Great Canadian Gaming Corporation
TSX : GCD

Great Canadian Gaming Corporation

November 07, 2005 17:05 ET

Great Canadian Gaming Corporation Reports Third Quarter 2005 Results; Delivering Growth and Integration

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Nov. 7, 2005) - Great Canadian Gaming Corporation (TSX:GCD) ("the Company") announces its financial results for the period ended September 30, 2005.

"Our financial results continue to reflect Great Canadian's growth through both expansion and acquisition. Our EBITDA has once again increased, and I am very pleased with our Company's progress. We have become broader in our scope and entered into complementary businesses that drive our core gaming product. Our assessment of the Canadian gaming market is proving accurate and our strategy for developing that market continues as planned. Gaming in Canada continues to grow, and Great Canadian's stakeholders are positioned to benefit from this growth," said Ross J. McLeod, Chairman and CEO. "Our progress is reflected in the highlights of our overall performance."



Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 % Chg 2005 2004 % Chg
---------------------------------------------------------
Derived From the Interim Financial Statements
Revenues $ 75,065 $ 51,075 47% $ 196,840 $ 121,852 62%
EBITDA (1) $ 19,749 $ 16,898 17% $ 55,760 $ 37,741 48%
Adjusted
EBITDA (1) $ 27,161 $ 20,418 33% $ 71,180 $ 46,325 54%
Net Income $ 9,026 $ 6,285 44% $ 28,744 $ 17,039 69%
Earnings per
common share:
Basic $ 0.12 $ 0.09 33% $ 0.38 $ 0.26 46%
Diluted $ 0.11 $ 0.09 22% $ 0.37 $ 0.24 54%
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The Company has accounted for the results of operation of Georgian Downs since July 2, 2005, the date of acquisition under a bare trust arrangement, to September 30, 2005, the date of regulatory approval, under the equity basis of accounting, whereby the net results from its operations are reflected as "income from investments" in the statement of income. The following table reflects the financial results as if the Company had accounted for the results of operation of Georgian Downs on a consolidated basis since July 2, 2005:



Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 % Chg 2005 2004 % Chg
---------------------------------------------------------
Adjusted to Consolidate Georgian Downs (2)
Revenues $ 80,300 $ 51,075 57% $ 202,075 $ 121,852 66%
EBITDA (1) $ 21,304 $ 16,898 26% $ 57,315 $ 37,741 52%
Adjusted
EBITDA (1) $ 28,716 $ 20,418 41% $ 72,735 $ 46,325 57%
Net Income $ 9,026 $ 6,285 44% $ 28,744 $ 17,039 69%
Earnings per
common share:
Basic $ 0.12 $ 0.09 33% $ 0.38 $ 0.26 46%
Diluted $ 0.11 $ 0.09 22% $ 0.37 $ 0.24 54%
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The financial results for the nine month periods ended September 30, 2005 and 2004, reflect the inclusion of River Rock Casino Resort's operations since June 2004, Fraser Downs' slot operations since March 2005, two Nova Scotia casinos from May 2005, and the expansion of non-casino activities, such as food & beverage, horseracing, entertainment and hotel operations.

For the nine month period ended September 30, 2005, the Company's revenues reached $196.8 million, a 62% increase from the same period in 2004. EBITDA reached $71.2 million, a 54% increase from 2004. Net income was $28.7 million, a 69% increase from 2004. Basic earnings per share were $0.38, up 46% from 2004. Diluted earnings per share were $0.37, up 54% from 2004.

For the three month period ended September 30, 2005, revenues were $75.1 million, a 47% increase from the third quarter of 2004 and a 10% increase from the second quarter of 2005. EBITDA was $19.7 million, a 17% increase from the third quarter of 2004 and a 2% increase from the second quarter of 2005. Net income was $9.0 million, a 44% increase from the third quarter of 2004 (which included an after-tax restructuring charge of $3,663) and a 14% decrease from the second quarter of 2005. Basic earnings per share were $0.12, a 33% increase over the third quarter of 2004 and a 14% decrease from the second quarter of 2005. Diluted earnings per share were $0.11, an increase of 22% over the third quarter of 2004 and a 21% decrease from the second quarter of 2005.

