Entertainment Gaming Asia Inc. (NYSE Amex: EGT) (“Entertainment
Gaming Asia” or “the Company”), a leading provider of electronic
gaming machines (EGMs) on a participation basis to the Pan-Asian
gaming industry, today reported operating results for the fourth
quarter and fiscal year ended December 31, 2011 and reviewed recent
corporate progress.
Highlights:
- 2011 fiscal year produced
record-breaking financial performance with adjusted EBITDA
(earnings before interest, taxes, depreciation, amortization and
non-cash charges) of $11.7 million, an increase of 41% from the
2010 fiscal year, and net income of $642,000, marking the first
time in the Company’s history to achieve an annual net profit.
- Total net revenue from gaming
operations was $4.3 million for the fourth quarter of 2011, an
increase of 12% from the fourth quarter of 2010 and $17.4 million
for the 2011 fiscal year, an increase of 22% from the 2010 fiscal
year.
- Average consolidated win per unit per
day (WUD) was $136 for the fourth quarter of 2011, an increase of
14% from the fourth quarter of 2010 and $140 for the 2011 fiscal
year, an increase of 20% from the 2010 fiscal year.
- As of December 31, 2011, total
installed EGM seats in operation were 1,477 in seven venues,
comprised of five venues in the Philippines with a total of 758
seats and two venues in Cambodia with a total of 719 seats.
- As part of its annual impairment
review, the Company recorded a $1.4 million non-cash impairment
charge as of December 31, 2011 associated with the write-down of
certain gaming machines and systems in inventory as well as
infrastructure costs related to the closure of one venue in the
Philippines in April 2011.
- Cash balance was $12.8 million as of
December 31, 2011 compared to $10.2 million as of December 31,
2010.
- Total debt was $6.2 million as of
December 31, 2011 compared to $9.2 million as of December 31,
2010.
- The Company intends to expand its
gaming machine participation and management operations in Cambodia
with the placement of an initial 200 EGM seats in Sokha Hotels and
Resort’s new five-star Thansur Bokor Resort and Casino expected to
open in April 2012.
- The Company is making progress on the
development of its casino projects in the Pailin and Kampot
Provinces of Cambodia with Dreamworld Casino Pailin expected to
open on May 9, 2012 and Dreamworld Casino Kampot expected to open
in the third quarter of 2012.
Clarence Chung, Chairman and Chief Executive Officer of
Entertainment Gaming Asia, commented, “2011 was a milestone year
for the Company. It marks the third consecutive year of earnings
growth since we began to implement our restructuring efforts and
the achievement of record-breaking financial performance. For the
2011 fiscal year, we generated nearly $12 million in adjusted
EBITDA, demonstrating dramatic improvement from essentially
breakeven results just three years ago, and recorded an annual net
profit for the first time in the Company’s history. This enhanced
ability to generate cash flow enabled us to increase our cash
position for the year while still investing in our strategic growth
plans and strengthening our balance sheet. We enter 2012 a stronger
Company with a solid foundation from which to invest in our core
participation business and to expand our gaming operations to
include the development and operation of our own casinos in the
Indo-China region.”
Q4 and 2011 Fiscal Year Financial Review
Beginning in the fiscal year 2011, the Company reclassified its
reporting segments to include: “gaming”, which consists of its
gaming machine participation and future casino operations; and
“other products,” which consolidates the previously reported
segments of “table game products” and “non-gaming products” from
the Company’s wholly-owned Dolphin subsidiary. The new manner of
segment reporting has been applied retroactively to all periods
presented.
Entertainment Gaming Asia’s fourth quarter of 2011 consolidated
revenue was $7.7 million, an increase of 25% compared to $6.1
million in the fourth quarter of 2010. Consolidated revenue was
$27.1 million for the 2011 fiscal year, an increase of 22% compared
to $22.2 million in the 2010 fiscal year. The increases were due to
significant improvements in both of the Company’s gaming and other
products business segments.
