Great Canadian Gaming announces second quarter 2014 results

RICHMOND, BC, Aug. 13, 2014 /CNW/ - Great Canadian Gaming Corporation [TSX:GC] ("Great Canadian," or "the Company") today announced its financial results for the three month period ended June 30, 2014 (the "second quarter of 2014").

SECOND QUARTER 2014 HIGHLIGHTS

  • Revenues and EBITDA(1) increased by 12% and 30%, respectively, to $114.7 million and $49.5 million, both the highest in Great Canadian's history.  Excluding non-recurring revenues in the prior year period, Revenues and EBITDA increased $14.0 million, or 14%, and $12.9 million, or 35%, respectively.

  • Net earnings of $19.9 million, a 76% increase when compared to the second quarter of 2013.

  • Adjusted net earnings(1) of $19.9 million, a 91% increase when compared to the second quarter of 2013.

  • Revenues and EBITDA at River Rock Casino Resort increased by 33% and 54%, respectively, to $53.8 million and $32.7 million, both the highest in the property's history.

  • Revenues and EBITDA at Hard Rock Casino Vancouver increased by 7% and 29%, respectively, to $13.5 million and $4.5 million.

  • Great Canadian exercised its renewal option with the Nova Scotia Provincial Lotteries and Casino Corporation ("NSPLCC") to extend the Company's casino operating contract for 10 years beyond July 1, 2015.

(Amounts presented in millions of Canadian dollars, except for per share information)


Second Quarter


First Half


2014

2013

% Chg


2014

2013

% Chg

Revenues

$

114.7

$

102.1

12%


$

218.5

$

202.6

8%

EBITDA (1)

$

49.5

$

38.0

30%


$

87.6

$

76.3

15%









EBITDA as a % of Revenues

43.2%

37.2%



40.1%

37.7%










Net earnings

$

19.9

$

11.3

76%


$

36.9

$

42.6

(13%)









Net earnings per common share









Basic

$

0.29

$

0.17



$

0.55

$

0.61



Diluted

$

0.29

$

0.16



$

0.53

$

0.60










Adjusted net earnings (1)

$

19.9

$

10.4

91%


$

33.2

$

21.6

54%














June 30,

2014

December

31, 2013

% Chg

Total assets





$

949.7

$

915.7

4%

Long-term debt





$

441.5

$

441.0

0%

(1)

EBITDA and adjusted net earnings are non-IFRS measures as described in the disclaimer section of this press release. A reconciliation between net earnings and adjusted net earnings is included on page 6 of this press release.

Great Canadian recorded revenues of $114.7 million during the second quarter of 2014, a $12.6 million, or 12%, increase from the second quarter of 2013. EBITDA during the second quarter of 2014 was $49.5 million, an $11.5 million, or 30%, increase from the second quarter of 2013. EBITDA as a percentage of revenues for the second quarter of 2014 was 43.2%, a 6.0 percentage point increase from the second quarter of 2013. Both the revenues and EBITDA increases were primarily due to record quarterly performance at River Rock Casino Resort ("River Rock"). The Company's Hard Rock Casino Vancouver also delivered a meaningful quarterly improvement. These increases were partially offset by declines at the Company's Nova Scotia Casinos and Vancouver Island Casinos, as well as a one-time, non-recurring FDC payment of $0.7 million to the BC Racinos and a one-time, non-recurring payment of $0.7 million to the Ontario Racetracks, both of which were received during the second quarter of 2013. Excluding these non-recurring revenues from the prior year, revenues in the second quarter of 2014 increased by $14.0 million, or 14%, and EBITDA increased by $12.9 million, or 35%, when compared to the same period in 2013. 

River Rock's revenues of $53.8 million and EBITDA of $32.7 million were the highest in the property's history, increasing by 33% and 54%, respectively, when compared to the second quarter of 2013.

Great Canadian recorded net earnings of $19.9 million during the second quarter of 2014, an $8.6 million increase when compared to the second quarter of 2013. This increase was primarily due to growth in EBITDA.

"Great Canadian's financial results this quarter were led by the strong performance at River Rock and a turnaround in performance at the new Hard Rock Casino Vancouver," stated Rod N. Baker, Great Canadian's President and Chief Executive Officer. "The second quarter marked River Rock's ten year anniversary, and the property celebrated by achieving record results, once again generating significant growth in both gaming and hospitality revenues. Since the fourth quarter of 2011, River Rock's quarterly table drop has increased at a compound annual rate of 31.9%, while its table hold has increased at a compound annual rate of 37.5%. We are pleased with these results, and look forward to River Rock continuing to build upon this momentum.

