Great Canadian Gaming Announces First Quarter 2016 Results

COQUITLAM, BC, May 9, 2016 /CNW/ - Great Canadian Gaming Corporation [TSX:GC] ("Great Canadian," or "the Company") today announced its financial results for the three month period ended March 31, 2016 (the "first quarter").

FIRST QUARTER 2016 HIGHLIGHTS

• Revenues of $130.9 million in the first quarter, a 20% increase when compared to the same period in the prior year.
• Adjusted EBITDA⁽¹⁾ of $43.5 million in the first quarter, a 6% increase when compared to the same period in the prior year.
• Adjusted shareholders' net earnings⁽¹⁾ of $12.1 million in the first quarter, compared to $16.9 million for the same period in the prior year.
• On January 11, 2016, a partnership in which the Company owns a 90.5% interest completed the acquisition of the first bundle in the Ontario Gaming Modernization Process. The two properties acquired in this bundle were collectively rebranded as Shorelines Casinos.
• Construction is underway on a new Shorelines Casino in Belleville, Ontario. The Company anticipates completing construction of this property by the conclusion of the first quarter of 2017.

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

						First quarter
						2016	2015	% Chg
Revenues						$        130.9	$        109.0	20%
Adjusted EBITDA ^(1)						$          43.5	$          41.1	6%
Adjusted EBITDA as a % of Revenues						33.2%	37.7%
Shareholders' net earnings						$          10.4	$          16.1	(35%)
Shareholders' net earnings per common share
	Basic					$          0.16	$          0.23	(30%)
	Diluted					$          0.16	$          0.23	(30%)
Adjusted shareholders' net earnings ^(1)						$          12.1	$          16.9	(28%)
						March 31, 2016	December 31, 2015	% Chg
Total assets						$      1,043.8	$        998.1	(2%)
Long-term debt						$        477.3	$        443.0	0%

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

Great Canadian generated revenues of $130.9 million during the first quarter, a 20% increase from the first quarter of 2015.  This improvement was primarily due to the Company's October 2015 acquisition of Casino New Brunswick and January 2016 acquisition of Ontario Lottery and Gaming Corporation's Gaming Bundle 2 (East), which consists of Shorelines Casino Thousand Islands (formerly OLG Casino Thousand Islands) and Shorelines Slots at Kawartha Downs (formerly OLG Slots at Kawartha Downs), collectively known as the "Shorelines Casinos". Casino New Brunswick and the Shorelines Casinos contributed $9.7 million and $11.9 million of revenues, respectively, in the first quarter.  Revenues also increased at the majority of the Company's other properties, most notably Hard Rock Casino Vancouver, other Vancouver Area Casinos, and the Great American Casinos.  These increases were partially offset by a decline in table gaming revenues at River Rock Casino Resort ("River Rock"). 

Adjusted EBITDA during the first quarter was $43.5 million, a 6% increase from the first quarter of 2015. This improvement was primarily due to the acquisition of Casino New Brunswick and Shorelines Casinos, as well as Adjusted EBITDA improvements at Hard Rock Casino Vancouver and Great American Casinos. These factors were partially offset by a decrease at River Rock.

Great Canadian generated shareholders' net earnings of $10.4 million during the first quarter.  After adjusting for items of note in the current and prior periods' shareholders' net earnings (listed on Page 6 of this press release), the Company's adjusted shareholders' net earnings for the first quarter were $12.1 million, a 28% decrease when compared with the same period in 2015.  This decrease was primarily due to both the impact of foreign exchange and an increase in amortization expense, as well as an increase in restructuring and other costs. These factors were partially offset by the aforementioned improvement in the Company's Adjusted EBITDA.

"During the first quarter of 2016, Great Canadian generated revenues and Adjusted EBITDA improvements across the majority of our portfolio," stated Rod Baker, the Company's President and Chief Executive Officer. "These improvements reflect the significant contributions of our recently acquired Casino New Brunswick and Shorelines Casinos properties.

"The benefit of these new properties was partially offset by a revenue decline at River Rock Casino Resort.  River Rock did generate encouraging slot machine revenues during the first quarter, recording the second highest slot win in its history. However, the property also experienced a 2.3 percentage point decrease in table hold percentage when compared to the first quarter of 2015.  River Rock also witnessed a 16% decline in table drop, primarily as a result of decreased high limit table volumes."

"As a result of the aforementioned acquisitions, Great Canadian's revenue base has gained considerable diversity, and we look forward to developing our presence within these new operating markets. This effort has already begun in Ontario, where we recently started construction of a new Shorelines Casino property in the city of Belleville. This property will encompass nearly 50,000 square feet, and feature approximately 400 slot machines and 20 tables.  We have also announced plans to relocate the Shorelines Slots at Kawartha Downs to a new location within the city limits of Peterborough, pending receipt of the appropriate governmental approvals. This new location will allow the property to offer guests a wider array of gaming and entertainment options."

"At the conclusion of the first quarter, Great Canadian maintained a strong cash balance," concluded Mr. Baker.  "As a result, Company remains well-positioned to take advantage of new opportunities for value creation.  While we continue to pursue other potential opportunities in Ontario and elsewhere, we will also continue to efficiently manage our operations and explore additional options to grow our business."