Revenue from gaming operations was $4.3 million in the fourth
quarter of 2011, an increase of 12% compared to $3.8 million in the
fourth quarter of 2010. Revenue from gaming operations was $17.4
million for the 2011 fiscal year, an increase of 22% compared to
$14.3 million in the 2010 fiscal year. The increases reflected
strong performance from our operations at Nagaworld in Cambodia,
where the Company achieved solid growth in average WUD driven
primarily by targeted marketing to customers and machine mix
improvements.
The Company’s Philippines operations also experienced strong
improvement in average WUD for the fourth quarter and 2011 fiscal
year compared to the prior-year periods. The Company attributes
this to efforts to strategically manage its machine placements,
marketing initiatives focused on the Company’s most promising
venues in this market and the October 2011 agreement to increase
the Company’s revenue sharing rights and marketing control in the
attractive San Pedro VIP Club.
WUD* Q4:11
Q4:10 Y/Y ∆
FY11 FY10 Y/Y ∆
Cambodia $219 $197 11%
$232 $202 15% Philippines
$64 $58
10%
$63 $57 10% Consolidated
$136 $119 14%
$140 $117 20%
EGM Seats in
Operation
12/31/11
12/31/10 Y/Y ∆ Cambodia
719
680 6% Philippines
758
867 -13% Consolidated
1,477
1,547 -5%
* WUD figures exclude EGM seats operating under a new venue’s
soft launch, if applicable. As a result, 60 EGM seats were excluded
from the above fourth quarter and 2011 fiscal year WUD
calculations. Had these seats been included in the fourth quarter
and 2011 fiscal year WUD calculations, WUD for these periods would
have been $202 for Cambodia, $65 for the Philippines, and $132 for
the consolidated average and $214, $61, and $133, respectively.
During the 2010 fiscal year, only one venue in Cambodia operated
under a soft launch from September to December of that year with a
total of 10 EGM seats. Consequently, there was no material
difference to average WUD figures for the 2010 periods had these
seats been included in the WUD calculations.
Revenue from other products was $3.4 million in the fourth
quarter of 2011, an increase of 47% compared to $2.3 million in the
fourth quarter of 2010. Revenue from other products was $9.7
million for the 2011 fiscal year, an increase of 23% compared to
$7.9 million in the 2010 fiscal year. The increases were primarily
the result of substantially higher sales of gaming chips and
plaques, which reached $1.3 million for the fourth quarter of 2011
and $2.0 million for the 2011 fiscal year compared to $294,000 and
$1.3 million, respectively in the prior-year periods. These gains
were due to higher reorders from existing customers and the
addition of new customers as the Company benefited from its ongoing
efforts to enhance performance in this business segment.
Entertainment Gaming Asia reported adjusted EBITDA of $2.6
million for the fourth quarter of 2011 compared to $2.5 million for
the fourth quarter of 2010. Adjusted EBITDA was $11.7 million for
the 2011 fiscal year compared to $8.4 million for the 2010 fiscal
year.
Entertainment Gaming Asia reported a net loss of $1.0 million,
or $0.01 per share, on a weighted average diluted share count of
approximately 118.8 million shares for the fourth quarter of 2011.
The fourth quarter of 2011 net loss included a $1.4 million
non-cash impairment charge as of December 31, 2011 primarily
associated with the write-down of certain gaming machines and
systems in inventory as well as infrastructure costs related to the
closure of one venue in the Philippines in April 2011. Excluding
this non-cash charge, net income was $346,000, or $0.00 per share.
This compared to a net loss of $2.7 million, or a $0.02 per share,
on a weighted average diluted share count of approximately 116.1
million shares for the fourth quarter of 2010. The fourth quarter
of 2010 net loss included a non-cash impairment charge of $3.2
million related to the write-down of certain Dolphin intangible and
fixed assets as the current carrying value of the assets was higher
than the expected value of the projected future cash flows.