"Although River Rock served as the primary contributor to Great Canadian's strong second quarter, we are also encouraged by the performance of Hard Rock Casino Vancouver. The property has steadily gained in popularity since its re-launch last December, and its quarterly results are a testament to its growing status as one of Vancouver's premier entertainment destinations. We believe that there is considerable potential for further improvement at this property, and will continue our efforts to increase its traffic.  

"In June of 2014, Great Canadian exercised its renewal option with NSPLCC to extend the term of its operating contract for the Nova Scotia Casinos for an additional ten years beyond July 1, 2015. We will invest $10 million of capital in these properties by the end of 2015 in order to enhance our guests' entertainment experiences. We are proud to continue our relationship with NSPLCC, and look forward to building upon the success we have experienced in Nova Scotia."

"With our strong cash balance and our undrawn revolving credit facility, Great Canadian remains financially prepared to take advantage of new opportunities for value creation," concluded Mr. Baker. "This includes any opportunities that may arise from Ontario's plans to modernize gaming. While we pursue these potential opportunities, we will continue to efficiently manage our operations and look for other ways to continue to grow our business."

Great Canadian will host a conference call for investors and analysts today, August 13, 2014, at 2:00 PM Pacific Time in order to review the financial results for the period ended June 30, 2014. To participate in the conference call, please dial 416-764-8688, or toll free at 888-390-0546 (Passcode: 04968575).  Questions will be reserved for institutional investors and analysts. Interested parties may also access the call via the Investor Relations section of the Company's website, www.gcgaming.com. Investors using the website should allow 15 minutes for the registration and installation of any necessary software. A replay of the call will also be available at www.gcgaming.com.

ABOUT GREAT CANADIAN GAMING CORPORATION
Great Canadian Gaming Corporation operates gaming, entertainment and hospitality facilities in British Columbia, Ontario, Nova Scotia, and Washington State.  The Company's 17 gaming properties consist of three community gaming centres, four racetracks, and ten casinos, including one with a Four Diamond hotel resort.  As of June 30, 2014, the Company had approximately 3,900 employees in Canada and 600 in Washington State.  Further information is available on the Company's website, www.gcgaming.com.

Please refer to the Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") at www.gcgaming.com (available on August 13, 2014) or www.sedar.com (available on August 14, 2014) for detailed financial information and analysis.

The financial results on the following pages are unaudited and prepared by management. Expressed in millions of Canadian dollars, except for per share information.

GREAT CANADIAN GAMING CORPORATION
Condensed Interim Consolidated Statement of Earnings
(Unaudited - Expressed in millions of Canadian dollars, except for per share information)


Second Quarter


First Half


2014

2013

% Chg


2014

2013

% Chg

Gaming revenues

$

79.9

$

67.7

18%


$

150.9

$

137.0

10%

Facility Development Commission

9.7

8.9

9%


18.6

17.6

6%

Hospitality, lease and other revenues

27.1

25.9

5%


52.7

49.9

6%

Racetrack revenues

3.9

4.0

(3%)


7.2

7.1

1%


120.6

106.5

13%


229.4

211.6

8%

Less: Promotional allowances

(5.9)

(4.4)

34%


(10.9)

(9.0)

21%

Revenues

114.7

102.1

12%


218.5

202.6

8%









Human resources

40.6

40.4

0%


81.2

79.5

2%

Property, marketing and administration

24.6

23.7

4%


49.7

46.8

6%


65.2

64.1

2%


130.9

126.3

4%









EBITDA

49.5

38.0

30%


87.6

76.3

15%









Human resources as a % of Revenues before








Promotional allowances

33.7%

37.9%



35.4%

37.6%


EBITDA as a % of Revenues

43.2%

37.2%



40.1%

37.7%










Amortization

12.1

11.7



24.3

24.7


Share-based compensation

1.8

0.6



2.2

2.7


Reversal of impairment of long-lived assets

-

-



(5.2)

(28.5)


Interest and financing costs, net

7.9

8.2



16.0

16.4


Restructuring and other

0.2

0.2



0.2

1.3


Foreign exchange gain and other

0.1

(0.2)



(0.2)

(0.4)


