NEW YORK--(BUSINESS WIRE)--Trans World Corporation (“TWC” or the “Company”) (OTCQB:TWOC), a premier owner and operator of casinos and hotels in Europe, today announced its financial results for the third quarter ended September 30, 2017.
Rami Ramadan, TWC’s Chief Executive Officer, commented: “The quarter was negatively impacted by a combination of factors that resulted in net income per diluted share of $0.01, for the third quarter of 2017 versus net income per diluted share of $0.20, for the same quarter a year ago. The contributing factors were: (i) the implementation in August 2017 of a new casino management system (“CMS”) at all of our casinos, as required for all casino companies in the Czech Republic by the recently enacted 2017 Gambling Act, which now requires all casino customers to use a player loyalty card to track all gaming activities; (ii) the implementation in July 2017 of the European Union (“EU”)-directed, Czech government-mandated Anti-Money Laundering (“AML”) registration forms; (iii) a significant decrease of 4.9 percentage points (“ppts”) in consolidated hold percentage versus the same prior year’s quarter and a decrease of 5.4 ppts versus the Company’s five-year average of historical hold percentage; (iv) the impact of a new competitor for one of our larger casinos; and (v) the negative impact of an in-door smoking ban that became effective on May 31, 2017.”
Mr. Ramadan continued, “Because we are in the process of applying for the renewal of our gaming licenses, we instituted these changes proactively and believe that early compliance with these legal mandates will help expedite the government approval process. However, these new regulations created a different casino experience/environment for our frequent and new customers. Many of our guests were initially not accustomed to the changes and as a result, reduced their visitation and play during this quarter. Furthermore, because TWC was the first casino operator to implement the Czech government and EU mandates, our guests were experiencing this new environment for the first time at TWC’s facilities. Consequently, our casino attendance and business volume were disproportionately and negatively impacted during the third quarter, with live game attendance decreasing by 22.5%, contributing to a 27.4% decline in total gaming revenue, when compared to the prior year’s comparable quarter. By the end of the quarter, our guest visit numbers have stabilized as our players become acclimated to this new casino experience.”
TWC’s hotel segment was not affected by the regulations and showed significant continued improvement this quarter, beating the prior year’s third quarter in total revenue per available room (“TRevPAR”) by 40.8%, despite a 116.8% increase in available rooms, from 22,560 to 41,880 resulting from its two recent hotel acquisitions and their subsequent room and common area renovations. The hotel segment also posted occupancy growth of 21.0 ppts for the third quarter versus the comparable quarter last year, while integrating the new hotels into the Trans World Hotels brand.
Mr. Ramadan remarked, “The multi‐phase renovations at TWC’s two newest hotels, Hotel Kranichhöhe, located in Much, Germany, and Hotel Donauwelle, located in Linz, Austria, are designed to boost their TRevPAR and occupancies. We anticipate that the renovations at Hotel Donauwelle will be completed in the first quarter of 2018 and Hotel Kranichhöhe’s renovations will be completed in the summer of 2018. In addition to these enhancements, we are also rolling out a new property management system (“PMS”) and integrated yield management module, used to maximize revenue per available room, to all of our hotels. The system installation for Hotel Donauwelle was completed in October 2017, and the remaining installations are expected to be completed by the early part of the second quarter of 2018. With these crucial enhancements, we believe the hotels will be more effective in coordinating operational functions of front office, sales and planning, reporting, among other benefits, and to help maximize business.”
Third Quarter 2017
As a result of the above negative factors impacting our casino segment, TWC earned net income of $145,000, or $0.01 per diluted share, for the third quarter of 2017 versus $1.9 million, or $0.20 per diluted share, for the same prior year period.
Gaming revenue was down 27.4%, while rooms and food and beverage (“F&B”) revenues were up 150.2% and 130.1%, respectively, over the prior year’s quarter, due in large part to the inclusion of a full three-months of revenue from the two newly acquired hotels. Nevertheless, the hotel segment revenue was insufficient to offset the revenue decline of the casino segment. Thus, total revenue decreased by 4.2% to $12.6 million, compared with approximately $13.2 million for the same quarter of the prior year.
Earnings before interest, income taxes, depreciation and amortization (“EBITDA”) in the third quarter 2017 declined to approximately $879,000, versus $3.1 million in the prior year’s third quarter. The EBITDA decline primarily resulted from lower operating results in the casino segment, due to the factors highlighted above and to the impact of the higher slot gaming tax (28% to 35%) that became effective on January 1, 2017. A table reconciling adjusted EBITDA, a non-U.S. GAAP (United States Generally Accepted Accounting Principles) financial measure, to the appropriate GAAP measure is included with the Company’s financial information below.
Net income decreased to $2.9 million, or $0.30 per diluted share, for the nine months ended September 30, 2017, versus $4.5 million, or $0.48 per diluted share, for the same prior year period.