Excluding this charge, net income was $478,000, or $0.00 per share,
for the fourth quarter of 2010.
For the 2011 fiscal year, the Company reported a record net
profit of $642,000, or $0.01 per share, on a weighted average share
count of 118.0 million. Excluding the above-mentioned non-cash
impairment charge in the fourth quarter of 2011, the Company
reported a net profit of $2.0 million, or $0.02 per share, for the
2011 fiscal year. This compared to a net loss of $5.2 million, or
$0.05 per share, on a weighted average share count of 115.7 million
for the 2010 fiscal year. Excluding the above-mentioned non-cash
impairment charge in the fourth quarter of 2010, the net loss was
$1.8 million, or $0.02 per share, for the 2010 fiscal year.
Expanding Gaming Machine Participation and Management
Operations in Cambodia
In November 2011, the Company entered into a gaming machine
participation and management agreement (the “Agreement”) with Sokha
Hotels and Resorts (“Sokha”) to place 250 EGM seats and jointly
manage these slot operations in its Thansur Bokor Resort and Casino
in the Bokor Mountains of Cambodia (“Thansur Bokor”). Sokha, a
wholly-owned subsidiary of the Cambodian conglomerate Sokimex, is a
leading operator of luxury hotels and resorts in prime locations in
Cambodia.
The slot operations under the Agreement will be located within
the much-anticipated, new Thansur Bokor in the highly-trafficked
tourist area of the Bokor Mountains in the Kampot Province of
Cambodia. This will be the only casino in the nearby area for the
present time and will cater primarily to tourists. The first phase
of Thansur Bokor, which will include over 650 hotel rooms and
suites, entertainment parks and amenities, and convention
facilities, is expected to open in April 2012. The Company will
have 200 EGM seats in operation at the time of the opening and
expects to ramp up to 250 seats over the subsequent several
months.
Under the terms of the Agreement, Entertainment Gaming Asia will
be the exclusive provider of the EGMs in the ground floor slot area
of Thansur Bokor and will jointly manage with Sokha these slot
operations. The Company and Sokha will share the gross win and
certain operating expenses on a respective basis of 27/73%. The
Company will collect its share of the gross win on a bi-monthly
basis and will settle its share of the operating costs on a monthly
basis. The contract duration is five years, commencing upon the
live operation of the slot floor.
The Company will use a combination of purchased new and used
machines and machines from its existing inventory. The total
capital expenditures for the Agreement are estimated at
approximately $2 million, which will be funded from internal cash
resources.
Clarence Chung, Chairman and Chief Executive Officer of
Entertainment Gaming Asia, commented, “We are pleased to work with
such a prominent partner as Sokha to manage their slot operations
at Thansur Bokor and to have the opportunity to expand this
relationship to its other prestigious properties. We believe this
agreement offers strategic benefits by not only expanding our
presence in the Indo-China region and demonstrating our operational
expertise but also by contributing to near-term earnings and
long-term growth. Further, given Thansur Bokor is a destination
resort, catering primarily to tourists, and is approximately 1.5
hours by car from our Kampot border casino project, we believe the
Agreement is an attractive complement to our gaming operations in
Cambodia.”
Gaming Chip and Plaque Improvements
The Company is focused on driving continued improvement in the
financial performance of its other products division, which
includes the manufacture and sale of gaming chips and plaques. The
Company is working to expand its product offerings to include new
styles of chips and more innovative, state of the art security
features. Further, through its investment in its manufacturing
facilities, the Company is planning to expand its production
capacity and increase operating efficiencies and automation.
The Company continues to implement targeted marketing programs
to further strengthen its existing customer relationships in its
core markets of Australia and Macau and to broaden its customer
base in current and new geographies. These programs are already
beginning to provide benefits with quality customer reorders booked
in the fourth quarter of 2011 and the recent acquisition of several
new customers including one in the Indo-China region and one in
Macau.
While these efforts are not expected to minimize the normal
fluctuation in quarterly sales flow of this business segment, the
Company anticipates they will drive meaningful long-term
improvement in revenue and gross profit for these operations.
