Great Canadian Gaming Corporation
TSX : GCD

Great Canadian Gaming Corporation

August 08, 2005 19:54 ET

Great Canadian Gaming Corporation Reports Second Quarter 2005 Results; Strong Growth, Successful Integrations

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Aug. 8, 2005) - Great Canadian Gaming Corporation (TSX:GCD) ("the Company") is pleased to announce its financial results for the period ended June 30, 2005.

For the six month period ended June 30, 2005, the Company's revenues reached $121.8 million, a 72% increase from the same period in 2004. Net income was $19.7 million, an 83% increase from last year. Basic and diluted earnings per share were both $0.26, with basic earnings per share 53% higher than last year and diluted earnings per share 73% higher than last year. EBITDA (see note regarding non-GAAP measures in the Highlights section) reached $36.0 million, a 73% increase from last year.

For the three month period ended June 30, 2005 (second quarter), revenues were $68.5 million, an 83% increase from the second quarter of 2004 and a 29% increase from the first quarter of 2005. Net income was $10.5 million, a 93% increase from the second quarter of 2004 and a 13% increase from the first quarter of 2005. Basic and diluted earnings per share were both $0.14, both 75% higher than the corresponding earnings per share for the second quarter of 2004 and 17% higher than the first quarter of 2005. EBITDA was $19.4 million, an 83% increase from the second quarter of 2004 and a 17% increase from the first quarter of 2005.

"The second quarter has been a period of acquisition and integration of our operations and expansion of our capital structure. We continue to see the improved performance of our US operations. Our BC operations have met our expectations and sustained their performance and levels of profitability in the face of significant expansion by our competitors. Our major construction projects at River Rock Casino Resort and Coquitlam Boulevard Casino are anticipated to conclude this quarter," said Mr. Anthony R. Martin, President and Chief Operating Officer.

The financial results for the three month period ended June 30, 2005 include the results of operation of Orangeville Raceway Ltd., which operates Fraser Downs and Sandown, for the full quarter, Metropolitan Entertainment Group, which operates the two casinos in Nova Scotia, from June 1, 2005, and the River Rock Casino Resort (opened June 24, 2004) for the full quarter.

The Company's operations have diversified into non-casino gaming products, including horseracing, food and beverage, hospitality and entertainment products. These products are offered primarily to increase the traffic into the core casino business, where the company enjoys strong margins. EBITDA margins on non-gaming products are lower than those derived from gaming operations, and are expected to improve with additional revenues from coordinating events between racetracks, increased cross-marketing and promotion, and expansion of teletheatres. In addition, the opening and achievement of full scale operations at food and beverage, hotel and theatre facilities will allow the Company to achieve full economies of scale.

"In the short-term, our restructuring activities have resulted in profitability in the United States operations for the third consecutive quarter. We formed an Integration Team earlier this year, whose sole mandate is to improve the financial performance of recently acquired operations and integrate them with our overall business," said Mr. Martin. "Importantly, we remain committed to long-term growth with the delivery of our capital projects later this year, maintenance of a flexible financing structure, a strong balance sheet, and the pursuit of attractive expansion opportunities across Canada."

"In British Columbia, we have maintained our strategy of capital investment in our properties, which we expect will grow the size of the gaming market and through the offering of exceptional products, secure a larger market share for our Company. We have been focused on the Coquitlam Boulevard Casino expansion, scheduled to open this quarter, the Fraser Downs Casino expansion, which was virtually completed in June, the completion of the River Rock Casino Resort hotel, scheduled to open on August 19, and the renovation of Hastings Racecourse, targeted to commence construction in the near term," said Mr. Ross McLeod, Chairman and Chief Executive Officer.

"Beyond British Columbia, we have steadily developed our position as Canada's largest gaming company. We added four gaming and entertainment facilities to our already outstanding roster of properties. They are Casino Halifax and Casino Sydney, both in Nova Scotia, and, subject to regulatory approval, Georgian Downs Racetrack and Slots, and Flamboro Downs Racetrack and Slots, both in Ontario," added Mr. McLeod. "These acquisitions and our facilities' continued development in British Columbia only serve to secure Great Canadian's potential for this year and into the future."



