Great Canadian Gaming Announces Third Quarter 2013 Results

RICHMOND, BC, Nov. 6, 2013 /CNW/ - Great Canadian Gaming Corporation (TSX:GC) ("Great Canadian" or "the Company") today announced its financial results for the three month period ended September 30, 2013 ("third quarter 2013").

THIRD QUARTER 2013 HIGHLIGHTS
(Amounts presented in millions of Canadian dollars, except for per share information)

  • Revenues of $103.1 million, a 1% increase when compared to the prior year

  • EBITDA(1) of $39.1 million, a 9% increase when compared to the prior year

  • Net earnings of $13.3 million, a $14.2 million increase when compared to the prior year

  • Adjusted net earnings(2) of $13.3 million, a 10% increase when compared to the prior year

  • Opened  the permanent Chances Maple Ridge facility on October 23, 2013 (formerly the temporary 'Maple Ridge Community Gaming Centre')

  • Announced that Boulevard Casino will re-launch as the Hard Rock Casino Vancouver, opening on December 20, 2013

  • During the third quarter and early October of 2013, repurchased and cancelled 1.7 million common shares at an average price of $11.14

           
  Third Quarter   First Nine Months of
  2013 2012 % Chg   2013 2012 % Chg
Revenues  $ 103.1  $ 101.8 1%    $ 305.7  $ 305.9 0%
EBITDA (1)  $ 39.1  $ 35.8 9%    $ 115.4  $ 110.1 5%
               
EBITDA as a % of Revenues 37.9% 35.2%     37.7% 36.0%  
               
Net earnings (loss)  $ 13.3  $ (0.9)      $ 55.9  $ (30.1)  
               
Net earnings (loss) per common share              
  Basic  $ 0.20  $ (0.01)      $ 0.81  $ (0.38)  
  Diluted  $ 0.19  $ (0.01)      $ 0.80  $ (0.38)  
               
Adjusted net earnings (1) (2)  $ 13.3  $ 12.1 10%    $ 34.9  $ 36.2 (4%)
               
          September
30, 2013
December
31, 2012
% Chg
Total assets          $ 898.9  $ 862.7 4%
Long-term debt          $ 440.7  $ 439.9 0%
               
(1) EBITDA and Adjusted net earnings are non-IFRS measures as described in the Disclaimer section of this press
release.
(2) A reconciliation between Net earnings (loss) and Adjusted net earnings is included on page 6 of this press release.

 
Great Canadian recorded revenues of $103.1 million during the third quarter of 2013, a $1.3 million, or 1%, increase from the third quarter of 2012.  EBITDA was $39.1 million, a $3.3 million, or 9%, increase from the third quarter of 2012.  Both these increases were primarily due to revenue growth at the River Rock Casino Resort ("River Rock"), in addition to improvements at both the Company's Other BC Casinos and Great American Casinos. These increases were offset by declines at both the Boulevard Casino ("Boulevard") and the Company`s Ontario Racetracks. EBITDA as a percentage of revenues for the third quarter of 2013 was 37.9%, a 2.7 percentage point increase from the third quarter of 2012.

Net earnings increased by $14.2 million in the third quarter of 2013, when compared to the third quarter of 2012.  This increase was primarily due to non-recurring expenses recorded during the third quarter of 2012, including both foreign exchange losses of $8.1 million and interest and financing costs of $6.3 million. Net earnings were also impacted by the increased EBITDA, which was partially offset by higher net interest and financing costs, an increase in income taxes arising from higher earnings, and an increase in British Columbia's provincial corporate income tax rate.

"Great Canadian's financial results for the third quarter of 2013 reflect positive contributions from River Rock, Chances Chilliwack, and the Great American Casinos," stated Rod Baker, Great Canadian's President and Chief Executive Officer. "These encouraging performances were partially offset by Boulevard, which again witnessed declines in slot coin-in, table drop, and food and beverage revenues. Boulevard remains challenged by both local economic conditions and ongoing disruption caused by proximate highway construction. To a lesser extent, Boulevard's guests were also affected by the property's repositioning and refresh.

"We continue to focus upon providing Boulevard's loyal guests with exceptional service as we work towards the re-launch of the property under the Hard Rock Casino Vancouver brand later this year. The introduction of this exciting brand will coincide with the substantial completion of the nearby highway construction, although guests may still be affected by some minor roadwork during the first quarter of 2014.  We are optimistic about the property's future prospects for the Company. In the meantime, we will continue to carefully manage both Boulevard's staffing levels and discretionary spending.