Net income, and basic and diluted earnings per share in the third quarter of 2005, as compared to the second quarter, has been impacted by increased interest and financing charges, an increase in the income tax provision rate, and non-cash operating expenses, such as amortization and stock based compensation. In addition, the issuance of 3.7 million common shares in the third quarter, without the corresponding income from the acquisition of Flamboro Downs, had a dilutive effect on the earnings per share for the quarter.

"In the third quarter, we continued to focus and deliver on our strategy. The final phase of the River Rock Casino Resort fully opened in September, and the grandstand, food and beverage amenities at Fraser Downs completed in the beginning of October. As expected, following the opening of these two properties, we saw an immediate lift in customer count, and volume of play. The Coquitlam Boulevard Casino expansion is scheduled to open on November 17, with 68 table games, and 1,000 slot and electronic games. We achieved our registration in Ontario and took over the management of Georgian Downs on September 30 and completed our acquisition of Flamboro Downs on October 19. The Ontario Lottery and Gaming Corporation has increased weekend hours of operation at Georgian Downs," said Mr. Anthony Martin, President and COO.

"Last month, we received the final approval of the City of Vancouver's Council and the Development Permit Board for the installation of slots at Hastings Racecourse. We will work directly with city staff on finalizing the development and building permits, and creating an operating agreement for the site. We will then commence demolition and construction activities, at which time we will indicate an expected opening date for the Hastings Racecourse expansion," said Mr. Martin.

The Company's operations have diversified into non-casino activities, including horseracing, food and beverage, hospitality and entertainment products. These activities are offered primarily to increase 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 Washington State operations for the fourth consecutive quarter. The Company's Integration Team has already achieved reductions in the cost structure of the Nova Scotia casinos. Additional improvements are now planned, which should bring the operations closer to the financial performance of our British Columbia properties," said Mr. Martin. "Importantly, our commitment to long-term growth with the delivery of our capital projects is evidenced in the delivery of the Coquitlam casino expansion. The maintenance of our flexible financing structure and a strong balance sheet will allow us to complete our current projects and, where accretive, pursue attractive expansion opportunities across Canada."

Total assets increased to $807,206 at September 30, 2005, an increase of 123% from the year-end and a 17% increase from June 30, 2005. These increases are primarily due to the acquisition of Orangeville, MEG and Georgian Downs, and the continued build-out of the River Rock and Coquitlam expansions. Working capital was $46,928 at September 30, 2005, an increase of 74% from the year-end and an increase of 62% from June 30, 2005.

Due from provincial gaming corporations increased from $117.0 million to $255.2 million. Property, plant and equipment increased to $319.3 million at September 30, 2005. Due from provincial gaming corporations and property, plant and equipment, collectively, have increased by 137% from December 31, 2004 and 18% from June 30, 2005, representing the continued capital investment on facilities construction, and the acquisitions of Orangeville, MEG and Georgian Downs.

To finance acquisitions and capital development projects, the Company issued 3.75 million common shares for net proceeds of $60.3 million on January 13, 2005, increased its revolving credit facility from $100 million to $200 million on April 26, 2005, issued $150 million in 10-year 5.50% Senior B Series Notes on July 21, 2005 and issued 3.7 million special warrants, which were converted to an equivalent number of common shares, for net proceeds of $72.8 million on August 3, 2005.

The Company will continue to focus on the delivery of its expansions, integration of its acquisitions and seek efficiencies in its operations. In the fourth quarter of 2005, the Company expects to see the opening of the expansion at the Coquitlam Boulevard Casino, the start-up of the live racing season at Fraser Downs, a full quarter of financial results from the added hotel, theatre, and food and beverage facilities at the River Rock Casino Resort, the additional income from the added hours of operations at Georgian Downs and full consolidation of its results, the integration of and financial results from the acquisition of Flamboro Downs, and added gaming revenues from River Rock and Coquitlam as these properties return to a steady state of operations and growth.

