Great Canadian Gaming Corporation
TSX : GCD

Great Canadian Gaming Corporation

November 09, 2006 17:49 ET

Great Canadian Reports Third Quarter Revenues of $100.2 Million, EBITDA of $27.0 Million, Reflecting New Facility Development Commisson Accounting Policy

Benefits from Ongoing Expense Reduction Initiatives Results in Year-Over-Year and Quarterly Sequential Improvements in EBITDA Margins

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Nov. 9, 2006) - Great Canadian Gaming Corporation (TSX:GCD) (the "Company") announces its financial results for the three and nine month period ended September 30, 2006.

THIRD QUARTER OF 2006 HIGHLIGHTS

- Revenue growth and EBITDA margin improvements with revenues increasing by 30% and EBITDA increasing by 33%, compared to the third quarter of 2005.

- Revenues increased by 5% and EBITDA increased by 12%, compared to the second quarter of 2006.

- Greater financial flexibility with $450 million in bridge financing secured and $300 million in Series A and Series B Senior Secured Notes redeemed. Associated non-recurring redemption costs amount to $20.3 million after-tax ($30.9 million before-tax) or $0.23 on a diluted per share basis, causing the net loss in the current quarter of $14.1 million and diluted loss per share of $0.16.

- Simplified new accounting policy classifies the Facility Development Commission ("FDC") as revenue when earned (See figure below.)



In CAD
000's,
except per Three Months Ended Nine Months Ended
share ------------------------------------- ------------------------
inform- % % %
ation Sept 30, June 30, Chan- Sept 30, Chan- Sept 30, Sept 30, Chan-
See 2006 2006 ge 2005 ge 2006 2005 ge
Note (1) ------------------------------------- ------------------------

Revenues $100,220 $95,681 5% $77,247 30% $287,182 $204,920 40%
EBITDA (2)$ 26,985 $24,148 12% $20,296 33% $ 72,803 $ 61,713 18%
Net income
(loss),
adjusted
(3) $ 6,158 $ 6,088 1% $ 6,404 (4%) $ 13,161 $ 24,765 (47%)
Net (loss)
income $(14,112) $ 6,088 $ 6,404 $ (7,109)$ 24,765

Earnings
(loss)
per
common
share:
Basic $ (0.16) $ 0.07 $ 0.08 $ (0.08)$ 0.33
Diluted $ (0.16) $ 0.07 $ 0.08 $ (0.08)$ 0.32
Adjusted
diluted
(3) $ 0.07 $ 0.07 $ 0.08 $ 0.16 $ 0.32

Notes:
(1) The unaudited summary of financial results above reflects the
retrospective application of the change in accounting policy for the
FDC received from the British Columbia Lottery Corporation ("BCLC").
FDC is recorded as revenues when earned (when it is payable by BCLC
to the Company), subject to the Company making sufficient improvement
or development expenditures, approved by BCLC, on its BC gaming
properties.

For the three month period ended September 30, 2006, the change in
accounting policy had the effect of benefiting reported revenues by
$4.9 million and EBITDA by $4.8 million, while raising amortization
expense by $2.7 million and eliminating accretive income of $2.7
million. The change in accounting policy reduced the quarter's net
income by $0.5 million and earnings per common share by $0.01.

A reconciliation of reported financial results for previously reported
periods (including the comparative period ended September 30, 2005
noted in the table above) summarizing the effect of the change in the
accounting policy is provided beginning on page 10 of this press
release.

(2) "EBITDA", a non-GAAP measure, is earnings before interest and financing
expense, taxes, depreciation and amortization, stock-based
compensation, restructuring costs, impairment of investments and
long-lived assets, foreign exchange gain (loss) and non-controlling
interests. EBITDA is derived from the consolidated statement of income
(loss) and can also be computed as revenues, less human resources,
general and administration, marketing and promotion, occupancy costs
and operating supplies. See additional comments in the Disclaimer.

(3) "Net income (loss), adjusted" and "Adjusted diluted earnings per share"
are non-GAAP measures. See additional comments in the Disclaimer.

Net income (loss), adjusted is Net income (loss) from the consolidated
statement of income (loss) adjusted for the elimination of $20,270 on
an after-tax basis ($30,904 on a pre-tax basis) in cost associated with
the redemption of the Series A and Series B Senior Secured Notes (the
"Notes").