"On October 23, 2013, we were proud to officially open 'Chances Maple Ridge', a newly constructed, community gaming and entertainment facility in Maple Ridge, BC. This facility features 175 slot machines, 200 bingo seats, a casual fine dining restaurant, and improved parking capacity. Over the past year, Chances Chilliwack has become valuable component of our property portfolio. We are optimistic that Chances Maple Ridge will mirror that property's success.

"Since April 1, 2013, Great Canadian's Ontario Racetracks have operated under interim lease arrangements with the Ontario Lottery and Gaming Corporation. Under the terms of these agreements, these two racetracks now receive both lease revenues from the OLG and horse racing transition funding from the Government of Ontario. However, they no longer receive a fixed percentage of the OLG's slot revenues, and do not directly share in horse racing pari-mutuel wagering revenues. As a result of these changes, these facilities witnessed declines in both overall revenues and EBITDA. We are pleased to continue our relationship with the OLG, and look forward to developing this relationship further as the gaming industry in Ontario continues its evolution.

"Great Canadian is financially prepared to take advantage of new value-added growth opportunities, including those in Ontario. The Company's financial flexibility is evident in both our strong cash balance and our undrawn revolving credit facility. While we await greater clarity surrounding these opportunities, we continue to pursue other avenues for the creation of shareholder value. In 2013, the Company has devoted $43.0 million of its cash resources towards repurchasing and cancelling 4.3 million common shares at an average price of $10.07. As a result of these cancellations, we have increased the ownership percentage of our existing shareholders by 6.0% this year."

Great Canadian will host a conference call for investors and analysts today, November 6, 2013, at 3:00 PM Pacific Time to review the financial results for the period ended September 30, 2013. To participate in the conference call, please dial 416-764-8688, or toll free at 888-390-0546 (Passcode: 60245971). 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; please allow 15 minutes to register and install 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 September 30, 2013, the Company had approximately 4,000 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 November 6, 2013) or www.sedar.com (available on November 7, 2013) 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
Consolidated Results of Operations
(Unaudited - Expressed in millions of Canadian dollars, except for per share information)
                                   
    Third Quarter           First Nine Months of    
      2013     2012     % Chg     2013     2012   % Chg
Gaming revenues     69.5     73.8     (6%)     212.8     223.5   (5%)
Facility Development Commission     8.3     7.6     9%     25.9     24.5   6%
Hospitality, lease and other revenues     26.3     21.5     22%     69.8     60.7   15%
Racetrack revenues     3.8     4.3     (12%)     10.9     12.4   (12%)
      107.9     107.2     1%     319.4     321.1   (1%)
Less: Promotional allowances     (4.8)     (5.4)     (11%)     (13.7)     (15.2)   (10%)
Revenues     103.1     101.8     1%     305.7     305.9   0%
                                   
Human resources     40.2     42.3     (5%)     119.7     123.0   (3%)
Property, marketing and administration     23.8     23.7     0%     70.6     72.8   (3%)
      64.0     66.0     (3%)     190.3     195.8   (3%)
                                   
EBITDA     39.1     35.8     9%     115.4     110.1   5%
                                   
Human resources as a % of Revenues before                                   
 Promotional allowances     37.3%     39.5%           37.5%     38.3%    
EBITDA as a % of Revenues      37.9%     35.2%           37.7%     36.0%    
                                   
Amortization     12.2     12.8           36.9     38.7    
Share-based compensation     0.9     0.6           3.6     3.4    
(Reversals of) impairments of long-lived assets     -     -           (28.5)     54.2    
Impairment of goodwill     -     -           -     3.2    
Interest and financing costs, net     8.4     14.1           24.8     28.6    
Litigation settlement     -     -           -     11.0    
Restructuring and other     0.1     2.1           1.4     2.7    
Foreign exchange (gain) loss and other     (0.2)     8.1           (0.6)     7.0    
Income taxes     4.4     (1.0)           21.9     (8.6)    
Net earnings (loss)    $ 13.3    $ (0.9)          $ 55.9    $ (30.1)    
                                   
Net earnings (loss) per common share                                  
  Basic    $ 0.20    $ (0.01)          $ 0.81    $ (0.38)    
  Diluted    $ 0.19    $ (0.01)          $ 0.80    $ (0.38)    
                                   
Weighted average number of common shares (in thousands)                                  
  Basic     68,190     75,557           68,976     78,986    
  Diluted     69,471     75,557           70,115     78,986    
                                   

GREAT CANADIAN GAMING CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Unaudited - Expressed in millions of Canadian dollars)                
        September 30,       December 31,  
        2013       2012  
                   