Income taxes

7.5

6.2



13.4

17.5


Net earnings

$

19.9

$

11.3

76%


$

36.9

$

42.6

(13%)









Net earnings per common share









Basic

$

0.29

$

0.17



$

0.55

$

0.61



Diluted

$

0.29

$

0.16



$

0.53

$

0.60










Weighted average number of common shares (in thousands)








Basic

67,678

68,329



67,569

69,375



Diluted

69,498

69,471



69,324

70,475


(1)

For the second quarter and first half of 2013, the Company has reclassified its Ontario gaming revenues, of $0.7 and $6.4 respectively that related to its prior Ontario Racetrack site holder agreements, as "Hospitality, lease and other revenues". Management believes this presentation improves the comparability with the current year's revenues from OLG for their lease of the slot machine areas at the Ontario Racetracks; however, included in the second quarter of 2013 were $0.7 of non-recurring without prejudice dispute resolution payments received from OLG. The prior site holder agreements were terminated by the OLG effective March 31, 2013 and replaced by 5-year lease agreements effective April 1, 2013 as more completely described in the "Major Developments" section of the MD&A for the second quarter of 2014.

 

GREAT CANADIAN GAMING CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Unaudited - Expressed in millions of Canadian dollars)





June 30,


December 31,





2014


2013








Assets













Current







Cash and cash equivalents



$

243.8


$

192.6


Accounts receivable



6.6


7.2


Income taxes receivable



-


3.7


Prepaids, deposits and other assets



8.2


8.0





258.6


211.5

Property, plant and equipment



583.3


596.3

Intangible assets



74.3


75.8

Goodwill



20.6


20.6

Deferred tax assets



10.4


8.8

Other assets



2.5


2.7





$

949.7


$

915.7








Liabilities













Current







Accounts payable and accrued liabilities



$

55.0


$

67.9


Other liabilities



3.1


2.6





58.1


70.5

Long-term debt



441.5


441.0

Deferred credits, provisions and other liabilities



26.4


26.4

Deferred tax liabilities



74.7


70.3





600.7


608.2








Shareholders' equity













Share capital and reserves



309.7


305.1

Accumulated other comprehensive income



0.4


0.4

Retained earnings



38.9


2.0





349.0


307.5





$

949.7


$

915.7

 

GREAT CANADIAN GAMING CORPORATION
Adjusted Net Earnings
(Unaudited - Expressed in millions of Canadian dollars)

The current and prior periods' net earnings included some items of note, which are summarized in the following adjusted net earnings table:  




Second Quarter


First Half




2014

2013

% Chg


2014

2013

% Chg

Net earnings 

$

19.9

$

11.3

76%


$

36.9

$

42.6

(13%)


Items of note










Reversal of impairment of long-lived assets

-

-



(5.2)

(28.5)




FDC revenues previously deferred at Fraser Downs

-

(0.7)



(0.2)

(0.7)




Without prejudice dispute resolution payments received from OLG


(0.7)




(0.7)




Restructuring severance costs

-

0.2



0.2

1.2




Income taxes on the above items of note

-

0.3



1.5

7.7


Adjusted net earnings (1)

$

19.9

$

10.4

91%


$

33.2

$

21.6

54%

(1)

Adjusted net earnings is a non-IFRS measure as described in the disclaimer section of this press release.

 

After adjusting for the above items of note, the Company's adjusted net earnings increased by $9.5 million in the second quarter and $11.6 million in the first half of 2014, when compared to the same periods in 2013. 

DISCLAIMER

This press release contains certain "forward-looking information" or statements within the meaning of applicable securities legislation. Forward-looking information is based on the Company's current expectations, estimates, projections and assumptions that were made by the Company in light of its historical trends and other factors. All information or statements, other than statements of historical fact, are forward-looking information including statements that address expectations, estimates or projections about the future, the Company's strategy for growth and objectives, expected future expenditures, costs, operating and financial results, expected impact of future commitments, the future ability of the Company to operate the Georgian Downs and Flamboro Downs facilities beyond the terms of the signed Ontario Lease Agreements and Ontario Racing Agreements, the terms and expected benefits of the normal course issuer bid, and expectations and implications of changes in legislation and government policies. Forward-looking information may be identified by words such as "anticipate", "believe", "expect", or similar expressions. Such forward-looking information is not a guarantee of future performance and may involve a number of risks and uncertainties. 