Adjusted diluted earnings per share is Diluted loss per share from the
consolidated statement of income (loss) adjusted for the elimination of
the per share effect of $20,270 on an after-tax basis in costs
associated with the redemption of the Notes.


"In the third quarter of 2006, Great Canadian's 30% year-over-year revenue increase drove a 33% rise in EBITDA reflecting our expanded operating base as well as initial benefits realized from our ongoing expense reduction initiatives," stated Ross J. McLeod, Chairman and CEO. "Importantly, the EBITDA margin for the third quarter of 2006 improved to 26.9%, from 25.2% in the second quarter of 2006. Under our previous accounting policy for FDC, the EBITDA margin would have improved to 23.3% in the third quarter, compared to 21.5% in the second quarter. This continued improvement highlights the progress we are achieving in realizing operating efficiencies. I am pleased with the results but our focus remains on continuing to generate higher revenue and commensurate EBITDA margin growth at our existing properties.

"Further expense reduction initiatives will be implemented over the next several quarters. Combined with the benefit from initiatives already in place, we expect we will continue to elevate operating margins throughout 2007. The implementation of these initiatives would not be possible without the appropriate senior and property level management. Accordingly, over the last several months, we have significantly enhanced our senior management team through the appointments of Milton Woensdregt as CFO and Vincent Trudel as COO, subject to regulatory approvals. These appointments bring to Great Canadian the leadership necessary to leverage the strong growth created by our diversified property portfolio into increased stakeholder value.

"Great Canadian also made a significant step in the improvement of its debt structure. During the third quarter, we secured $450 million in new bridge credit facilities. These facilities were used to finance the early redemption of our outstanding $300 million in aggregate of Series A and Series B Senior Secured Notes. The non-recurring costs associated with the redemption of the Notes amounted to $20.3 million on an after-tax basis, or $0.23 on a diluted per share basis, which significantly impacted our third quarter results. We believe the costs of the redemption are outweighed by the benefits of having a more flexible permanent debt structure, lower cost of capital and a leverage ratio more typical of our industry. This new structure will permit greater capacity to support the development and expansion of our properties.

"Reflecting our integrated approach to improving EBITDA margins, we recently brought the management of our hotel, food and beverage operations in-house. In doing so, we will leverage the expertise of the strong team of seasoned hospitality executives we now possess internally, better integrate hospitality with our core gaming operations and improve the EBITDA margins.

We look forward to Vincent's proven history of success in managing such functions at other properties. This change in hospitality operating structure eliminates the management fee that was paid to our previous provider."

Mr. McLeod continued, "Great Canadian is also looking to optimize the contributions from our existing operations given our strong competitive positioning in each of our markets. At River Rock Casino Resort and Boulevard Casino, we are adjusting the proportion of high-stakes baccarat tables. We hope to both leverage the popularity of this game into higher gaming win and decrease its volatility with the offering of additional positions. In addition, we continue to work on integrating new theatres at both facilities with the goal of driving incremental gaming and hospitality revenues. At Hastings Racecourse preparations are underway for the eventual placement of approximately 600 slot machines. Elsewhere in Canada, Great Canadian exercised an option to purchase approximately 70 acres of developable land adjacent to our Georgian Downs property. Any future development of gaming at that property would be subject to the participation and approval of the Ontario Lottery and Gaming Corporation."

Mr. McLeod concluded, "Our current property portfolio, management team and focus on improving EBITDA margins provide Great Canadian with significant earnings growth potential. As revenues from our existing facilities continue to grow, we will continue to prioritize the achievement of increased efficiencies and operating margin improvements. I am confident that in 2007, Great Canadian's Silver Anniversary, we will generate additional long-term value for all our stakeholders."

The Company will host a conference call for investors and analysts today, Thursday, November 9, 2006 at 5:00 PM Eastern Standard Time, or 2:00 PM Pacific Standard Time, to review the financial results for the period ended September 30, 2006. To participate in the conference call, please dial 416-695-5259 or toll free at 877-461-2814. Questions will be reserved for institutional investors and analysts. Interested parties may also access the call on the Internet at www.gcgaming.com; please allow 15 minutes to register and install any necessary software. Following completion of the call, a replay will be available until November 23, 2006 by dialing 416-695-5275, or toll free at 866-559-6831. A replay of the call will also be available at www.gcgaming.com.