Casino Development Plans
The Company continues to make progress in the development of its
Dreamworld Casino Pailin and Dreamworld Casino Kampot projects. The
Pailin project is located in the Pailin Province of Cambodia near
the Thailand border. The initial phase of the casino is intended to
include up to 23 table games and 40 EGM seats. The Company
commenced construction in December 2011 and the building structure
is now nearly complete. The Company will start the fit-out work of
the casino shortly and has already begun hiring and training the
casino staff. Based on the swift pace of development, the Company
has scheduled the grand opening of Dreamworld Casino Pailin for May
9, 2012.
The Kampot project is located in the Kampot Province of Cambodia
near the Vietnam border. The initial phase of the casino is
intended to include up to 14 table games and 25 EGM seats. The
Company has completed the landfill process and held the
groundbreaking ceremony. The Company plans to commence construction
in March 2012. Based on the current project timeline, Dreamworld
Casino Kampot is expected to open in the third quarter of 2012.
Clarence Chung, Chairman and Chief Executive Officer of
Entertainment Gaming Asia, concluded, “Our vision to expand our
gaming operations to become an owner and operator of casinos in the
Indo-China region is soon to become a reality. The upcoming opening
of our first two casino projects in Cambodia marks a new chapter in
our growth strategy and serves to deepen our footprint and
demonstrate our operational expertise in our markets. We are
excited about the future and view these projects as the initial
steps toward achieving our long-term goal of becoming a leading
owner and operator of regional style casinos in the emerging gaming
markets of Indo-China.”
Entertainment Gaming Asia is hosting a conference call and
simultaneous webcast at 8:30 a.m. ET today, March 8, 2012, both of
which are open to the general public. The conference call number is
800/920-5548 or 212/231-2914. Questions and answers will be
reserved for call-in analysts and investors. Interested parties may
also access the live call on the Internet at www.EGT-Group.com.
Please allow 15 minutes to register and download and install any
necessary software. Following its completion, a replay of the call
can be accessed for thirty days on the Internet at
www.EGT-Group.com
About Entertainment Gaming Asia Inc.
Entertainment Gaming Asia Inc. (NYSE Amex: EGT) is a leading
provider of electronic gaming machines on a participation basis to
the Pan-Asian gaming industry. The Company secures long-term
contracts to provide electronic gaming machines and related systems
to premier hotels and other well-located gaming venues in Asia. The
Company retains ownership of the gaming machines and systems and
receives recurring daily or monthly fees based on an agreed upon
percentage of the net gaming win per machine and provides on-site
maintenance. Entertainment Gaming Asia Inc. is also engaged in the
development of casinos in the Indo-China region where it intends to
own and operate casino resorts under the “Dreamworld” brand. For
more information please visit www.EGT-Group.com.
Forward Looking Statements
This press release contains forward-looking statements
concerning Entertainment Gaming Asia within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Those
forward-looking statements include statements regarding
expectations for the expansion of the Company’s participation
business model, the timeline and working capital requirements for
the Sokha, Pailin and Kampot casino projects, the near-term
earnings of the Sokha, Pailin and Kampot casino projects, growth of
the gaming industry in the Indo-China region, the Company’s ability
to secure new casino projects and fund those projects and the
prospects for the expanded customer base for the Company’s Dolphin
gaming chips and plaques. Such statements are subject to certain
risks and uncertainties, and actual circumstances, events or
results may differ materially from those projected in such
forward-looking statements. Factors that could cause or contribute
to differences include, but are not limited to, risks related to
Entertainment Gaming Asia’s ability to place gaming machines at
significant levels and generate the expected amount of net win from
the gaming machines placed, obtain the gaming license and building
permits for the casino projects on a timely basis or at all,
complete construction and development of the casino projects on
budget and in a timely manner, identify and successfully develop
additional casino projects in the Indo-China region, acquire
additional capital as and when needed, adverse weather conditions
that cause delays to casino projects timelines, obtain and fulfill
significant purchase orders from the new customers for the
Company’s gaming chips and plaques and those other risks set forth
in Entertainment Gaming Asia’s annual report on Form 10-K for the
year ended December 31, 2010 filed with the SEC on March 30, 2011
and subsequently filed quarterly reports on Form 10-Q.
