Great Canadian Gaming Corporation

Great Canadian Gaming Corporation

March 08, 2005 16:00 ET

Great Canadian Gaming Corporation Reports Results for 2004; A Profitable Year Full of Growth, Acquisitions and Opportunities


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: GREAT CANADIAN GAMING CORPORATION

TSX SYMBOL: GCD

MARCH 8, 2005 - 16:00 ET

Great Canadian Gaming Corporation Reports Results for
2004; A Profitable Year Full of Growth, Acquisitions
and Opportunities

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - March 8, 2005) - Great
Canadian Gaming Corporation (TSX:GCD) (the "Company") is pleased to
announce its financial results for the year ended December 31, 2004.

"It has truly been a remarkable year in the history of Great Canadian.
We accomplished the strategic growth initiatives we set for the year. We
achieved record revenues and profitability, but more importantly, we
established a solid foundation of people, processes and projects to
ensure our continued growth into the future. In 2005, we will continue
to focus on improving the efficiency of our operation, ensure the
successful integration of our acquisitions, and seek opportunities to
expand our operations into markets which are consistent with our overall
strategy and core operating principles," said Mr. Ross J. McLeod,
Chairman and Chief Executive Officer.

Annual consolidated revenues increased to $178.5 million in 2004 from
$114.5 million in 2003, an increase of 56% over the prior year, and net
income increased to $26.7 million in 2004 from $14.4 million in 2003, an
increase of 86% (restated figures for 2003, see note following Financial
Highlights). Basic earnings per common share and diluted earnings per
common share for 2004 were $1.01 and $0.95, respectively, both an
increase of 53% over the respective restated 2003 earnings per common
share.

Management's decisions in 2004 to seek operational efficiencies,
implement restructuring of our underperforming assets and terminate
legal proceedings resulted in one-time after-tax charges against income
of $3.7 million for restructuring costs and $1.5 million for a payment
to terminate legal proceedings with Allegiance Capital Corporation
("Allegiance"). Net income without the restructuring costs and
Allegiance payment would have been $31.9 million for 2004, or $1.21
basic earnings per common share or $1.13 diluted earnings per common
share.

"During 2004, we increased the scope of our operations and revenue base
with the opening of River Rock Casino Resort Phase I and the acquisition
of Hastings Entertainment Inc. Just before the year-end, the Company
entered into a purchase agreement to acquire Orangeville Raceway
Limited, which operates the Fraser Downs Racecourse and Casino, and
Sandown Park Racecourse. This acquisition is expected to close in March
2005. We worked to reduce the business risks associated with operations
not within the direct control of the Company by acquiring the minority
interests in our casinos in Washington State and selling part of our
ownership interest in Creation Casinos Inc. In the fourth quarter of
2004, the Washington operations achieved break-even quarterly net income
and the gain on sale of Creation's shares was reflected in non-operating
income. In 2005, we expect to complete construction projects at our
Coquitlam Casino, River Rock Phases II and III, Bear Mountain Bingo, and
Fraser Downs Racecourse and Casino," added Mr. Anthony R. Martin,
President and Chief Operating Officer.

Mr. Martin continued, "We also positioned the Company to fund our
long-term growth strategy by graduating to the senior TSX and obtaining
a BBB (stable) rating on our debt from Dominion Bond Rating Service. We
issued $150 million in 10-year senior notes at an interest rate of 5.74%
and secured a $100 million line of credit at an interest rate of prime
in September 2004. After the year-end, we raised over $59 million in
cash from an issuance of 1.5 million common shares. The combination of
short and long-term credit facilities and equity offering allowed us to
close on several integral acquisitions and fund the construction of
several major projects."



FINANCIAL HIGHLIGHTS

$000, Three Months Years Ended
Except per Ended December 31, December 31,
share 2004 2003 % Chg 2004 2003 % Chg
------------------------- --------------------------
Gaming
revenues $ 50,002 $ 29,237 71% $ 162,610 $ 109,548 48%
Food &
beverage 4,263 1,521 180% 11,472 3,459 232%
Other income 2,398 397 504% 4,433 1,475 201%
------------------------- --------------------------
Revenues 56,663 31,155 82% 178,515 114,482 56%
------------------------- --------------------------
Human
resources 26,782 16,690 60% 89,361 58,709 52%
Other
operating
expenses 10,677 5,738 86% 32,209 18,957 70%
------------------------- --------------------------
37,459 22,428 67% 121,570 77,666 57%
------------------------- --------------------------
EBITDA 19,204 8,727 120% 56,945 36,816 55%
------------------------- --------------------------
Stock based
compensation 936 3,030 (69%) 2,209 5,401 (59%)
Amortization 1,559 769 103% 4,825 2,520 91%
Restructuring
costs - - n/a 5,557 - n/a
Allegiance 2,275 - n/a 2,275 - n/a
------------------------- --------------------------
Income from
operations 14,434 4,928 193% 42,079 28,895 46%
Non-operating
(income)
expenses (1,616) 473 (442%) (1,814) 370 (590%)
Interest and
financing,
net 1,158 453 156% 2,201 1,426 54%
Income taxes 5,206 2,840 83% 14,967 12,728 18%
------------------------- --------------------------
Net Income $ 9,686 $ 1,162 734% $ 26,725 $ 14,371 86%
------------------------- --------------------------
------------------------- --------------------------