ABOUT GREAT CANADIAN GAMING CORPORATION

Great Canadian is a multi-jurisdictional gaming and entertainment operator with facilities in British Columbia, Ontario, Nova Scotia and Washington State. Great Canadian operates fourteen casinos, five thoroughbred or standardbred racecourses, a community gaming centre, a hotel, two show theatres, and various food and beverage facilities. Further information is available on the Company's website, www.gcgaming.com.

Please refer to the Interim Consolidated Financial Statements and Management's Discussion and Analysis at www.gcgaming.com (available on November 9, 2006) or www.sedar.com (available on November 10, 2006) for detailed financial information and analysis.

The financials results on the following pages are unaudited and prepared by management. Amounts are in thousands, except per share information.



Operating Results in Canada

Three Months Ended Nine Months Ended
------------------------------------- ----------------------
% % %
Sept 30, June 30, Chan- Sept 30, Chan- Sept 30, Sept 30, Chan-
2006 2006 ge 2005 ge 2006 2005 ge
------------------------------------- ----------------------
Gaming
revenues $71,888 $67,137 7% $56,349 28% $204,653 $149,626 37%
Racetrack
revenues 8,307 8,135 2% 6,145 35% 22,850 15,420 48%
Food and
beverage
revenues 12,444 11,708 6% 8,030 55% 35,634 18,436 93%
Hotel
revenues 2,763 2,285 21% 399 592% 6,890 399 1627%
Other
non-gaming
revenues 919 1,549 (41%) 1,329 (31%) 3,906 3,167 23%
96,321 90,814 6% 72,252 33% 273,933 187,048 46%
-------------------------------------------------- ----------------------
Less:
Promotional
allowances (2,082) (1,787) 17% (1,832) 14% (5,768) (3,269) 76%
-------------------------------------------------- ----------------------
Revenues 94,239 89,027 6% 70,420 34% 268,165 183,779 46%
-------------------------------------------------- ----------------------
Human
resources 42,098 40,696 3% 34,110 23% 122,823 85,611 43%
Marketing
and
promotion,
occupancy
costs,
operating
supplies
and G&A 26,238 25,529 3% 17,284 52% 76,189 40,482 88%
-------------------------------------------------- ----------------------
68,336 66,225 3% 51,394 33% 199,012 126,093 58%
-------------------------------------------------- ----------------------

EBITDA(i) 25,903 22,802 14% 19,026 36% 69,153 57,686 20%
-------------------------------------------------- ----------------------
EBITDA %
of
revenues 28% 26% 27% 26% 31%
Stock-based
compensation 1,247 1,480 (16%) 1,396 (11%) 4,869 3,264 49%
Amortization 9,047 8,526 6% 4,850 87% 26,175 11,748 123%
Restructuring
costs 427 994 (57%) - n/a 3,023 - n/a
-------------------------------------------------- ----------------------
Income from
operations $15,182 $11,802 29% $12,780 19% $35,086 $42,674 (18%)
-------------------------------------------------- ----------------------
(i) EBITDA is a non-GAAP measure. Please see Disclaimer.


Table Drop and Table Hold Summary

Three Months Ended Nine Months Ended
------------------------------------- ------------------------
% % %
Sept 30, June 30, Chan- Sept 30, Chan- Sept 30, Sept 30, Chan-
2006 2006 ge 2005 ge 2006 2005 ge
------------------------------------- ------------------------
River Rock
Table
Drop $122,680 $116,580 5% $104,282 18% $232,311 $240,355 (3%)
Table
Hold % 26.5% 24.4% 25.8% 24.5% 25.6%
Slot Win $ 28,785 $ 27,836 3% $ 24,979 15% $ 53,736 $ 47,795 12%

Boulevard
Table
Drop $ 51,909 $ 52,158 0% $ 35,489 46% $110,746 $ 89,966 23%
Table
Hold % 22.2% 19.3% 21.2% 20.8% 22.2%
Slot Win $ 28,759 $ 28,525 1% $ 18,507 55% $ 57,318 $ 37,740 52%

Other
BC
Casinos
Table
Drop $ 46,124 $ 46,138 0% $ 43,138 7% $ 91,345 $ 87,785 4%
Table
Hold % 20.3% 22.0% 22.3% 21.9% 22.8%
Slot Win $ 30,120 $ 29,669 2% $ 27,687 9% $ 58,230 $ 51,251 14%

