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 reported financial results for the second quarter ended June 30, 2017.
Rami Ramadan, TWC’s Chief Executive Officer, commented: "The quarter was marked by a healthy year-over-year increase of 10.1% in overall attendance in our casino segment, continued growth in our slot drop and stable live game drop. However, the hold percentage for the second quarter was below the same quarter last year. After adjusting for a normalized hold, casino segment revenues would have been approximately $0.5 million higher; thus, second quarter gaming revenue would have been down 1.8% compared to a gaming revenue decline of 6.1% as reported. Additionally, the casino segment was also adversely impacted by a new competitor which opened in early 2017 near one of TWC’s casino locations, and the implementation of the smoking ban in the Czech Republic on May 31, 2017."
The hotel segment showed continued improvement this quarter, beating the prior year’s second quarter in total revenue per available room (“TRevPAR”) by 20.6%, despite a 134.8% increase in available rooms, from 19,110 to 44,863 due to our recent hotel acquisitions. The hotel segment also posted occupancy growth of 11.9 percentage points for the second quarter versus the comparable quarter last year, and included the successful integration of recent acquisitions.
Mr. Ramadan remarked, "The multi‐phase renovations at TWC’s newly acquired hotels, Hotel Kranichhöhe, located in Much, Germany, and Hotel Donauwelle, located in Linz, Austria, are designed to boost their TRevPAR and occupancies; we anticipate these renovations to be completed in the third quarter 2017 and in the first quarter 2018, respectively. With these crucial steps in place, we believe the hotel segment is poised to continue to increase its contribution to the Company’s profitability."
Second Quarter 2017
Net income reached approximately $2.2 million, or $0.22 per diluted share, for the second quarter of 2017 versus $1.6 million, or $0.17 per diluted share, for the same prior year period, primarily due to a one-time gain from the advantageous purchase on March 1, 2017 of the Hotel Donauwelle in Linz, Austria. The gain represented the excess of the aggregate fair value of the purchased assets over the purchase price paid. This gain favorably impacted net income for the quarter by $803,000 or $0.08 per diluted share.
Total revenue increased by 12.4% to $15.0 million, compared with approximately $13.4 million for the same quarter of the prior year. The main reason for the revenue increase this quarter was the inclusion of a full three months of revenue from both Hotel Kranichhöhe and Hotel Donauwelle.
Earnings before interest, income taxes, depreciation and amortization (“EBITDA”), excluding the previously noted one-time gain, in the second quarter 2017 declined to approximately $2.6 million, versus $3.2 million in the prior year’s second quarter. The EBITDA decline primarily resulted from lower operating results in the casino segment, due to the increase in the 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.
2017 Year-to-date
Net income increased to approximately $2.8 million, or $0.28 per diluted share, for the six months ended June 30, 2017, versus $2.6 million, or $0.28 per diluted share, for the same prior year period. The net income increase was largely due to the gain on the purchase of the Hotel Donauwelle.
Total revenue increased by 11.8% to $28.6 million, compared with $25.6 million for the same prior year period. This result was primarily due to six months of revenue from both Hotel Kranichhöhe and the Hotel Donauwelle, neither of which we owned during the prior year’s six-month period.
TWC incurred foreign income taxes of $792,000, as compared with a foreign income tax expense of $1.3 million for the same period last year, due primarily to higher gaming taxes paid, which effectively reduced the total taxable income base. Despite lower casino segment revenue, gaming taxes for the six months ended June 30, 2017 increased to $6.7 million versus approximately $6.0 million in the comparable period in 2016.
Adjusted EBITDA was $4.1 million, versus approximately $5.2 million in the same period of the prior year for the reasons set forth in the Second Quarter Results analysis above. 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 June 30, 2017 was approximately $54.8 million compared with approximately $45.7 million at December 31, 2016, or $6.17 per share compared with $5.17 per share, respectively, an increase of 19.3%. The Company’s balance sheet at June 30, 2017 includes $10.9 million in cash and cash equivalents and net debt of $5.2 million, 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 June 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.
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 three previous years’ comparable quarterly 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 for sale.
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 six and three months ended June 30, 2017, please refer to our Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission.
Conference Call
The Company will discuss these results in a conference call today at 2:00 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/q2-2017.