Although forward-looking information is based on information and assumptions that the Company believes are current, reasonable and complete, they are subject to unknown risks, uncertainties, and a number of factors that could cause actual results to vary materially from those expressed or implied by such forward-looking information. Such factors may include, but are not limited to: terms of operational services agreements with lottery corporations; changes to gaming laws that may impact the operational services agreements, pending, proposed or unanticipated regulatory or policy changes; the outcome of restructuring of gaming in Ontario, the Company's ability to obtain and renew required business licenses, leases, and operational services agreements; the future of horse racing in Ontario, unanticipated fines, sanctions and suspensions imposed on the Company by its regulators; impact of global liquidity and credit availability; possible reassessments of the Company's prior tax filings by tax authorities; adverse tourism trends and further decreases in levels of travel, leisure and consumer spending; competition from established competitors and new entrants in the gaming business; dependence on key personnel; the Company's ability to manage its capital projects and its expanding operations; the risk that systems, procedures and controls may not be adequate to meet regulatory requirements or to support current and expanding operations; potential undisclosed liabilities and capital expenditures associated with acquisitions; negative connotations linked to the gaming industry; First Nations rights with respect to some land on which we conduct our operations; future or current legal proceedings; construction disruptions; financial covenants associated with credit facilities and long-term debt; credit, liquidity and market risks associated with our financial instruments; interest and exchange rate fluctuations; non-realization of cost reductions and synergies; demand for new products and services; fluctuations in operating results; economic uncertainty and financial market volatility; technology dependence; and privacy breaches or data theft. The Company cautions that this list of factors is not exhaustive. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. These factors and other risks and uncertainties are discussed in the Company's continuous disclosure documents filed with the Canadian securities regulatory authorities from time to time, including in the "Risk Factors" section of the Company's Annual Information Form for fiscal 2013, and as identified in the Company's disclosure record on SEDAR at www.sedar.com.

Readers are cautioned not to place undue reliance on the forward-looking information, as there can be no assurance that the plans, intentions, or expectations upon which they are based will occur.  The forward-looking information contained herein is made as of the date hereof, is subject to change after such date, and is expressly qualified in its entirety by cautionary statements in this press release. Forward-looking information is provided for the purpose of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of the Company's operating environment. The Company undertakes no obligation to publicly revise forward-looking information to reflect subsequent events or circumstances except as required by law. 

The Company has included non-International Financial Reporting Standards ("non-IFRS") measures in this press release. EBITDA, as defined by the Company, means earnings before interest and financing costs (net of interest income), income taxes, depreciation and amortization, share-based compensation, reversals of impairments of long-lived assets, restructuring and other, and foreign exchange gain and other. EBITDA is derived from the condensed interim consolidated statements of earnings, and can be computed as revenues less human resources expenses, and property, marketing and administration expenses. The Company believes EBITDA is a useful measure because it provides information to management about the operating and financial performance of the Company and its ability to generate operating cash flow to fund future working capital needs, service outstanding debt, and fund future capital expenditures. EBITDA is also used by the investors and analysts for the purpose of valuing the Company. Adjusted net earnings, as defined by the Company, means net earnings plus or minus items of note that management may reasonably quantify and that it believes will provide the reader with a better understanding of the Company's underlying business performance. Items of note may vary from time to time and in this press release include reversals of impairments of long-lived assets, FDC revenues previously deferred at Fraser Downs, restructuring severance costs, and the related income taxes thereon.

Readers are cautioned that these non-IFRS definitions are not recognized measures under International Financial Reporting Standards ("IFRS"), do not have standardized meanings prescribed by IFRS, and should not be construed to be alternatives to net earnings determined in accordance with IFRS 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 or in other jurisdictions. 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

"Original Signed By Rod N. Baker"

_____________________
Rod N. Baker
President and Chief Executive Officer

SOURCE: Great Canadian Gaming Corporation

For further information: GREAT CANADIAN GAMING CORPORATION [TSX:GC], Suite #350 - 13775 Commerce Parkway, Richmond, BC, V6V 2V4, (604) 303-1000, Website: www.gcgaming.com; For enquiries: ir@gcgaming.com or Ms. Tanya Ruskowski, Executive Assistant to the President and Chief Executive Officer and the Chief Financial Officer, (604) 303-1000; For media enquiries: Mr. Chuck Keeling, Vice-President, Stakeholder Relations and Responsible Gaming, (778) 874-4942


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