Casino
Nova
Scotia
Table
Drop $ 19,401 $ 15,282 27% $ 20,572 (6%) $ 31,990 $ 6,057 428%
Table
Hold % 19.1% 20.7% 16.5% 18.9% 17.6%
Slot Win $ 21,910 $ 18,819 16% $ 20,441 7% $ 35,466 $ 5,758 516%


Operating Results in Washington

Three Months Ended Nine Months Ended
------------------------------------- ----------------------
% % %
Sept 30, June 30, Chan- Sept 30, Chan- Sept 30, Sept 30, Chan-
2006 2006 ge 2005 ge 2006 2005 ge
------------------------------------- ----------------------

Gaming
revenues $ 5,397 $ 5,860 (8%) $ 5,834 (7%) $16,718 $17,914 (7%)
Food and
beverage
revenues 1,014 1,024 (1%) 1,205 (16%) 3,200 3,861 (17%)
Other
non-gaming
revenue 98 96 2% 137 (28%) 287 392 (27%)
-------------------------------------------------- ----------------------
6,509 6,980 (7%) 7,176 (9%) 20,205 22,167 (9%)

Less:
Promotional
Allowances (528) (326) 62% (349) 51% (1,188) (1,026) 16%
-------------------------------------------------- ----------------------
Revenues 5,981 6,654 (10%) 6,827 (12%) 19,017 21,141 (10%)
-------------------------------------------------- ----------------------

Human
resources 3,527 3,640 (3%) 3,729 (5%) 10,709 11,481 (7%)
Marketing
and
promotion,
occupancy
costs,
operating
supplies
and G&A 1,372 1,668 (18%) 1,828 (25%) 4,658 5,633 (17%)
-------------------------------------------------- ----------------------
4,899 5,308 (8%) 5,557 (12%) 15,367 17,114 (10%)
-------------------------------------------------- ----------------------

EBITDA(i) 1,082 1,346 (20%) 1,270 (15%) 3,650 4,027 (9%)
-------------------------------------------------- ----------------------
EBITDA %
of
revenues 18% 20% 19% 19% 19%

Stock-based
compensation 44 19 132% 22 100% 115 60 92%
Amortization 455 446 2% 467 (3%) 1,411 1,429 (1%)
-------------------------------------------------- ----------------------
Income from
operations $ 583 $ 881 (34%) $ 781 (25%) $ 2,124 $ 2,538 (16%)
-------------------------------------------------- ----------------------
(i) EBITDA is a non-GAAP measure. Please see Disclaimer.


Consolidated Results of Operations

Three Months Ended Nine Months Ended
--------------------------------------- ----------------------------
% % %
Sept 30, June 30, Chan- Sept 30, Chan- Sept 30, Sept 30, Chan-
2006 2006 ge 2005 ge 2006 2005 ge
--------------------------------------------- ----------------------------
Gaming
reve-
nues $77,285 $72,997 6% $62,183 24% $221,371 $ 167,540 32%
Race-
track
reve-
nues 8,307 8,135 2% 6,145 35% 22,850 15,420 48%
Food
and
bever-
age
reve-
nues 13,458 12,732 6% 9,235 46% 38,834 22,297 74%
Hotel
reve-
nues 2,763 2,285 21% 399 592% 6,890 399 1627%
Other
non-
gaming
reve-
nues 1,017 1,645 (38%) 1,466 (31%) 4,193 3,559 18%
--------------------------------------------- ----------------------------
102,830 97,794 5% 79,428 29% 294,138 209,215 41%
Less:
promo-
tional
allow-
ances (2,610) (2,113) 24% (2,181) 20% (6,956) (4,295) 62%
--------------------------------------------- ----------------------------
Reve-
nues 100,220 95,681 5% 77,247 30% 287,182 204,920 40%
--------------------------------------------- ----------------------------
Human
resour-
ces 45,625 44,336 3% 37,839 21% 133,532 97,092 38%
Market-
ing
and
promo-
tion,
occup-
ancy
costs,
operat-
ing
supp-
lies,
and
G&A 27,610 27,197 2% 19,112 44% 80,847 46,115 75%
--------------------------------------------- ----------------------------
73,235 71,533 2% 56,951 29% 214,379 143,207 50%
--------------------------------------------- ----------------------------
EBITDA 26,985 24,148 12% 20,296 33% 72,803 61,713 18%
--------------------------------------------- ----------------------------
EBITDA %
of
reve-
nues 27% 25% 26% 25% 30%
Stock-
based
compen-
sation 1,291 1,499 (14%) 1,418 (9%) 4,984 3,324 50%
Amortiz-
ation 9,502 8,972 6% 5,317 79% 27,586 13,177 109%
Restruct-
uring
costs 427 994 (57%) - n/a 3,023 - n/a
--------------------------------------------- ----------------------------
Income
from
opera-
tions 15,765 12,683 24% 13,561 16% 37,210 45,212 (18%)
--------------------------------------------- ----------------------------
Non-
operating
(income)
expense 535 2,277 (77%) 199 169% 2,941 422 597%
Impair-
ment
of
invest-
ments
and
long-
lived
assets 201 2,214 (91%) 62 224% 2,487 23 10713%
Interest
and
financ-
ing,
net 34,874 4,224 726% 2,624 1229% 44,435 5,527 704%
Income
taxes (5,733) (2,120) 170% 4,272 (5,544) 14,475
--------------------------------------------- ----------------------------
Net
income
(loss)
$(14,112) $ 6,088 $ 6,404 $ (7,109)$ 24,765
--------------------------------------------- ----------------------------
--------------------------------------------- ----------------------------