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 | ||||||||||||||||||||||
| Six and Three Months Ended June 30, 2017 and 2016 | ||||||||||||||||||||||
| (in thousands, except for share and per share data) | ||||||||||||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||
| REVENUES: | ||||||||||||||||||||||
| Gaming | $ | 21,647 | $ | 22,244 | $ | 10,871 | $ | 11,574 | ||||||||||||||
| Rooms | 3,680 | 1,775 | 2,285 | 986 | ||||||||||||||||||
| Food and beverage | 2,817 | 1,374 | 1,633 | 744 | ||||||||||||||||||
| Other | 473 | 209 | 243 | 65 | ||||||||||||||||||
| 28,617 | 25,602 | 15,032 | 13,369 | |||||||||||||||||||
| COSTS AND EXPENSES: | ||||||||||||||||||||||
| Gaming | 12,648 | 11,956 | 6,397 | 6,180 | ||||||||||||||||||
| Rooms | 1,552 | 644 | 908 | 337 | ||||||||||||||||||
| Food and beverage | 2,365 | 1,209 | 1,329 | 627 | ||||||||||||||||||
| Other | 320 | 86 | 182 | 51 | ||||||||||||||||||
| Depreciation and amortization | 1,171 | 1,186 | 601 | 686 | ||||||||||||||||||
| Selling, general and administrative | 7,601 | 6,466 | 3,666 | 2,972 | ||||||||||||||||||
| 25,657 | 21,547 | 13,083 | 10,853 | |||||||||||||||||||
| INCOME FROM OPERATIONS | 2,960 | 4,055 | 1,949 | 2,516 | ||||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
| Interest expense | (192 | ) | (125 | ) | (109 | ) | (63 | ) | ||||||||||||||
| Other income (bargain purchase gain) | 803 | 803 | ||||||||||||||||||||
| 611 | (125 | ) | 694 | (63 | ) | |||||||||||||||||
| INCOME BEFORE INCOME TAX EXPENSE | 3,571 | 3,930 | 2,643 | 2,453 | ||||||||||||||||||
| INCOME TAX EXPENSE | (792 | ) | (1,316 | ) | (458 | ) | (845 | ) | ||||||||||||||
| NET INCOME | 2,779 | 2,614 | 2,185 | 1,608 | ||||||||||||||||||
| Other comprehensive income (loss), foreign currency | ||||||||||||||||||||||
| translation adjustments | 5,450 | 680 | 4,801 | (1,182 | ) | |||||||||||||||||
| COMPREHENSIVE INCOME | $ | 8,229 | $ | 3,294 | $ | 6,986 | $ | 426 | ||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||||
| Basic | 8,869,204 | 8,829,011 | 8,879,011 | 8,829,011 | ||||||||||||||||||
| Diluted | 9,898,040 | 9,449,861 | 9,902,071 | 9,453,709 | ||||||||||||||||||
| EARNINGS PER COMMON SHARE: | ||||||||||||||||||||||
| Basic | $ | 0.31 | $ | 0.30 | $ | 0.25 | $ | 0.18 | ||||||||||||||
| Diluted | $ | 0.28 | $ | 0.28 | $ | 0.22 | $ | 0.17 | ||||||||||||||
| TRANS WORLD CORPORATION AND SUBSIDIARIES | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| June 30, 2017 and December 31, 2016 | ||||||
| (in thousands, except for share data) | ||||||
| ASSETS | ||||||
| June 30, 2017 | December 31, 2016 | |||||
| CURRENT ASSETS: | (Unaudited) | |||||
| Cash and cash equivalents | $ | 10,946 | $ | 12,868 | ||
| Prepaid expenses | 1,081 | 227 | ||||
| Loan receivable | 4,215 | |||||
| Other current assets | 1,355 | 853 | ||||
| Total current assets | 13,382 | 18,163 | ||||
| PROPERTY AND EQUIPMENT, net | 57,790 | 41,524 | ||||
| OTHER ASSETS: | ||||||
| Goodwill | 5,425 | 4,857 | ||||
| Deferred tax assets | 110 | 99 | ||||
| Deposits and other assets | 3,837 | 1,461 | ||||
| Total other assets | 9,372 | 6,417 | ||||
| TOTAL ASSETS | $ | 80,544 | $ | 66,104 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Long-term debt, current maturities | $ | 1,370 | $ | 832 | ||
| Contractual land lease, current portion | 211 | |||||
| Accounts payable | 1,022 | 1,169 | ||||
| Czech gaming tax accrual | 3,550 | 3,305 | ||||
| Foreign income tax accrual | 956 | |||||
| Accrued expenses and other current liabilities | 2,088 | 3,540 | ||||
| Total current liabilities | 8,241 | 9,802 | ||||
| LONG-TERM LIABILITIES: | ||||||
| Long-term debt, less current maturities | 14,780 | 10,646 | ||||
| Contractual land lease, less current portion | 2,762 | |||||
| Total long-term liabilities | 17,542 | 10,646 | ||||
| COMMITMENTS AND CONTINGENCIES | ||||||
| STOCKHOLDERS' EQUITY: | ||||||
| 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 | 9 | 9 | ||||
| Additional paid-in capital | 55,146 | 54,270 | ||||
| Accumulated other comprehensive income (loss) | 449 | (5,001) | ||||
| Accumulated deficit | (843) | (3,622) | ||||
| Total stockholders' equity | 54,761 | 45,656 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 80,544 | $ | 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 bargain purchase gain. 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 | ||||||||||||
| Six and Three Months Ended June 30, 2017 and 2016 | ||||||||||||
| (in thousands) | ||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||
| NET INCOME | $ | 2,779 | $ | 2,614 | $ | 2,185 | $ | 1,608 | ||||
| Add back: Interest expense | 192 | 125 | 109 | 63 | ||||||||
| Less: Gain from bargain purchase | (803) | (803) | ||||||||||
| Add back: Foreign income taxes | 792 | 1,316 | 458 | 845 | ||||||||
| Add back: Depreciation and amortization expense | 1,171 | 1,186 | 601 | 686 | ||||||||
| Adjusted EBITDA | $ | 4,131 | $ | 5,241 | $ | 2,550 | $ | 3,202 | ||||