HIGHLIGHTS/OVERALL PERFORMANCE

Three Months Ended Six Months Ended
In thousands, June 30, June 30,
except per share 2005 2004 % Chg 2005 2004 % Chg
-------------------------------------------------
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Revenues $ 68,548 $ 37,513 83% $ 121,775 $ 70,777 72%
EBITDA (1) $ 19,427 $ 10,614 83% $ 36,011 $ 20,843 73%
Adjusted
EBITDA (1) $ 23,728 $ 13,148 80% $ 44,019 $ 25,907 70%
Net Income $ 10,459 $ 5,427 93% $ 19,718 $ 10,754 83%
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Earnings per
common share:
Basic $ 0.14 $ 0.08 75% $ 0.26 $ 0.17 53%
Diluted $ 0.14 $ 0.08 75% $ 0.26 $ 0.15 73%
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(1) See "Definitions used in MD&A"


Note: Certain of the prior year's comparative figures have been reclassified to conform to the current period's presentation. EBITDA means Earnings Before Interest, income Taxes, Depreciation and Amortization, stock-based compensation, and other non-operating items. Adjusted EBITDA means EBITDA plus amount received from Provincial Gaming Corporations in respect of capital reimbursement. Adjusted EBITDA and EBITDA are non-generally accepted accounting principles measures.

The inclusion of River Rock, Fraser Downs and the two Casinos in Nova Scotia have had a positive impact on the increased financial performance of the second quarter of 2005 as compared to the same quarter of 2004 and the first quarter of 2005.

The Washington state operations continue to show growth, with a significant turnaround in results following the restructuring undertaken late last year. In the second quarter of 2005, the results were positively impacted by the recognition of a previously unrecognized tax loss.

Total assets increased to $688.1 million at June 30, 2005, an increase of 90% from the year-end and a 48% increase from March 31, 2005. These increases are due primarily to the acquisition of Orangeville, the acquisition of MEG, the continued construction at River Rock and Coquitlam, and the deposit for the Georgian Downs acquisition. Working capital increased to $28.9 million at June 30, 2005, an increase of 7% from the year-end and a decrease of 7% from March 31, 2005.

Due from Provincial Gaming Corporations ("PGC") increased from $117 million to $227.7 million. Property, plant and equipment increased to $257.5 million at June 30, 2005. Due from PGC and property, plant and equipment, collectively, have increased by 100% from December 31, 2004 and 48% from the previous quarter, representing the continued capital investment on facilities construction, and the acquisitions of Orangeville and MEG.

Subsequent to June 30, 2005, the Company acquired additional financing through the issuance of $150 million Series B Senior Secured Notes and a private placement of special warrants for gross proceeds of $75 million, used to reduce the credit facility.

Please refer to the Interim Consolidated Financial Statements and Management Discussion and Analysis at www.gcgaming.com (available on August 8, 2005) or www.sedar.com (available on August 9, 2005) for detailed financial information and analysis.

The Company will hold a conference call for investors and analysts on Tuesday, August 9th, 2005 at 8:30 am Eastern Daylight Time, or 5:30 am Pacific Daylight Time. The Company will discuss its financial results for the quarter ended June 30, 2005, and provide an update on the Company's activities. To participate in the conference call, please dial 416-695-6622, or toll free at 1-888-789-0150. This call is solely for investors and analysts.

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

Great Canadian, home to approximately 5,000 employees, is a multi-jurisdictional gaming and entertainment operator with facilities in British Columbia, Nova Scotia and Washington State. Great Canadian operates casinos, thoroughbred and standardbred racecourses, a community gaming centre, and various food and beverage and entertainment facilities.

ON BEHALF OF GREAT CANADIAN GAMING CORPORATION

Howard S. Hum, CA, Chief Financial Officer



GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(In thousands)
As at June 30, 2005 and December 31, 2004
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June 30, December 31,
2005 2004
--------------------------
--------------------------
ASSETS

CURRENT
Cash and cash equivalents $ 47,815 $ 43,133
Accounts receivable 8,227 6,040
Promissory notes receivable 1,026 1,639
Due from Provincial Gaming
Corporations 31,518 15,000
Prepaid expenses and deposits 12,723 3,201
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101,309 69,013
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Promissory notes receivable 723 7,462
Due from Provincial Gaming
Corporations 196,163 102,065
Property, plant and equipment 257,511 125,352
Goodwill 21,618 20,038
Intangible assets 49,857 28,629
Advance and deposit
on acquisitions 48,124 4,000
Other assets 12,762 5,856
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$ 688,067 $ 362,415
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LIABILITIES

CURRENT
Gaming revenue payables $ 5,804 $ 6,272
Accounts payable and accrued
liabilities 62,811 33,044
Income taxes payable 3,086 1,797
Current portion of
long-term debt 710 860
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72,411 41,973
Long-term debt 330,079 154,000
Future income taxes 41,407 11,536
Non-controlling interest 806 836
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444,703 208,345
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SHAREHOLDERS' EQUITY

Share capital and other equity 170,682 101,801
Cumulative foreign
currency translation (5,213) (5,908)
Retained earnings 77,895 58,177
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243,364 154,070
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$ 688,067 $ 362,415
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Summary statement - Readers should refer to the complete Interim
Consolidated Financial Statements


GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Statements of Income
(Unaudited - Prepared by Management)
(In thousands, except for share and
per share information)
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Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
---------------------- -----------------------
---------------------- -----------------------