Great Canadian, home to approximately 5,400 employees, is a multi-jurisdictional gaming and entertainment operator with facilities in British Columbia, Ontario, Nova Scotia and Washington State. Great Canadian operates casinos, thoroughbred and standardbred racecourses, a community gaming centre, hotel, theatre, and various food and beverage facilities.

Please refer to the Interim Consolidated Financial Statements and Management Discussion and Analysis at www.gcgaming.com (available on November 7, 2005) or www.sedar.com (available on November 8, 2005) for detailed financial information and analysis.

The Company will hold a conference call for investors and analysts on Tuesday, November 8th, 2005 at 8:30 am Eastern Standard Time, or 5:30 am Pacific Standard Time. The Company will discuss its financial results for the period ended September 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 intended 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.

ON BEHALF OF GREAT CANADIAN GAMING CORPORATION

Howard S. Hum, CA, Chief Financial Officer

(1) EBITDA means earnings before interest, taxes, depreciation, amortization, stock based compensation and restructuring charges. Adjusted EBITDA means EBITDA plus any repayments under the Facility Development Improvement Fund from British Columbia Lottery Corporation, or Capital Recovery Account, Operator's Capital Investment or Mandatory Deferral from Nova Scotia Gaming Corporation. Both EBITDA and Adjusted EBITDA are non-generally accepted accounting standards ("non-GAAP") measures. See additional comments on non-GAAP measures in the Management Discussion & Analysis.

(2) Calculated by adding the financial results from Georgian Downs for the three-month period ended September 30, 2005 as if it were consolidated instead of accounted for using the equity method.



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

ASSETS

CURRENT
Cash and cash equivalents $ 58,062 $ 43,133
Accounts receivable 10,192 6,040
Promissory notes receivable, current 3,145 1,639
Due from Provincial Gaming Corporations,
current 34,948 15,000
Prepaid expenses and deposits 11,776 3,201
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118,123 69,013
Promissory notes receivable 600 7,462
Advance and deposit on acquisitions 33,761 4,000
Due from Provincial Gaming Corporations 220,297 102,065
Property, plant and equipment 319,345 125,352
Goodwill 21,208 20,038
Intangible assets 79,435 28,629
Other assets 14,437 5,856
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$ 807,206 $ 362,415
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LIABILITIES

CURRENT
Gaming revenue payables $ 11,772 $ 6,272
Accounts payable and accrued liabilities 55,561 33,044
Income taxes payable 3,179 1,797
Long-term debt, current 683 860
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71,195 41,973
Long-term debt 356,812 154,000
Future income taxes 51,616 11,536
Deferred credit and other liabilities 1,703 -
Non-controlling interest 750 836
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482,076 208,345
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SHAREHOLDERS' EQUITY

Share capital and other equity 245,395 101,801
Cumulative foreign currency translation (7,186) (5,908)
Retained earnings 86,921 58,177
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325,130 154,070
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$ 807,206 $ 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)
For the Nine months ended, September 30, 2005
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Three months ended Nine months ended
Sept 30, Sept 30,
2005 2004 2005 2004
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REVENUES $ 75,065 $ 51,075 $ 196,840 $ 121,852

EXPENSES
Amortization 2,838 1,188 6,441 3,266
Human resources 38,128 25,587 97,653 62,579
Marketing and promotion 6,337 2,393 14,090 6,152
Occupancy costs 3,064 2,513 10,861 6,712
Operating supplies 7,787 3,684 18,476 8,668
Stock-based compensation 1,418 286 3,324 1,273
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59,572 35,651 150,845 88,650
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INCOME BEFORE UNDERNOTED
ITEMS 15,493 15,424 45,995 33,202