Entertainment Gaming Asia cautions readers not to place undue
reliance on any forward-looking statements. Entertainment Gaming
Asia does not undertake, and specifically disclaims any obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
- financial tables follow -
Entertainment Gaming Asia Inc.
Consolidated Statements of
Operations
(Unaudited)
Old Basis Old
Basis
Three Months Ended
December 31,
Years Ended
December 31,
(amounts in thousands, except per share data) 2011
2010 2011 2010 Revenues:
Gaming $ 4,299 $ 3,830 $ 17,396
$
14,312 Other products 3,385 2,308 9,733 7,893 Total revenues 7,684
6,138 27,129 22,205 Operating costs and expenses: Cost of
electronic gaming machine (EGM) participation: EGM depreciation
1,249 2,150 4,890 8,020 Casino contract amortization 616 — 2,457 —
Other gaming related intangibles amortization 63 — 63 — Other
operating costs 360 155 1,169 759 Cost of other products 2,762
1,866 8,346 6,916 Selling, general and administrative expenses
2,020 1,603 5,880 5,880 Stock-based compensation expenses 215 220
1,452 887 Impairment of assets 1,351 3,216 1,351 3,460 Loss on
disposition of assets 23 47 175 164 Product development expenses 85
90 386 610 Depreciation and amortization 27 207 113 885
Restructuring charges — — — 310 Total operating costs and expenses
8,771 9,554 26,282 27,891 Income/(loss) from operations
(1,087) (3,416) 847 (5,686) Other income/(expense): Interest
expense and finance fees (100) (89) (405) (411) Interest income 32
26 93 92 Foreign currency losses (28) (44) (94) (72) Other 60 (15)
252 202 Total other income/(expense) (36) (122) (154) (189)
Income/(loss) before income tax (1,123) (3,538) 693 (5,875)
Income tax benefit/(expense) 118 800 (51) 665 Net
income/(loss) $ (1,005) $ (2,738) $ 642 $ (5,210) Basic and
diluted earnings/(loss) per share
$
(0.01) $ (0.02) $ 0.01 $ (0.05) Weighted average common
shares outstanding: Basic 118,760 116,064 117,953 115,702 Diluted
119,955 119,033 118,902 117,816
As a result of the Quasi-Reorganization, the consolidated
statements of operations for the three months and fiscal years
ended December 31, 2011 and 2010 are not comparable. The
consolidated statements of operations for the three months and
fiscal year ended December 31, 2011 reflect depreciation and
amortization of the assets using the basis from the
Quasi-Reorganization, and the consolidated statements of operations
for the three months and fiscal year ended December 31, 2010 are
prepared on the Company’s historical basis of accounting. As such,
operations for the periods ended December 31, 2010 are labeled as
being under the “Old Basis,” which is defined as accounting
policies and estimates prior to the adoption of the
Quasi-Reorganization.
Entertainment Gaming Asia Inc.