Total revenue increased by 6.3% to $41.2 million, compared with approximately $38.8 million for the same prior year period. This result was primarily due to nine months of revenue from both Hotel Kranichhöhe and the Hotel Donauwelle, neither of which TWC owned during the prior year’s comparable period, as well revenue improvements for Hotel Columbus and Hotel Auefeld, which posted 5.1% and 12.7%, year-over-year increase, respectively.
TWC incurred foreign income taxes of $850,000, as compared with a foreign income tax expense of approximately $2.0 million for the same period last year, due primarily to lower casino earnings, which effectively reduced the total taxable income base. Despite lower casino segment revenue, gaming taxes for the nine months ended September 30, 2017 increased to approximately $9.2 million, representing 31.5% of gambling revenue, versus approximately $9.0 million, representing 27.5% of gambling revenue in the comparable period in 2016, as a result of the increase of the gaming tax rate on slot revenue from 28.0% to 35.0% in 2017.
Excluding the one-time gain from the advantageous purchase on March 1, 2017 of the Hotel Donauwelle in Linz, Austria, which represented the excess of the aggregate fair value of the purchased assets over the purchase price paid, adjusted EBITDA was $5.0 million, versus approximately $8.4 million for the same prior year period due primarily to decreased revenue during the period. A table reconciling adjusted EBITDA, a non-GAAP financial measure, to the appropriate GAAP measure is included with the Company’s financial information below.
Balance Sheet Highlights
The Company’s stockholders’ equity as of September 30, 2017 was approximately $57.2 million compared with approximately $45.7 million at December 31, 2016, or $6.45 per share compared with $5.17 per share, respectively, an increase of 24.8%. The Company’s balance sheet at September 30, 2017 includes approximately $8.6 million in cash and cash equivalents and net debt of approximately $7.8 million on $82.2 million in total assets, resulting in minimal leverage levels.
Non-U.S. GAAP Financial Measures
This press release utilizes EBITDA to express certain financial information about the results of our operations for the quarter ended September 30, 2017. EBITDA is a non-U.S. GAAP financial measure. Our financial statements are prepared in accordance with U.S. GAAP. Management believes that this non-U.S. GAAP financial measure reflects the results of our operations or financial condition in other ways that are common to the gambling and hotel industries, and that are commonly used by lending institutions and investors in evaluating our performance in comparison to our competitors and the market in general. This belief is based on conversations and meetings our management has had with our lenders and investors where the substance of these talks has typically centered on historical and prospective EBITDA measurements. Based on management’s observations, even though EBITDA measurement is not U.S. GAAP, it does enhance investors’ understanding of the Company’s business and its results of operations.
In addition, management presents, and uses for its own analysis, EBITDA as a supplemental disclosure metric because management believes that it is widely used in the gambling and hotel industries to measure performance and serves as the basis for valuation of our Company in the market. EBITDA measures our ability to meet our working capital requirements and debt obligations, make capital expenditures and perform analyses on possible acquisitions that may include the need for additional debt service requirements.
In short, this performance measurement gives an analytic view of the Company’s operational earnings and reflects our earnings on a cash-basis, excluding the impact of our debt obligations, taxes and non-cash depreciation and amortization.
In addition to EBITDA, management may use other non-U.S. GAAP financial measures to describe our business in press releases, on earning calls and in meetings with stockholders and investors. The following defines the other non-U.S. GAAP financial measures that may be used in TWC’s press releases, earnings calls or meetings:
- “Drop per head” is the per guest average dollar value of gaming chips purchased.
- “Live game attendance” is the number of patrons who played at our table games during a particular period.
- “Live games revenue” is the total dollar value of revenues generated by our table games.
- “Slot revenue” is the total dollar value of revenues generated by our slot machines.
- “Slot attendance” is the number of patrons who played our slot machines during a particular period.
- “Win percentage” or “hold percentage” is the ratio of net win (the difference between live game wagers and the amount paid out to patrons) to total drop (the dollar value of gaming chips purchased in a given period).
- “Normalized hold” is the average of five previous years’ annual hold percentage.
- “Total revenue per available room” (“TRevPAR”) is the total hotel revenue per available rooms for sale.
- “Occupancy rate” is the ratio of number of rooms sold to available rooms.
The Company has presented the table below to reconcile EBITDA, a non-U.S. GAAP financial measure, to its most directly comparable U.S. GAAP measure.
For further information regarding our results of operations and financial condition for the nine and three months ended September 30, 2017, please refer to our Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on November 14, 2017.
The Company will discuss these results in a conference call today at 3:00 PM ET.
|The dial-in numbers are:|
|Live Participant Dial-in (Toll Free):||877-407-9037|
|Live Participant Dial-in (International):||201-493-6738|
The conference call will also be webcast live via the Investor Relations section of Trans World’s website at www.transwc.com, or by clicking the following link: http://transwc.equisolvewebcast.com/q3-2017.