Assets                
                   
Current                
  Cash and cash equivalents      $ 169.3      $ 116.2  
  Restricted cash     6.4       4.9  
  Accounts receivable     6.4       7.7  
  Income taxes receivable     2.1       -  
  Prepaids, deposits and other assets     7.7       6.1  
        191.9       134.9  
Property, plant and equipment     595.6       621.3  
Intangible assets     78.8       73.3  
Goodwill     20.4       20.1  
Deferred tax assets     9.4       9.9  
Other assets     2.8       3.2  
         $ 898.9      $ 862.7  
                   
Liabilities                
                   
Current                
  Accounts payable and accrued liabilities      $ 51.7      $ 60.4  
  Income taxes payable     -       0.5  
  Other liabilities     2.7       2.9  
        54.4       63.8  
Long-term debt     440.7       439.9  
Deferred credits, provisions and other liabilities      26.6       25.4  
Deferred tax liabilities     68.5       53.3  
        590.2       582.4  
                   
Shareholders' equity                
                   
Share capital and contributed surplus     305.8       313.5  
Accumulated other comprehensive loss     (0.3)       (1.0)  
Retained earnings (deficit)     3.2       (32.2)  
        308.7       280.3  
         $ 898.9      $ 862.7  
                   

GREAT CANADIAN GAMING CORPORATION
Adjusted Net Earnings
(Unaudited - Expressed in millions of Canadian dollars)
 
The current and prior periods' net earnings (loss) included some items of note, which are summarized in the following adjusted net earnings table:
                                 
        Third Quarter     First Nine Months of
        2013     2012   % Chg     2013     2012 % Chg
Net earnings (loss)     $ 13.3      $ (0.9)          $ 55.9      $   (30.1)  
  Items of note                            
    (Reversals of) impairments of long-lived
  assets
  -     -         (28.5)     54.2  
    Impairment of goodwill   -     -         -     3.2  
    Litigation settlement   -     -         -     11.0  
    Equity investment loss   -     2.0         -     2.6  
    FDC revenues previously deferred   -     -         (0.7)     -  
    Without prejudice dispute resolution
  payments received from OLG
  -     -         (0.7)     -  
    Senior Subordinated Notes redemption costs
  and previously deferred transaction costs
  associated with Term Loan B and Senior
  Subordinated Notes
  -     6.3         -     6.3  
    Settlement of derivative liabilities associated
  with the cross-currency interest rate and
  principal swaps
  -     8.1         -     8.1  
    Human resources severance costs   -     1.1         -     1.8  
    Restructuring severance costs   -     -         1.2     -  
    Income taxes on the above items of note   -     (4.5)         7.7     (20.9)  
Adjusted net earnings (1)    $ 13.3      $ 12.1   10%      $ 34.9      $ 36.2 (4%)
(1)  Adjusted net earnings and Adjusted net earnings per common share are non-IFRS measures and are defined in the "Introduction - Non-IFRS Measures" section of this MD&A.

 

After adjusting for the above items of note, the Company's adjusted net earnings increased by $1.2 million, or 10%, in the third quarter of 2013, when compared to the third quarter of 2012.  This increase was primarily due to growth in EBITDA which was partially offset by the increase in income taxes due to higher earnings before income taxes and a percentage point increase to the British Columbia provincial corporate income tax rate in 2013 to 26%.

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 terms and expected benefits of the normal course issuer bid, the Company's strategy for growth, 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 and their profitability, and the ability of the Company to enter into new agreements for the operation of gaming facilities at Georgian Downs and Flamboro Downs.  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; pending, proposed or unanticipated regulatory or policy changes; the Company's ability to obtain and renew required business licenses, leases, and operational services agreements;  unanticipated fines, sanctions and suspensions imposed on the Company by its regulators; impact of global liquidity and credit availability; 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; and economic uncertainty and financial market volatility.  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 2012, 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, impairment of goodwill, litigation settlement, restructuring and other, and foreign exchange loss and other.  EBITDA is derived from the condensed interim consolidated statements of earnings (loss), and can be computed as revenues less human resources expenses and property, marketing and administration expenses.  Adjusted net earnings, as defined by the Company, means net earnings (loss) 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, impairment of goodwill, litigation settlement, equity investment loss, FDC revenues previously deferred, without prejudice dispute resolution payments received from the Ontario Lottery and Gaming Corporation ("OLG"), Senior Subordinated Notes redemption costs and previously deferred transaction costs associated with Term Loan B and Senior Subordinated Notes, settlement of derivative liabilities severance costs, and income taxes on the above items of note.

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


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