA increased 15% to $800,000. Marketing competition remains fierce as properties strive to develop stronger player loyalties. Ameristar, a competitor of ours in the Black Hawk, Central City market, opened a 536-room hotel with pool and spa facilities in which they invested $235 million. The opening of that property certainly had an adverse impact on our revenue. Going forward, we continue to focus on operating efficiencies through cost control. Also, this property is debt-free and the planned slot upgrades with new purchases and conversions, will be done out of cash flow. Overall, we expect revenues in Colorado to remain pretty much flat in Q1 due to on going economic conditions.

The revenue of our first property in Canada, the Century Casino & Hotel in Edmonton, was flat year-over-year, EBITDA was up 6%, and net earnings were up 17%. Halfway through the quarter, the major construction work on the main roads directly in front of our casino has finally been completed and the road opened with six new lanes, restoring and improving access and convenience for our customers. There has also been some work on the gaming floor, with a number of slot conversions, swaps and slot relocations that have been done in partnership with the Gaming Commission. 20 additional slots are being added to the floor this month, which will put our total number of gaming machines at that property to 687. We have also just installed a new players club loyalty program, providing an improved customer experience. Other small CapEx projects include enhancements to the exterior smoking patio, the new players club deck, as well as the carpeting and redecoration of the hotel lobby, all for a total of $200,000.

In Calgary, we are refurbishing and redecorating the exterior as well as most interior spaces of our newly acquired property. We are introducing our (inaudible) player's club loyalty program and will, as we do in Edmonton, focus heavily on the showroom and live entertainment to drive customers to the property and the casino. The first results are encouraging. We are happy with the developments and we continue to be optimistic about Edmonton, Calgary, and the Alberta gaming market as a whole.

The ship casinos saw revenues decline by 8% and EBITDA by 17%. Pretty much all due to weak results of one particular ship. The first quarter of this year started off very well with increases in revenues, EBITDA and net earnings. Both Oceania cruises and the joint venture between TUI and Royal Caribbean Cruises have announced to bring additional ships into service next year and we look forward to expanding in that segment.

Our equity investment in Casinos Poland, Ltd., of which we own one third, did not perform to our expectations. Revenues declined 9%, EBITDA 21%. Effective January 1, 2010, the gaming laws in Poland changed with both negative, but also potentially positive effects on us. On the one hand, the gaming tax rate was increased from 45% to 50%. And a new provision of the law now requires all casino licenses to go through a new licensing process once the license expires, which is open to everybody. While some industry observers believe that the 50 casinos, as long as they are not in default with regard to rules and regulations, will probably be relicensed. It is not for certain and casts a cloud over the future of all existing casinos in Poland. That is the main reason why we determined that our investment in Poland suffers a potential decline in value that could be other than temporary. As a result, in line with our conservative (inaudible) approach, we recorded an impairment of $9 million in (inaudible) of Casinos Poland. (inaudible) revenues declined 9% compared to the previous year. Compared to the previous quarter, revenues were up 10% in the fourth quarter. So all is not bad.

In addition, the potentially positive side of the new gaming law provides for the expiration, with no possibility for relicensing, of all gaming machines out of those casinos. This should mean that over the next six years more than 10,000 gaming machines that are currently operating in slot arcades and bars should fall away and disappear from the market. We are briefly analyzing the impact, short, mid and long term, the new gaming law will have on each of the eight properties in Casinos Poland and we will adapt the business plans accordingly. With regards to the ownership situation, our partners, the Polish Airlines LOT and the Polish Airport Company, who have wanted to sell their stakes for quite some time, are also busy analyzing the new situation. They still want to sell but valuation and future outlook are hard to assess right now, making it difficult for both the sellers as well as potential buyers.

Before starting the Q&A, let's take a brief look at the results of the corporate segment. Corporate G&A consists primarily of legal and accounting fees from being a public company. Corporate travel expenses, corporate payroll, the amortization of stock compensation expense, and other expenses not directly related to any of our individual properties. In Q4, corporate G&A was $200,000 higher than last year. During 2009, we incurred $200,000 in legal, accounting, and professional fees related to the acquisition of the Silver Dollar Casino in Calgary. Under previous accounting guidance, this use for Silver Dollar quickly capitalized to the investment but under new accounting guidance that must be expensed, and this is what we did. Our balance sheet currently shows, even after the recent Calgary acquisition, a net cash position net of all third party debt of approximately $5 million. The current book value per share is $4.54 which is approximately double our current share price. During Q4 '09, we repurchased 53,557 shares of our common stock at an average price of $2.43 per share. The total remaining authorization under the repurchase program was $14.9 million as of December 31 '09. And that repurchase program has no set expiration or termination date.

With that, I complete my presentation, and we can now start the Q&A session. Operator, please go ahead.

Thank you. (Operator Instructions). And I'm showing no questions at this time.

Okay. Would you like another one or two minutes?

(Operator Instructions).

Okay, Operator, why don't you turn back the call over to me again.

Okay please go ahead.

Thank you, thanks everybody for your interest in Century Casinos, and thank you for participating in the call. For a recording of the call please visit our financial results section on our Web site, at www.CNTY.com. Thank you.

This concludes today's program. You may disconnect at any time.