Evergreen Gaming Corporation
TSX VENTURE : TNA

Evergreen Gaming Corporation

December 01, 2008 20:22 ET

Evergreen Gaming Reports Third Quarter Loss of $0.01

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 1, 2008) -

NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Evergreen Gaming Corp (TSX VENTURE:TNA) today announced its financial and operating results for the third quarter and nine-month periods ended September 30, 2008.

The results for the three month period ended September 30, 2008 were consistent with our second quarter results in many respects, with the additional revenue reductions expected due to typical seasonal fluctuations in the gaming industry. Our revenues for the third quarter increased $646,000 and our net income decreased $1.6 million over the third quarter of 2007. The addition of our Calgary, Alberta Casino (EGC) in late 2007 contributed revenues of $1.56 million in the third quarter of 2008. Revenue in our Washington operations (WGI) declined by $854,000 compared to the third quarter of 2007, plus the additional loss of $237,000 of revenue that was contributed by two nightclubs that were closed in June and July of 2007. The decrease in net income is primarily attributable to increased operating costs, primarily labor, of $1.6 million, increased interest expense of $700,000 resulting from the debt related to the acquisition of EGC, plus a non-cash foreign exchange loss of $745,000 for the quarter. Offsetting these costs was an income tax recovery of $651,000.

Management believes the reduction in revenue is due to factors in the U.S. economy at large and does not represent a long term change in our market position or expected future results. The region in which WGI operates has experienced an economic downturn and our revenue shortfall is a reflection of reduced spending by individuals throughout the economy. The seasonal revenue reduction normally experienced by our casinos is exaggerated by these economic conditions. Revenues decreased 8.4% from the second quarter to the third quarter in 2008, compared to a decrease of 7.0% for the same period in 2007.

For the nine month period ended September 30, 2008 our revenues increased $5.1 million and our net income decreased $2.23 million. Of the total increase in revenues, $5.3 million is the result of the addition of EGC in late 2007. WGI's revenue was flat, as the continuing operations had an increase of $510,000, offset by the reduced revenue due to the closure of two nightclubs in 2007 that contributed $515,000 of revenue during 2007. The decrease in the year to date net income is primarily attributable to a $2.2 million increase in interest expense compared to the first nine months of 2007. Income from operations decreased by $967,000 for the first nine months of 2008 compared to the same period of 2007.

Earnings before interest, taxes, depreciation and amortization (EBITDA) are a non-GAAP measurement that the Company uses to evaluate its operations. In computing EBITDA, the Company takes Income from operations and adds back stock based compensation and depreciation and amortization. This results in the exclusion of interest income and expense, income taxes, foreign currency exchange gain or loss, gains and losses on the disposal of subsidiaries or discontinued operations, restructuring and related costs, and other income.

As defined above, EBITDA was $2.68 million for 2008 year to date versus $3.39 million in 2007, a decrease of $707,000. Revenues increased by $5.2 million over 2007, the result of the addition of EGC in Calgary, offset by a $5.8 million increase in operating expenses, of which $5.4 million was due to the addition of EGC. Management expects that increased revenues are supportable without significantly higher operating costs, and thus improved results are expected during the fourth quarter of 2008 and into 2009. In addition, labor costs at EGC were higher than expected during the first quarter of 2008 and have been reduced significantly over the course of 2008, with a run rate that is $1.2 million lower on an annual basis.

FORTRESS INVESTMENT CREDIT AMENDMENTS

On October 2, 2007, Evergreen Gaming Corporation ("Evergreen") entered into a Credit Agreement with Fortress Investment Group ("Fortress") to borrow US$28,250,000 from Fortress ("Term Loan") to fund the purchase of the Frank Sissons Silver Dollar Casino in Calgary, Alberta.

The Company is negotiating with the lender on an amendment to its long term credit facility that would provide significant short term liquidity relief to the Company while calling for revised repayment terms beginning in 2009. While not yet completed, the Company and the lender have agreed in principle on the terms of an amendment and management expects the amendment to be completed before year end. The amendment, when completed, permits interest due and payable on the loan from October 1, 2008 to January 31, 2009 to accrete as additional principal of the loan under certain conditions that the Company expects to occur. The amendment also increases the interest rate on the loan by 3% per annum until such time as a $10 million repayment is made. Should such repayment occur on or prior to March 31, 2009, the additional 3% interest will be forgiven by the lender. Should such repayment not be made by March 31, 2009, the additional interest will be added to the principal amount of the debt and additional fees will be incurred by the Company when repayments are made. The Company is investigating all available methods to ensure that it will be able to meet with the terms of the amended debt agreement, including operational revisions, issuing additional debt or equity, and potential asset disposals. In particular, the Company has engaged the services of a real estate broker to assist with the sale of the land on which our Calgary operation currently resides. The Company anticipates that such a sale would be accompanied by a lease-back of the facilities to allow for operations to continue uninterrupted. As of the date of this filing, no firm offer has been received or accepted.

INCENTIVE STOCK OPTIONS

Evergreen Gaming Corporation announces that it has granted to employees stock options for the purchase of a total of 115,000 common shares of the Company at a price of $0.25 per share, exercisable for a period of five years.

EVERGREEN GAMING ADOPTS EMPLOYEE STOCK PURCHASE PLAN

The purpose of this plan is to help Employee become an owner in the Company and invest in the Company's future by becoming a shareholder. Employee Contributions will be matched on a 1 for 4 basis by the Company. 100% of all contributions will be used to purchase common shares of the Company.

About the Company: Evergreen Gaming is a Richmond, BC, based publicly traded (TSX.V) Casino and Hospitality Company with over 1600 employees. Through its subsidiary companies, Evergreen owns and operates 11 casinos in the State of Washington and Frank Sisson's Silver Dollar Casino & Entertainment Centre in Calgary, Alberta.

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