Earnings per common share:
Basic $ 0.35 $ 0.05 600% $ 1.01 $ 0.66 53%
Diluted $ 0.34 $ 0.05 580% $ 0.95 $ 0.62 53%
------------------------- --------------------------

Earnings per common share factoring out restructuring and Allegiance:
Basic $ 0.41 $ 0.05 720% $ 1.21 $ 0.66 83%
Diluted $ 0.39 $ 0.05 680% $ 1.13 $ 0.62 82%
------------------------- --------------------------

Notes: 2003 figures have been restated to reflect the retroactive
application of a change in accounting policy for stock-based
compensation as recommended by the Canadian Institute of Chartered
Accountants. EBITDA means Earnings Before Income Taxes, Interest
Expense, Depreciation and Amortization, stock-based compensation,
non-operating expenses, restructuring costs and Allegiance, and is a
non-generally accepted accounting principles ("non-GAAP") measure.
Earnings per common share factoring out restructuring and Allegiance
means earnings per share computed under GAAP plus the after-tax per
share impact of restructuring costs and Allegiance, and is a
non-GAAP measure. Please see additional comments in the Management
Discussion and Analysis in regards to the use of non-GAAP measures.


Total assets increased to $362.4 million at the end of 2004 compared to
$156.5 million at the end of 2003, an increase of 132% primarily due to
the construction of River Rock and the acquisition of Hastings. At the
end of 2004, the Company's cash and cash equivalents and total Facility
Development Improvement Fund ("FDIF") receivables of $160.2 million
exceeded total long-term debt of $154.9 million. At the end of 2004, the
Company's cash and cash equivalents were $43.1 million and working
capital was $27 million ($34.2 million and $17.6 million, respectively
at the end of 2003). Costs of construction are funded from operations,
credit facilities and equity, and are expected to be refunded back to
the Company through the provisions of the FDIF in the operational
services agreements with British Columbia Lottery Corporation.

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

The Company will hold a conference call for investors and analysts on
Tuesday, March 8, 2005 at 4:30 pm Eastern Standard Time, or 1:30 pm
Pacific Standard Time. The Company will discuss its financial results
for the year ended December 31, 2004, and provide an update on the
Company's activities. To participate in the conference call, please dial
416-695-5275 or toll free 1-888-509-0082. 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, Executive Director, Media &
Public Relations. Mr. Blank can be reached at the following number (604)
512-6066.

Great Canadian Gaming Corporation, with over 3,200 employees, is a
multi-jurisdictional gaming and entertainment operator with six
operating casinos, a thoroughbred racecourse, a community gaming centre,
numerous licensed restaurants and a marina operation in British Columbia
and, through Great American Gaming Corporation, four gaming and
restaurant / entertainment facilities in Washington State.

Upon closing of the acquisition of Orangeville, the Company will also
own two standardbred racecourses, one of which has a casino.

ON BEHALF OF

GREAT CANADIAN GAMING CORPORATION

Howard S. Hum, CA, Controller & Acting Chief Financial Officer



GREAT CANADIAN GAMING CORPORATION
Consolidated Balance Sheets
(In thousands, except for share and per share information)
As at December 31,
--------------------------------------------------------------------
2004 2003
-----------------------
Restated

ASSETS

CURRENT
Cash and cash equivalents $ 43,133 $ 34,193
Accounts receivable 6,040 1,885
Current portion of promissory
notes receivable 1,639 1,031
Current portion of FDIF receivable 15,000 10,081
Prepaid expenses and deposits 3,201 2,448
--------------------------------------------------------------------
69,013 49,638
Promissory notes receivable 7,462 9,447
FDIF receivable 102,065 15,224
Property, plant and equipment 125,352 72,877
Goodwill 20,038 5,029
Intangible assets 28,629 573
Other assets 9,856 3,672
--------------------------------------------------------------------
$ 362,415 $ 156,460
--------------------------------------------------------------------
--------------------------------------------------------------------

LIABILITIES

CURRENT
Gaming commission and wager
revenue payable $ 6,272 $ 7,118
Accounts payable and accrued liabilities 33,044 17,448
Income taxes payable 1,797 1,354
Current portion of long-term debt 860 6,137
--------------------------------------------------------------------
41,973 32,057
Long-term debt 154,000 28,092
Future income taxes 11,536 725
Non-controlling interest 836 972
--------------------------------------------------------------------
208,345 61,846
--------------------------------------------------------------------

SHAREHOLDERS' EQUITY

Share capital and other equity 101,801 66,609
Cumulative foreign currency translation (5,908) (3,447)
Retained earnings 58,177 31,452
--------------------------------------------------------------------
154,070 94,614
--------------------------------------------------------------------
$ 362,415 $ 156,460
--------------------------------------------------------------------
--------------------------------------------------------------------
The 2003 numbers have been restated for the change in accounting
policy for stock-based compensation.