Earnings
(loss)
per
common
share:
Basic $(0.16) $ 0.07 $ 0.08 $ (0.08)$ 0.33
Dilu-
ted $(0.16) $ 0.07 $ 0.08 $ (0.08)$ 0.32
--------------------------------------------- ----------------------------
--------------------------------------------- ----------------------------

Weighted
average
number of
common
shares:
Basic
86,087,373 85,847,019 77,933,301 83,911,096 75,689,590
Dilu-
ted
86,087,373 86,560,019 79,532,208 83,911,096 77,898,824
--------------------------------------------- ----------------------------
--------------------------------------------- ----------------------------
(i) EBITDA is a non-GAAP measure. Please see Disclaimer.


GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
------------------------------------------------------------------------

September 30, December 31,
2006 2005

ASSETS

CURRENT
Cash and cash equivalents $ 86,876 $ 69,812
Restricted cash 6,553 6,598
Accounts receivable 8,306 13,098
Income taxes receivable 2,774 4,533
Due from Nova Scotia Gaming
Corporation, current 13,039 15,353
Promissory notes receivable, current 619 1,329
Future income taxes 2,227 1,875
Prepaids, deposits and other assets 17,246 7,708
------------------------------------------------------------------------
137,640 120,306
Due from Nova Scotia Gaming
Corporation 26,442 28,607
Property, plant and equipment 537,191 518,807
Promissory notes receivable and other
assets 4,412 8,544
Intangible assets 204,485 209,888
Goodwill 38,360 37,497
------------------------------------------------------------------------
$ 948,530 $ 923,649
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES

CURRENT
Gaming revenues payable $ 9,403 $ 10,030
Wager revenue payable 0 -
Accounts payable and accrued liabilities 48,557 56,854
Income taxes payable 2,630 3,694
Deferred credit and other
liabilities, current 1,817 -
Long-term debt, current 42,946 3,252
------------------------------------------------------------------------
105,353 73,830
Long-term debt 368,785 438,279
Future income taxes 70,551 83,821
Deferred credit and other liabilities 2,211 5,385
------------------------------------------------------------------------
546,900 601,315
------------------------------------------------------------------------

Non-controlling interests 41 733
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

Share capital and other equity 334,326 247,727
Cumulative foreign currency translation (6,665) (7,163)
Retained earnings 73,928 81,037
------------------------------------------------------------------------
401,589 321,601
------------------------------------------------------------------------
$ 948,530 $ 923,649
------------------------------------------------------------------------
------------------------------------------------------------------------


GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Statements of Income (Loss)
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
--------------------------------------------------------------------------

Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
--------------------- ----------------------

REVENUES $ 100,220 $ 77,247 $ 287,182 $ 204,920

EXPENSES
Human resources 45,625 37,839 133,532 97,092
General and administration 8,021 5,004 24,487 12,746
Operating supplies 7,012 5,309 20,126 13,032
Occupancy costs 8,218 5,293 25,080 12,374
Marketing and promotion 4,359 3,506 11,154 7,963
Amortization 9,502 5,317 27,586 13,177
Stock-based compensation 1,291 1,418 4,984 3,324
Restructuring costs 427 - 3,023 -
--------------------------------------------------------------------------
84,455 63,686 249,972 159,708
--------------------------------------------------------------------------

