Great Canadian Gaming Corporation
TSX : GCD

Great Canadian Gaming Corporation

May 12, 2005 16:00 ET

Great Canadian Gaming Corporation Reports First Quarter 2005 Results; Building for the Future with New & Expanded Gaming Operations

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - May 12, 2005) - Great Canadian Gaming Corporation (TSX:GCD) (the "Company") is pleased to announce its financial results for the first quarter ended March 31, 2005.

"In the first quarter of 2005, we continued to seek out and capitalize on opportunities in Canada with the intention of building Great Canadian's future beyond the current scope of operations and expansion plans. We expanded our gaming operations not only within British Columbia, but also into Ontario. In March, we concluded the purchase of Orangeville Raceway Limited, which operates both Fraser Downs Racetrack & Casino and Sandown Park. This purchase, combined with last year's acquisition of Hastings Entertainment Inc., establishes Great Canadian as the largest thoroughbred and standardbred racing operator in British Columbia, with the ability to offer our guests year-round racing and over 1,100 slot machines," said Mr. Ross J. McLeod, Chairman and Chief Executive Officer.

"In April, we reached an agreement to purchase Georgian Downs Limited, which operates a standardbred racecourse and slot machine facility in Innisfil, Ontario. Innisfil is approximately 45 minutes driving time north of Toronto and allows us access to Canada's largest metropolitan area. Georgian Downs is an excellent operation with a new facility offering year-round standardbred racing, food & beverage, simulcast racing and wagering, and 400 slot machines. This acquisition is an important step in expanding our commitment to the gaming industry beyond British Columbia's borders. We will continue to support the improvement of gaming facilities, development of expanded racing, and enhancement of customer experiences at our locations. I am proud of these additions to Great Canadian, but I am even more excited about our potential in 2005 and beyond," added Mr. McLeod.

"I am pleased to report that the financial results for the first quarter of 2005 substantially exceed the results from the first quarter of 2004. The first quarter results are slightly down when compared to the fourth quarter of 2004, but they are in line with our expectations. We expect that the first half of 2005 will be a transition period for us as we build to a larger scale of operation later in the year. We have significant capital expansions planned or underway at River Rock Casino Resort, Coquitlam Casino, Fraser Downs Racetrack and Casino, Hastings Racecourse and Bear Mountain Community Gaming Centre. In addition, we have the Orangeville and Georgian Downs' acquisitions to integrate into our operations. 2005 will be a growth and build-out year for us," said Mr. Anthony R. Martin, President and Chief Operating Officer.

As shown in the table below, financial performance in the first quarter of 2005 exceeded, by all measures, the financial performance of the first quarter of 2004. Revenues for the first quarter of 2005 were $54.7 million, up 64% from the first quarter of 2004. Net income was $9.3 million, up 74% from 2004. EBITDA (see Notes following Financial Highlights) was $18.0 million, up 76% from the first quarter of 2004. Income from operations was $15.8 million, up 81% from the first quarter of 2004. Basic earnings per common share and diluted earnings per common share for the first quarter of 2005 were $0.31 and $0.30, respectively, compared to $0.21 and $0.20, respectively, for the first quarter of 2004.



FINANCIAL HIGHLIGHTS

$000, Except per common share Three Months Ended March 31,
2005 2004 % Chg
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Gaming revenues $ 46,824 $ 31,518 49%
Food & beverage revenues 5,532 1,351 309%
Other income 2,295 395 481%
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Revenues 54,651 33,264 64%
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Human resources 26,577 17,523 52%
Other operating expenses 10,066 5,512 83%
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36,643 23,035 59%
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EBITDA 18,008 10,229 76%
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Stock based compensation 721 691 4%
Amortization 1,467 809 81%
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Income from operations 15,820 8,729 81%
Non-operating income (302) (93) 225%
Interest and financing, net 1,065 161 561%
Income taxes 5,798 3,334 74%
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Net Income $ 9,259 $ 5,327 74%
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Earnings per common share:
Basic $ 0.31 $ 0.21 48%
Diluted $ 0.30 $ 0.20 50%
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Notes: Certain of the prior year's comparative figures have been reclassified to conform to the current year's presentation. EBITDA means Earnings Before Income Taxes, Interest Expense, Depreciation and Amortization, stock-based compensation, and non-operating income, and is a non-generally accepted accounting principles ("non-GAAP") measure. EBITDA includes $1.4 million in FDIF accretive income in the first quarter of 2005. Please see additional comments in the Management Discussion and Analysis in regards to the use of non-GAAP measures.

The Company opened the casino portion of the River Rock Casino Resort last June, which contributed $15.2 million more in revenues and $6.6 million more in EBITDA for the first quarter of 2005 than the two former casinos (Richmond and Renaissance) that closed in conjunction with the opening of River Rock. In two acquisitions last April and November, the Company acquired Hastings Entertainment, which operates the Hastings Racecourse. Despite the lack of live racing during the winter season, the Hastings Racecourse added $2.0 million in simulcast, food and beverage revenues and $0.1 million in EBITDA for the first quarter in 2005. From the acquisition date of March 18, 2005 to the quarter end, Orangeville added $0.7 million in revenues and $0.3 million in EBITDA. Orangeville is operating with 420 slot machines, whereas Hastings Racecourse is expected to have its slots operational in the fourth quarter of 2005.