About Trans World Corporation
Trans World Corporation, founded in 1993, is a publicly-traded, Nevada corporation, headquartered in the U.S., with all of its gaming and hotel operations in Europe. Additional information about TWC can be found on the Company’s website at www.transwc.com.
The press release herein contains certain forward-looking statements and data regarding forecasts, operating trends and future results of operations. For this purpose, any statements and data contained herein that are not historical fact may be deemed to be forward-looking data. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipates,” “estimates,” or “continue” or comparable terminology or the negative thereof are intended to identify certain forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, both known and unknown, and actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such risks include but are not limited to, our dependence on our current management, the regulatory environment in which our operations reside, uncertainties over the development and success of our current and future gaming and hotel operations, general global macroeconomic and local economic conditions, extreme weather, and changes in tax or gaming laws or regulations. Additional information concerning potential factors that could affect the Company’s financial results, including other risks and uncertainties, is disclosed in our periodic reports filed with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2016. The Company undertakes no obligation (and expressly disclaims any such obligation) to publicly update or revise any forward-looking statements or data whether as a result of new information, future events or otherwise.
|CONSOLIDATED STATEMENTS OF INCOME|
|AND COMPREHENSIVE INCOME|
|Nine and Three Months Ended September 30, 2017 and 2016|
|(in thousands, except for share and per share data)|
|Nine Months Ended September 30,||Three Months Ended September 30,|
|Food and beverage||4,352||2,041||1,535||667|
|COSTS AND EXPENSES:|
|Food and beverage||3,719||1,848||1,354||640|
|Depreciation and amortization||1,733||1,690||562||504|
|Selling, general and administrative||11,228||9,495||3,627||3,029|
|INCOME FROM OPERATIONS||3,277||6,679||317||2,624|
|OTHER INCOME (EXPENSE):|
|Other income (bargain purchase gain)||803|
|INCOME BEFORE INCOME TAX EXPENSE||3,774||6,494||203||2,564|
|INCOME TAX EXPENSE||(850||)||(1,969||)||(58||)||(653||)|
Other comprehensive income, foreign currency translation adjustments
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:|
|EARNINGS PER COMMON SHARE:|
TRANS WORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2017 and December 31, 2016
(in thousands, except for share data)
|September 30, 2017||December 31, 2016|
|Cash and cash equivalents||$||8,587||$||12,868|
|Other current assets||1,390||853|
|Total current assets||11,725||18,163|
|PROPERTY AND EQUIPMENT, net||60,794||41,524|
|Deferred tax assets||115||99|
|Deposits and other assets||3,953||1,461|
|Total other assets||9,727||6,417|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Long-term debt, current maturities||$||1,423||$||832|
|Unfavorable lease liability, current portion||239|
|Czech gaming tax accrual||2,495||3,305|
|Foreign income tax accrual||956|
|Accrued expenses and other current liabilities||1,867||3,540|
|Total current liabilities||7,245||9,802|
|Long-term debt, less current maturities||14,930||10,646|
|Unfavorable lease liability, less current portion||2,863|
|Total long-term liabilities||17,793||10,646|
|COMMITMENTS AND CONTINGENCIES|
Preferred stock, $0.001 par value, 4,000,000 shares authorized, none issued
Common stock, $0.001 par value, 20,000,000 shares authorized, 8,879,011 shares in 2017 and 8,854,011 in 2016, issued and outstanding
|Additional paid-in capital||55,229||54,270|
|Accumulated other comprehensive income (loss)||2,668||(5,001||)|
|Total stockholders' equity||57,208||45,656|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||82,246||$||66,104|
Reconciliation of Non-U.S. GAAP Measures to U.S. GAAP
The table below reconciles adjusted EBITDA, a non-U.S. GAAP (United States Generally Accepted Accounting Principles) financial measure, to its most directly comparable U.S. GAAP measure. The adjusted EBITDA performance measurement gives an analytic view of the Company’s operational earnings on a cash-basis, excluding the impact of debt obligations, income taxes and (non-cash) depreciation and amortization and one-time gain from bargain purchase. The Company believes that this non-U.S. GAAP financial measure provides useful information to its investors as well as to others who might be interested in purchasing shares of TWC’s common stock. This belief is based on conversations and meetings TWC’s management has had with its investors and lenders. Based on management’s observations, it appears that, even though this measurement is not “U.S. GAAP,” it does enhance investors’ understanding of the Company’s business.
|TRANS WORLD CORPORATION AND SUBSIDIARIES|
|ADJUSTED EBITDA RECONCILIATION|
|Nine and Three Months Ended September 30, 2017 and 2016|
Nine Months Ended
Three Months Ended
|Add back: Interest expense||306||185||114||60|
|Less: Gain from bargain purchase||(803||)|
|Add back: Foreign income taxes||850||1,969||58||653|
|Add back: Depreciation and amortization expense||1,733||1,690||562||504|