INCOME FROM OPERATIONS 15,765 13,561 37,210 45,212

Impairment of investments
and long-lived assets (201) (62) (2,487) (23)
Interest and financing, net (34,874) (2,624) (44,435) (5,527)
Foreign exchange gain
(loss) 94 18 (1,602) 102
--------------------------------------------------------------------------

INCOME (LOSS) BEFORE INCOME
TAXES (19,216) 10,893 (11,314) 39,764

Income taxes (5,733) 4,272 (5,544) 14,475
--------------------------------------------------------------------------

INCOME (LOSS) BEFORE
NON-CONTROLLING INTERESTS (13,483) 6,621 (5,770) 25,289

Non-controlling interests 629 217 1,339 524
--------------------------------------------------------------------------
NET INCOME (LOSS) $ (14,112) $ 6,404 $ (7,109) $ 24,765
--------------------------------------------------------------------------
--------------------------------------------------------------------------

EARNINGS (LOSS) PER COMMON
SHARE
Basic $ (0.16) $ 0.08 $ (0.08) $ 0.33
Diluted $ (0.16) $ 0.08 $ (0.08) $ 0.32
--------------------------------------------------------------------------
--------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
Basic 86,087,373 77,933,301 83,911,096 75,689,590
Diluted 86,087,373 79,532,208 83,911,096 77,898,824
--------------------------------------------------------------------------
--------------------------------------------------------------------------


GREAT CANADIAN GAMING CORPORATION
Interim Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(In thousands, except for share and per share information)
--------------------------------------------------------------------------

Three months ended Nine months ended
Sept 30, Sept 30,
2006 2005 2006 2005
--------------------- ----------------------

Cash Flows from Operating
Activities
Net (loss) income $ (14,112) $ 6,404 $ (7,109) $ 24,765
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Amortization 9,502 5,317 27,586 13,177
Impairment of investments
and long-lived assets 201 62 2,487 23
Non-cash interest and
financing costs 5,930 746 7,062 978
Stock-based compensation
and non-cash restructuring
costs 1,291 1,418 6,032 3,324
Foreign exchange (gain)
loss (94) (18) 1,602 (102)
Non-controlling interest
and others (42) 309 (214) 1,834
Future income taxes (10,883) (1,357) (13,509) (2,268)
Changes in non-cash
operating working capital 146 (1,104) (11,877) (5,222)
--------------------------------------------------------------------------
Net cash provided by (used
in) operating activities (8,061) 11,777 12,060 36,509
--------------------------------------------------------------------------

Cash Flows from Financing
Activities
Proceeds from long-term
debt 396,823 203,000 396,823 379,243
Repayment of long-term debt (330,876) (176,543) (426,623) (177,179)
Deferred financing costs (2,522) (2,993) (3,871) (3,609)
Bond forward - 1,736 - 1,736
Common shares issued for
cash, net of issuance costs 337 72,005 80,411 137,916
--------------------------------------------------------------------------
Net cash provided by
financing activities 63,762 97,205 46,740 338,107
--------------------------------------------------------------------------

Cash Flows from Investing
Activities
Restricted cash 921 (2,576) 45 (7,148)
Investment in and advances
to equity investees - (393) - (614)
Funds received from Nova
Scotia Gaming Corporation 5,937 2,877 18,511 2,877
Funds advance to Nova
Scotia Gaming Corporation
to purchase plant and
equipment (1,769) - (15,006) -
Purchase of property, plant
and equipment,
net of related accounts
payable (17,365) (69,351) (44,099) (146,570)
Proceeds from disposal of
property, plant and
equipment - 2,382 - 2,382
Acquisitions, net of cash
acquired - (31,895) (1,100) (178,435)
River Rock prepaid lease - - - (9,262)
Promissory notes 1,604 (2,005) 8 (29,869)
--------------------------------------------------------------------------
Net cash used in investing
activities (10,672) (100,961) (41,641) (366,639)
--------------------------------------------------------------------------

--------------------------------------------------------------------------
Effect of foreign exchange
on cash and cash
equivalents 96 (350) (95) (196)
--------------------------------------------------------------------------