GREAT CANADIAN GAMING CORPORATION
Consolidated Statements of Income
(In thousands, except for share and per share information)
Years ended December 31,
--------------------------------------------------------------------
2004 2003
-----------------------
Restated

REVENUES $ 178,515 $ 114,482

EXPENSES
Amortization 4,825 2,520
Human resources 89,361 58,709
Stock-based compensation 2,209 5,401
Marketing and promotion 9,426 5,269
Occupancy costs 9,852 6,558
Operating supplies 12,931 7,130
--------------------------------------------------------------------
128,604 85,587
--------------------------------------------------------------------

INCOME BEFORE UNDERNOTED ITEMS 49,911 28,895

Restructuring costs 5,557 -
Termination of legal proceedings 2,275 -
--------------------------------------------------------------------

INCOME FROM OPERATIONS 42,079 28,895

Income (loss) from investments 1,874 (495)
Interest and financing, net of
interest income (2,201) (1,426)
Foreign exchange gain (loss) 340 (44)
--------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 42,092 26,930

Income taxes 14,967 12,728
--------------------------------------------------------------------

INCOME BEFORE NON-CONTROLLING INTEREST 27,125 14,202

Non-controlling interest 400 (169)
--------------------------------------------------------------------
NET INCOME $ 26,725 $ 14,371
--------------------------------------------------------------------
--------------------------------------------------------------------

EARNINGS PER COMMON SHARE
Basic $ 1.01 $ 0.66
Diluted $ 0.95 $ 0.62
--------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic 26,365,328 21,831,067
Diluted 28,261,107 23,332,741
--------------------------------------------------------------------
The 2003 numbers have been restated for the change in accounting
policy for stock-based compensation.



GREAT CANADIAN GAMING CORPORATION
Consolidated Statements of Cash Flows
(In thousands, except for share and per share information)
As at December 31,
--------------------------------------------------------------------
2004 2003
-----------------------
Restated

Cash Flows from Operating Activities
Net income $ 26,725 $ 14,371
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization 4,825 2,520
Non-cash restructuring costs 558 -
Write-down of equity investment 300 -
Imputed interest on FDIF receivable (1,365) -
Gain from sale of equity investment (1,975) -
Stock based compensation 2,209 5,401
Operating expenses reduced by FDIF
receivable (7,312) (604)
Other activities 1,562 1,076
Future income taxes 607 (494)
Changes in non-cash operating working
capital 3,509 (3,418)
--------------------------------------------------------------------
Net cash provided by operating activities 29,643 18,852
--------------------------------------------------------------------

Cash Flows from Financing Activities
Proceeds from long-term debt 222,451 14,239
Repayment of long-term debt (110,352) (8,896)
Deferred financing costs (2,846) -
Common shares issued for cash 32,983 39,246
Purchase of treasury shares - (965)
--------------------------------------------------------------------
Net cash provided by financing activities 142,236 43,624
--------------------------------------------------------------------

Cash Flows from Investing Activities
Investment in and advances to equity
investees (251) (3,472)
Deposit on acquisition of Orangeville (4,000) -
FDIF received 12,455 9,002
Purchase of property, plant and equipment,
net of related accounts payable (137,581) (35,465)
Acquisition of HEI, net of cash (28,943) -
Acquisition of Vetter Management (1,919) -
Acquisition of Evergreen and Grand
Central Properties (1,632) -
Acquisition of Pair O'Dice,
net of cash acquired (139) (8,109)
Acquisition of Jack O'Clubs,
net of cash acquired - (729)
Acquisition of River Rock - (3,681)
Promissory notes and advances
receivable, net 511 (6,524)
--------------------------------------------------------------------
Net cash used in investing activities (161,499) (48,978)
--------------------------------------------------------------------

--------------------------------------------------------------------
Effect of foreign exchange on cash
and cash equivalents (1,440) (2,200)
--------------------------------------------------------------------

Net Cash Inflow 8,940 11,298
Cash and cash equivalents,
Beginning of Year 34,193 22,895
--------------------------------------------------------------------
Cash and cash equivalents, End of Year $ 43,133 $ 34,193
--------------------------------------------------------------------
--------------------------------------------------------------------
The 2003 numbers have been restated for the change in accounting
policy for stock-based compensation.



-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Great Canadian Gaming Corporation
    Mr. Thomas Bell
    Executive Director, Corporate Development
    (604) 303-1000
    (604) 279-8605 (FAX)
    www.gcgaming.com