The average number of tables open in the Company's British Columbia casinos increased to 168 in the first quarter of 2005, or up 23% from the first quarter of 2004. The number of BC slot machines increased to 2,725 in the first quarter of 2005, or up 117% from the first quarter last year. The increase in the number of slots has helped improve operational efficiency in margin, with an 81% increase in income from operations resulting from a 59% increase in gaming, food and beverage revenues between the two first quarters. Human resources costs have improved from 53% of gaming, food and beverage revenues in the first quarter last year to 51% of revenues this quarter.

Financial performance in the first quarter of 2005 was less than the financial performance of the fourth quarter of 2004. Revenues for the first quarter of 2005 were down 3.6% from the fourth quarter of 2004. Net income for the first quarter was down 4.4% from the fourth quarter of 2004. EBITDA for the first quarter was down 6.2% from the fourth quarter of 2004. Basic earnings per common share and diluted earnings per common share for the first quarter of 2005 were $0.31 and $0.30, respectively, compared to $0.35 and $0.34, respectively, for the fourth quarter of 2004.

The first quarter's financial results, as compared to the fourth quarter, were influenced by:

- Two less operating days (90 days) in the first quarter compared to the fourth quarter (92 days). If the first quarter's results were extrapolated to a 92 day quarter, the diluted earnings per share would increase by $0.01.

- An absolute reduction of 1% in the overall table game hold percentage for the quarter as compared to the hold percentage achieved in the prior quarter and the month of April 2005. If the first quarter's hold percentage were increased by 1%, a normalized level of hold percentage, the diluted earnings per share would increase by an estimated $0.02.

- A phenomenon called a "players' quarter" on table games, which results in a lowered table drop whenever the table hold percentage is reduced. If the first quarter's table game drop was at the same level as achieved in the fourth quarter and the month of April 2005, without duplication for the adjustment in hold percentage or additional days in the quarter, diluted earnings per share would have increased by an estimated $0.01.

- An increase in competition from the expanded Burnaby casino and the new Vancouver casino, which affected slot revenues. Based on experience, new or expanded competition causes slot gaming revenues to temporarily drop as regular customers visit the new facilities. If the first quarter slot revenues were at the same level as in the fourth quarter, without duplication for the additional days in the quarter, diluted earnings per share would have increased by $0.02.

- The Company issued 1,500,000 common shares in a prospectus offering in January and a further 545,525 common shares from the exercise of options and warrants during the first quarter to fund the cost of acquisitions and expansions. The revenues and income from these acquisitions and expansions are not fully reflected in the first quarter's earnings per share. The impact of the increase in common shares outstanding during the quarter, without the corresponding net income from acquisitions or expansions, had the effect of lowering diluted earnings per share by $0.02.

- The acquisition of Orangeville was included in the financial results from March 18, 2005. If the results for the first quarter of 2005 reflected Orangeville's net income for a full three month period, the diluted earnings per share would have increased by $0.03. This $0.03 increase would have exceeded the $0.02 dilution in earnings per share caused by the issuance of new share capital in the quarter.

These factors would have resulted in a normalized financial result for the first quarter that increased the reported diluted earnings per share by $0.09.

For the month of April, the Company has seen both its table hold percentages and slot gaming revenues return to normal levels, as well as the start of live racing at Hastings Racecourse. In addition, the second quarter of 2005 will have 91 operating days and reflect a full quarter of financial results from Orangeville.

The Canadian operations contributed $47.4 million in revenues, $15 million in income from operations and $16.7 million in EBITDA during the first quarter of 2005. The United States operations contributed $7.3 million in revenues, $0.8 million in income from operations and $1.3 million in EBITDA during the first quarter of 2005. This is the US operation's second straight quarter of profitability.

Total assets increased to $466 million at the first quarter end, an increase of 29% from the year-end. Working capital increased to $31.1 million at the quarter end, an increase of 15% from the year-end. The Facility Development Improvement Fund receivable increased to $144 million and net property, plant and equipment increased to $183 million at the quarter end. The FDIF receivable and property, plant and equipment collectively have increased 35% from the year end, representing the continued capital investment on facilities construction, and the acquisition of Orangeville. Financing for the capital investments and acquisitions has come from a net increase in long-term debt of $13.4 million and a net increase in share capital of $65.7 million.

Please refer to the Interim Consolidated Financial Statements and Management Discussion and Analysis at http://www.gcgaming.com or http://www.sedar.com for detailed financial information and analysis.

The Company will hold a conference call for investors and analysts on Thursday, May 12, 2005 at 5:15 pm Eastern Daylight Time, or 2:15 pm Pacific Daylight Time. The Company will discuss its financial results for the quarter ended March 31, 2005, and provide an update on the Company's activities. To participate in the conference call, please dial 416-695-5261 or toll free 1-877-888-3490. This call is for investors and analysts only.