Net Cash Inflow 45,125 7,671 17,064 7,781
Cash and cash equivalents,
Beginning of the period 41,751 39,056 69,812 38,946
--------------------------------------------------------------------------
Cash and cash equivalents,
End of the period $ 86,876 $ 46,727 $ 86,876 $ 46,727
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Supplemental Disclosure
Interest received $ 1,282 $ 1,249 $ 3,390 $ 1,951
Interest and Series A and B
Notes prepayment fees paid $ 37,343 $ 5,768 $ 50,460 $ 10,674
Income taxes (received)
paid $ (3,623) $ 4,526 $ 6,551 $ 15,622
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Non-Cash Investing and
Financing Activities
Conversion of promissory
note to preferred shares $ - $ - $ - $ 6,917
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Change in Accounting Policy

In the third quarter of 2006, the Company adopted a change in its accounting policy whereby the Company now records Facility Development Commission ("FDC") in "Revenues" as it is earned (when it is payable by BCLC to the Company), limited to the extent that sufficient Approved Amounts exist. Approved Amounts is a defined term in the Company's operating agreements with BCLC, and generally consists of approved capital or operating expenditures related to the development or improvement of gaming properties. Approved Amounts to be recovered through future FDC receipts will be disclosed in the notes to the consolidated financial statements.

The Company has elected to adopt the new accounting policy as it believes it better reflects the nature of the current compensation arrangements with BCLC, provides better information on the cash flows of the Company and presents "Property, plant and equipment" on the balance sheet at amortized historical cost. The new accounting policy has been applied on a retrospective basis to prior periods, with the opening balance of retained earnings and other financial information presented as if the new accounting policy had always been applied.

Previously, the FDC was accounted for as a form of government assistance upon approval by BCLC of the Approved Amounts. Approved Amounts were recorded at the time of BCLC's approval as "Due from Provincial Gaming Corporations" on the balance sheet and reduced the cost of the related asset or operating expense. The "Due from Provincial Gaming Corporations" was then recorded on a discounted basis using a discount rate that management believed to be the market rate of interest for a similar instrument with similar terms and conditions. The FDC received reduced the "Due from Provincial Gaming Corporations" receivable. The "Accretive income" recognized increased the "Due from Provincial Gaming Corporations" receivable.

The tables below summarize the effect of the change in accounting policy on previously reported results. Further information on the change in accounting policy can be found in the interim consolidated financial statements and management's discussion and analysis available at the Company's website, www.gcgaming.com, on November 9, 2006, and at www.sedar.com on November 10, 2006.



--------------------------------------------------------------------------
(in thousands, except Three Months Ended Three Months Ended
per share data) June 30, 2006 June 30, 2005
--------------------------------------------------------------------------
Reflecting Reflecting
Accounting As Accounting As
Policy Previously Policy Previously
Change Reported Change Reported
--------------------------------------------------------------------------
Revenues $95,681 $91,001 $71,814 $67,513
--------------------------------------------------------------------------
EBITDA $24,148 $19,593 $23,611 $19,427
--------------------------------------------------------------------------
Net income $ 6,088 $ 6,644 $10,560 $10,459
--------------------------------------------------------------------------
Diluted earnings per share $ 0.07 $ 0.08 $ 0.14 $ 0.14
--------------------------------------------------------------------------


--------------------------------------------------------------------------
(in thousands, except Three Months Ended Three Months Ended
per share data) March 31, 2006 March 31, 2005
--------------------------------------------------------------------------
Reflecting Reflecting
Accounting As Accounting As
Policy Previously Policy Previously
Change Reported Change Reported
--------------------------------------------------------------------------
Revenues $91,281 $86,631 $55,853 $52,146
--------------------------------------------------------------------------
EBITDA $21,670 $17,123 $17,805 $16,584
--------------------------------------------------------------------------
Net income $ 915 $ 1,436 $ 7,801 $ 9,259
--------------------------------------------------------------------------
Diluted earnings per share $ 0.01 $ 0.02 $ 0.10 $ 0.12
--------------------------------------------------------------------------