REVENUES $ 68,548 $ 37,513 $ 121,775 $ 70,777

EXPENSES
Amortization 2,136 1,269 3,603 2,078
Human resources 32,948 19,469 59,525 36,992
Stock-based
compensation 1,185 296 1,906 987
Marketing and
promotion 4,742 1,593 7,753 3,759
Occupancy costs 4,672 2,588 7,797 4,199
Operating supplies 6,759 3,249 10,689 4,984
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52,442 28,464 91,273 52,999
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INCOME FROM OPERATIONS 16,106 9,049 30,502 17,778

Income (loss) from
investments (98) 271 39 133
Interest and
financing, net (1,804) (637) (2,869) (798)
Accretive income from
Provincial Gaming
Corporations 1,778 - 3,202 -
Foreign exchange
gain (loss) (60) 153 84 377
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INCOME BEFORE
INCOME TAXES 15,922 8,836 30,958 17,490

Income taxes 5,135 3,291 10,933 6,625
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INCOME BEFORE
NON-CONTROLLING
INTEREST 10,787 5,545 20,025 10,865

Non-controlling
interest 328 118 307 111
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NET INCOME $ 10,459 $ 5,427 $ 19,718 $ 10,754
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EARNINGS PER
COMMON SHARE
Basic $ 0.14 $ 0.08 $ 0.26 $ 0.17
Diluted $ 0.14 $ 0.08 $ 0.26 $ 0.15
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WEIGHTED AVERAGE
NUMBER OF
COMMON SHARES
Basic 75,172,593 65,144,020 74,549,141 64,163,533
Diluted 77,263,628 70,005,730 76,766,826 69,429,115
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Certain of the prior period's comparative figures have been
reclassified to conform to the current period's presentation.
Specifically, the FDIF accretive income previously shown as Revenues
is now presented as Accretive income from Provincial Gaming
Corporations. Historical common share information has been recomputed
to reflect the subdivision of the Company's common shares on a five
for two basis.

Summary statement - Readers should refer to the complete Interim
Consolidated Financial Statements


GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(In thousands)
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Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
---------------------- ---------------------
---------------------- ---------------------

Cash Flows from
Operating Activities
Net income $ 10,459 $ 5,427 $ 19,718 $ 10,754
Adjustments to
reconcile net
income to net cash
provided by
operating activities:
Amortization 2,136 1,269 3,603 2,078
Accretive income from
Provincial Gaming
Corporations (1,778) - (3,202) -
Stock based
compensation 1,185 296 1,906 987
Operating expenses
reduced by FDIF (200) (107) (2,561) (363)
Other activities 393 68 1,839 269
Future income taxes (184) (13) (184) (19)
Changes in non-cash
operating working
capital 4,750 (3,552) (4,315) (4,321)
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Net cash provided by
operating activities 16,761 3,388 16,804 9,385
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Cash Flows from
Financing Activities
Proceeds from
long-term debt 162,708 54,194 176,244 54,991
Repayment of
long-term debt (178) (8,218) (636) (9,416)
Deferred financing
costs (616) - (616) -
Common shares issued
for cash, net of
issuance costs 2,013 5,863 65,911 10,389
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Net cash provided
by financing
activities 163,927 51,839 240,903 55,964
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Cash Flows from
Investing Activities
Investment in and
advances to equity
investees (156) (3) (221) (241)
Funds received from
Provincial Gaming
Corporations 4,301 2,534 8,008 5,064
Purchase of property,
plant and equipment,
net of related
accounts payable (46,109) (44,857) (77,219) (69,651)
Acquisition of MEG,
net of cash acquired (86,148) - (86,148) -
Acquisition of
Orangeville, net of
cash acquired and
deposit (72) - (33,108) -
Acquisition of
Weinlager, net of
bank indebtedness - - (1,469) -
River Rock prepaid
lease - - (9,262) -
Advance on
acquisition of
Georgian Downs (48,124) - (48,124) -
Acquisition of HEI,
net of cash
acquired - (2,907) - (4,917)
Acquisition of
Pair O'Dice, net
of cash acquired - (13) - (139)
Promissory notes and
advances receivable,
net 209 (281) (5,556) (27)
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Net cash used in
investing activities (176,099) (45,527) (253,099) (69,911)
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Effect of foreign
exchange on cash
and cash equivalents 87 239 74 387
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Net Cash Inflow
(Outflow) 4,676 9,939 4,682 (4,175)
Cash and cash
equivalents,
Beginning of Period 43,139 20,079 43,133 34,193
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Cash and cash
equivalents,
End of Period $ 47,815 $ 30,018 $ 47,815 $ 30,018
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Summary statement - Readers should refer to the complete Interim
Consolidated Financial Statements



Contact Information

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