All media representatives and other interested parties are directed to forward their enquiries to Mr. Howard Blank, Vice-President, Media & Entertainment. Mr. Blank can be reached at: (604) 512-6066.

Great Canadian Gaming Corporation, with over 3,500 employees, is a multi-jurisdictional gaming and entertainment operator. In British Columbia, the Company operates seven casinos, a thoroughbred racecourse, two standardbred racecourses, a community gaming centre, numerous licensed restaurants and a marina operation. In Washington State, the Company operates four gaming and restaurant / entertainment facilities.

Upon completion of the Georgian Downs acquisition, the Company will operate Georgian Downs Racecourse and Slots, located in Ontario.

ON BEHALF OF GREAT CANADIAN GAMING CORPORATION

Howard S. Hum, CA

Acting Chief Financial Officer



GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
As at March 31, 2005 and December 31, 2004
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March 31, December 31,
2005 2004
------------------------

ASSETS

CURRENT
Cash and cash equivalents $ 43,139 $ 43,133
Accounts receivable 5,030 6,040
Current portion of promissory
notes receivable 1,357 1,639
Current portion of FDIF receivable 18,000 15,000
Prepaid expenses and deposits 5,429 3,201
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72,955 69,013
Promissory notes receivable 7,416 7,462
FDIF receivable 126,046 102,065
Property, plant and equipment 183,202 125,352
Goodwill 21,514 20,038
Intangible assets 49,897 28,629
Other assets 4,924 9,856
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$ 465,954 $ 362,415
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LIABILITIES

CURRENT
Gaming revenue payables $ 5,750 $ 6,272
Accounts payable and accrued liabilities 33,880 33,044
Income taxes payable 1,526 1,797
Current portion of long-term debt 701 860
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41,857 41,973
Long-term debt 167,555 154,000
Future income taxes 26,521 11,536
Non-controlling interest 815 836
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236,748 208,345
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SHAREHOLDERS' EQUITY

Share capital and other equity 167,485 101,801
Cumulative foreign currency translation (5,715) (5,908)
Retained earnings 67,436 58,177
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229,206 154,070
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$ 465,954 $ 362,415
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GREAT CANADIAN GAMING CORPORATION
Consolidated Statements of Income
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
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Three months ended March 31,
2005 2004
---------------------------
REVENUES $ 54,651 $ 33,264

EXPENSES
Amortization 1,467 809
Human resources 26,577 17,523
Stock-based compensation 721 691
Marketing and promotion 3,011 1,622
Occupancy costs 3,125 1,611
Operating supplies 3,930 2,279
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38,831 24,535
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INCOME FROM OPERATIONS 15,820 8,729

Income (loss) from investments 137 (138)
Interest and financing, net (1,065) (161)
Foreign exchange gain 144 224
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INCOME BEFORE INCOME TAXES 15,036 8,654

Income taxes 5,798 3,334
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INCOME BEFORE NON-CONTROLLING INTEREST 9,238 5,320

Non-controlling interest (21) (7)
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NET INCOME $ 9,259 $ 5,327
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EARNINGS PER COMMON SHARE
Basic $ 0.31 $ 0.21
Diluted $ 0.30 $ 0.20
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic 29,567,505 25,273,217
Diluted 30,515,555 27,210,118
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GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
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Three months ended March 31,
2005 2004
---------------------------

Cash Flows from Operating Activities
Net income $ 9,259 $ 5,327
Adjustments to reconcile
net income to net cash provided
by operating activities:
Amortization 1,467 809
Imputed interest on FDIF receivable (1,424) -
Stock based compensation 721 691
Operating expenses reduced by FDIF (2,361) (256)
Other activities 1,446 201
Future income taxes - (6)
Changes in non-cash operating
working capital (9,065) (769)
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Net cash provided by operating activities 43 5,997
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Cash Flows from Financing Activities
Proceeds from long-term debt 13,536 797
Repayment of long-term debt (458) (1,198)
Common shares issued for cash,
net of issuance costs 63,898 4,526
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Net cash provided by financing activities 76,976 4,125
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Cash Flows from Investing Activities
Investment in and advances to
equity investees (65) (238)
FDIF received 3,707 2,530
Purchase of property, plant and equipment,
net of related accounts payable (31,110) (24,794)
Acquisition of Orangeville, net of
cash and deposit (33,036) -
Acquisition of Weinlager, net of bank
indebtedness (1,469) -
River Rock prepaid lease (9,262) -
Deposit on acquisition of HEI - (2,010)
Acquisition of Pair O'Dice, net of cash - (126)
Promissory notes and advances
receivable, net (5,765) 254
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Net cash used in investing activities (77,000) (24,384)
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Effect of foreign exchange on cash and
cash equivalents (13) 148
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Net Cash Inflow (Outflow) 6 (14,114)
Cash and cash equivalents,
Beginning of Period 43,133 34,193
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Cash and cash equivalents, End of Period $ 43,139 $ 20,079
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Contact Information

  • Great Canadian Gaming Corporation
    Mr. Thomas Bell
    Vice-President, Corporate Development & Investor Relations
    (604) 303-1000
    (604) 279-8605 (FAX)
    http://www.gcgaming.com