------------------------------- --------------------- ---------------------
(in thousands,
except per
share Three Months Ended Three Months Ended Twelve Months Ended
data) September 30, 2005 December 31, 2005 December 31, 2005
------------------------------- --------------------- ---------------------
Reflecting Reflecting Reflecting
Accounting As Accounting As Accounting As
Policy Previously Policy Previously Policy Previously
Change Reported Change Reported Change Reported
------------------------------- --------------------- ---------------------
Revenues $77,247 $72,884 $89,530 $85,559 $294,444 $278,104
------------------------------- --------------------- ---------------------
EBITDA $20,296 $19,749 $14,858 $ 9,603 $ 76,570 $ 65,363
------------------------------- --------------------- ---------------------
Net income
(loss) $ 6,404 $ 9,026 ($ 9,095) ($ 9,165) $ 15,670 $ 19,579
------------------------------- --------------------- ---------------------
Diluted
earnings
(Loss) per
share $ 0.08 $ 0.11 ($ 0.11) ($ 0.12) $ 0.20 $ 0.25
------------------------------- --------------------- ---------------------


DISCLAIMER

This news release contains forward-looking statements which reflect management's current expectations regarding the Company's objectives, plans, goals, strategies, future growth, results of operations, performance and business prospects and opportunities. These forward-looking statements are not guarantees, but only predictions. Although the Company believes that these statements are based on information and assumptions which are current, reasonable and complete, these statements are necessarily subject to a number of factors that could cause actual results to vary significantly from current expectations. Such differences may be caused by factors which include, but are not limited to, ongoing requirements to comply with financial covenants associated with credit facilities, limited terms of operational service agreements with gaming regulators, pending and proposed legislative or regulatory developments, competition from established competitors and new entrants in the gaming business, dependence on key personnel, no assurance that systems, procedures and controls will be adequate to support expanding operations, potential undisclosed liabilities and capital expenditures associated with acquisitions, negative connotations linked to the gaming industry, First Nations claims with respect to public lands on which we conduct our operations, impact of legal proceedings, impact of smoking bans, interest and exchange rate fluctuations, non-realization of cost reductions and synergies, acceptance and demand for new products and services, fluctuations in operating results and general economic conditions. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including in the "Risks Factors" section of the Company's Annual Information Form for fiscal 2005, or as identified in the Company's disclosure record on www.sedar.com. The forward-looking statements included in this news release are made only as of the date of this news release and the Company does not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise.

The Company has included non-generally accepted accounting principles ("non-GAAP") measures in this news release. "EBITDA", a non-GAAP measure, means earnings before interest and financing expense, taxes, depreciation and amortization, stock-based compensation, restructuring costs, impairment of investments and long-lived assets, foreign exchange gain (loss) and non-controlling interests. EBITDA is derived from the consolidated statement of income and can also be computed as revenues, less human resources, general and administration, marketing and promotion, occupancy costs and operating supplies. EBITDA margin is computed as EBITDA as a percentage of revenues. "Net income (loss), adjusted" and "Adjusted diluted earnings per share" are also non-GAAP measures. Net income (loss), adjusted is Net income (loss) from the statement of income adjusted for the elimination of $20,270 on an after-tax basis ($30,904 on a pre-tax basis) in cost associated with the redemption of the Series A and Series B Senior Secured Notes. Adjusted diluted earnings per share is Diluted loss per share from the statement of income adjusted for the elimination of the per share effect of $20,270 on an after-tax basis in costs associated with the redemption of the Notes.

Readers are cautioned that these non-GAAP definitions are not recognized measures under Canadian GAAP, do not have standardized meanings prescribed by GAAP, and should not be construed to be alternatives to net income determined in accordance with GAAP or as indicators of performance or liquidity or cash flows. The Company's method of calculating these measures may differ from methods used by other entities and accordingly our measures may not be comparable to similarly titled measures used by other entities. The Company uses these measures because it believes they provide useful information to both management and investors with respect to the operating and financial performance of the Company.

ON BEHALF OF GREAT CANADIAN GAMING CORPORATION

Milton Woensdregt, CA Chief Financial Officer

Contact Information

  • Great Canadian Gaming Corporation - Investor Enquiries
    Mr. Thomas Bell
    Vice-President, Corporate Development & Investor Relations
    (604) 303-1000
    or
    Jaffoni & Collins Incorporated - Investor Enquiries
    Mr. Richard Land
    (212) 835-8500
    or
    Jaffoni & Collins Incorporated - Investor Enquiries
    Mr. David Jacoby
    (212) 835-8500
    Email: GCD@jcir.com
    or
    Great Canadian Gaming Corporation - Media Enquiries
    Mr. Howard Blank
    Vice-President, Media & Entertainment
    (604) 512-6066
    Website: www.gcgaming.com