Consolidated Balance Sheets
December 31,
2011
December 31,
2010
(amounts in thousands, except per share data)
(Unaudited)
ASSETS
Current assets: Cash and cash equivalents $ 12,759 $ 10,217 Trade
accounts receivable, net 2,691 2,854 Other receivables 114 101
Inventories 1,894 1,064 Assets held for sale 30 422 Prepaid
expenses and other current assets 811 1,051 Total current assets
18,299 15,709 Electronic gaming machines and systems, net
8,889 12,360 Casino contracts 10,340 12,790 Property and equipment,
net 2,558 1,941 Goodwill 357 — Intangible assets, net 1,227 140
Contract amendment fees 450 558 Deferred tax assets 91 — Prepaids,
deposits and other assets 1,893 561 Total assets $ 44,104 $ 44,059
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities: Accounts payable $ 1,316 $ 1,062 Amount due to
a related party 14 14 Accrued expenses 2,228 2,225 Income tax
payable 68 — Notes payable to a related party, current portion
6,211 2,991 Capital lease obligations, current portion 322 164
Customer deposits and other current liabilities 357 251 Total
current liabilities 10,516 6,707 Notes payable to a related
party, net of current portion — 6,211 Capital lease obligations,
net of current portion — 307 Other liabilities 869 441 Deferred tax
liability 207 71 Total liabilities 11,592 13,737
Stockholders’ equity: Common stock, $.001 par value, 300,000,000
shares authorized; 118,839,393 and 116,189,394 shares issued and
outstanding 119 116 Additional paid-in-capital 31,191 29,638
Accumulated other comprehensive income 559 568 Retained earnings
since January 1, 2011 ($386.1 million accumulated deficit
eliminated) 642 — Total EGT stockholders’ equity 32,511 30,322
Non-controlling interest 1 — Total EGT stockholders’ equity 32,512
30,322 Total liabilities and stockholders’ equity $ 44,104 $ 44,059
Entertainment Gaming Asia Inc.
Adjusted EBITDA
(Unaudited)
Old Basis Old
Basis
Three Months Ended
December 31,
Years Ended
December 31,
(amounts in thousands, except per share data) 2011
2010 2011 2010 Net profit/(loss) – GAAP $
(1,005) $ (2,738) $ 642 $ (5,210) Interest expense and finance fees
100 89 405 411 Interest income (32) (26) (93) (92) Income tax
(benefit)/expense (118) (800) 51 (665) Depreciation and
amortization 2,016 2,491 7,754 9,395 Stock-based compensation
expense 215 220 1,452 887 Impairment of all assets 1,351 3,216
1,351 3,460 Loss on dispositions of assets 23 47 175 164 EBITDA, as
adjusted (1) $ 2,550 2,499 $ 11,737 8,350
(1) Adjusted EBITDA for the year ended December 31, 2010 was
restated to include loss on dispositions.
Adjusted EBITDA is earnings before interest, taxes,
depreciation, amortization, stock-based compensation, and other
non-cash operating income and expenses. Adjusted EBITDA is
presented exclusively as a supplemental disclosure because
management believes that it is widely used to measure the
performance, and as a basis for valuation, of gaming companies.
Management uses Adjusted EBITDA as a measure of the operating
performance of its segments and to compare the operating
performance of its operations with those of its competitors. The
Company also presents Adjusted EBITDA because it is used by some
investors as a way to measure a company’s ability to incur and
service debt, make capital expenditures and meet working capital
requirements. Gaming companies have historically reported EBITDA as
a supplement to financial measures in accordance with generally
accepted accounting principles in the United States (“GAAP”).
Adjusted EBITDA should not be considered as an alternative to
operating income/(loss) as an indicator of the Company’s
performance, as an alternative to cash flows from operating
activities as a measure of liquidity, or as an alternative to any
other measure determined in accordance with GAAP. Unlike net
income/(loss), Adjusted EBITDA does not include depreciation or
interest expense and, therefore, does not reflect current or future
capital expenditures or the cost of capital. The Company
compensates for these limitations by using Adjusted EBITDA as only
one of several comparative tools, together with GAAP measurements,
to assist in the evaluation of operating performance. Such GAAP
measurements include operating income, net income/(loss), cash
flows from operations and cash flow data. The Company has
significant uses of cash flows, including capital expenditures,
interest payments, debt principal repayments, taxes and other
non-recurring charges, which are not reflected in Adjusted EBITDA.
Entertainment Gaming Asia’s calculation of Adjusted EBITDA may be
different from the calculation methods used by other companies and,
therefore, comparability may be limited.
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