Restructuring costs - 5,557 - 5,557

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INCOME FROM OPERATIONS 15,493 9,867 45,995 27,645

Income (loss) from
investments 402 (106) 441 27
Loss from disposal of
land and investment, net (463) - (463) -
Interest and financing (2,625) (245) (5,494) (1,043)
Accretive income 2,093 - 5,295 -
Foreign exchange gain
(loss) 18 (30) 102 347
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INCOME BEFORE INCOME TAXES 14,918 9,486 45,876 26,976

Income taxes 5,675 3,136 16,608 9,761
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INCOME BEFORE
NON-CONTROLLING INTEREST 9,243 6,350 29,268 17,215

Non-controlling interest 217 65 524 176
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NET INCOME $ 9,026 $ 6,285 $ 28,744 $ 17,039
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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. 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 Nine months ended
Sept 30, Sept 30,
2005 2004 2005 2004
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Cash Flows from Operating
Activities
Net income $ 9,026 $ 6,285 $ 28,744 $ 17,039
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Amortization 2,838 1,188 6,441 3,266
Non-cash restructuring
costs - 559 - 559
Loss from disposal of
land and investment,
net 463 - 463 -
Accretive income (2,093) - (5,295) -
Stock based compensation 1,418 286 3,324 1,273
Operating expenses
reduced by FDIF (3,441) (4,893) (6,002) (5,256)
Other activities 520 456 2,359 725
Future income taxes 47 43 (137) 24
Changes in non-cash
operating working capital (1,104) 3,347 (5,419) (973)
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Net cash provided by
operating activities 7,674 7,271 24,478 16,657
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Cash Flows from Financing
Activities
Proceeds from long-term
debt 202,999 163,708 379,243 218,699
Repayment of long-term
debt (176,543) (81,351) (177,179) (90,767)
Deferred financing costs (2,993) (2,291) (3,609) (2,291)
Deferred credits and
other liabilities 1,736 - 1,736 -
Common shares issued for
cash, net of issuance
costs 72,005 8,839 137,916 19,227
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Net cash provided by
financing activities 97,204 88,905 338,107 144,868
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Cash Flows from Investing
Activities
Investment in and
advances to equity
investees (393) 168 (614) (73)
Funds received from
Provincial Gaming
Corporations 6,996 3,520 15,004 8,584
Purchase of property,
plant and equipment,
net of related
accounts payable (69,351) (36,142) (146,570) (105,793)
Proceeds from disposal
of property, plant and
equipment 2,382 - 2,382 -
Acquisition of Georgian
Downs, net of cash
acquired 137 - (25,679) -
Consolidation of cash
of Georgian Downs 1,286 - 1,286 -
Acquisition of MEG, net
of cash acquired - - (86,148) -
Acquisition of
Orangeville, net of
cash acquired and
deposit 445 - (32,663) -
Acquisition of Weinlager,
net of bank indebtedness (2) - (1,471) -
Acquisition of HEI,
net of cash acquired - (10) - (4,927)
Acquisition of Evergreen
and Grand Central
Properties - (1,632) - (1,632)
Acquisition of Casino,
net of cash acquired - - - (139)
Advance on acquisition
of Flamboro Downs (33,761) - (33,761) -
River Rock prepaid lease - - (9,262) -
Promissory notes and
advances receivable, net (2,005) 88 (29,869) 61
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Net cash used in
investing activities (94,266) (34,008) (347,365) (103,919)
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Effect of foreign exchange
on cash and cash
equivalents (365) (859) (291) (472)
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Net Cash Inflow 10,247 61,309 14,929 57,134
Cash and cash equivalents,
Beginning of Period 47,815 30,018 43,133 34,193
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Cash and cash equivalents,
End of Period $ 58,062 $ 91,327 $ 58,062 $ 91,327
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Summary statement - Readers should refer to the complete Interim
Consolidated Financial Statements



Contact Information

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