On May 9, 2016, the Board of Directors accepted the resignation of Kiran Rao as the Company's Chief Financial Officer and waived the remainder of his notice period.  The Board of Directors has authorized Radek Kielar, the Controller & Interim Vice President, Finance to complete the certification of interim filings (Form 52-109F2) as required under National Instrument 52-109 in the capacity of chief financial officer of the Company.

Great Canadian will host a conference call for investors and analysts tomorrow, on May 10, 2016, at 5:30 AM Pacific Time in order to review the financial results for the period ended March 31, 2016.  To participate in the conference call, please dial 416-764-8688, 778-383-7413, or toll free at 1-888-390-0546 (Passcode: 22372054). 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/financials.  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/financials.

ABOUT GREAT CANADIAN GAMING CORPORATION
Great Canadian Gaming Corporation is a Canadian based company that operates gaming, entertainment and hospitality facilities in British Columbia, Ontario, New Brunswick, Nova Scotia, and Washington State. The Company has 19 gaming properties, which consists of twelve casinos, including a four Diamond resort hotel in Richmond, British Columbia and a four star hotel in Moncton, New Brunswick, four horse racetrack casinos and three community gaming centres. A key element of Great Canadian's business model is its commitment to social responsibility. "PROUD of our people, our business, our community" is Great Canadian's brand that unifies the company's community, volunteering and social responsibility efforts. Under the PROUD program, Great Canadian annually invests over $2 million in our communities, and in 2015, over 2,000 charitable organizations were supported by Great Canadian. In each Canadian gaming jurisdiction, a significant portion of gross gaming revenue from gaming facilities is retained by our crown partners on behalf of their provincial government for the purpose of supporting programs like healthcare, education and social services.

Please refer to the Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") at www.gcgaming.com (available on May 9, 2016) or www.sedar.com (available on May 10, 2016) 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 Statements of Earnings (Unaudited - Expressed in millions of Canadian dollars, except for per share information)
						First Quarter
						2016	2015	% Chg
Gaming revenues						$     92.7	$     74.7	24%
Facility Development Commission						9.2	9.5	(3%)
Hospitality, lease and other revenues						35.2	27.6	28%
Racetrack revenues						3.7	3.3	12%
						140.8	115.1	22%
Less: Promotional allowances						(9.9)	(6.1)	62%
Revenues						130.9	109.0	20%
Human resources						50.7	41.5	22%
Property, marketing and administration						36.7	26.4	39%
						87.4	67.9	29%
Adjusted EBITDA						43.5	41.1	6%
Human resources as a % of Revenues before Promotional allowances						36.0%	36.1
Adjusted EBITDA as a % of Revenues						33.2%	37.7%
Amortization						13.3	9.4
Share-based compensation						2.1	2.2
Interest and financing costs, net						8.7	7.8
Restructuring and other						3.4	1.6
Other expenses						1.0	(1.9)
Income taxes						4.6	5.9
Shareholders' net earnings						$ 10.4	$ 16.1	(35%)
Shareholders' net earnings per common share
	Basic					$     0.16	$     0.23
	Diluted					$     0.16	$     0.23
Weighted average number of common shares (in thousands)
	Basic					64,402	69,010
	Diluted					65,401	70,902

GREAT CANADIAN GAMING CORPORATION Consolidated Statements of Financial Position (Unaudited - Expressed in millions of Canadian dollars)
				March 31,		December 31,
				2016		2015
Assets
Current
	Cash and cash equivalents			$         214.8		$         207.5
	Accounts receivable			13.2		7.3
	Income taxes receivable			3.3		0.4
	Prepaids, deposits and other assets			9.0		8.1
				240.3		223.3
Property, plant and equipment				660.6		638.2
Intangible assets				87.9		81.4
Goodwill				22.0		22.6
Derivative asset				0.2		-
Deferred tax assets				20.2		9.6
Cash on deposit with Canada Revenue Agency				10.1		20.2
Other assets				2.5		2.8
				$      1,043.8		$         998.1
Liabilities
Current
	Accounts payable and accrued liabilities			$           63.3		$           66.6
	Other liabilities			3.2		2.9
				66.5		69.5
Long-term debt				477.3		443.0
Deferred credits, provisions and other liabilities				27.1		25.9
Deferred tax liabilities				80.6		80.1
				651.5		618.5
Shareholders' equity
Share capital and reserves				312.5		310.2
Accumulated other comprehensive income				2.3		3.3
Retained earnings				74.6		65.7
Equity attributable to shareholders of the company				389.4		379.2
Non-controlling interests				2.9		0.4
Total equity				392.3		379.6
				$      1,043.8		$         998.1

GREAT CANADIAN GAMING CORPORATION Adjusted Shareholders' Net Earnings (Unaudited - Expressed in millions of Canadian dollars)
The current and prior periods' shareholders' net earnings included some items of note, which are summarized in the following adjusted shareholders' net earnings table:
								First Quarter
								2016	2015	% Chg
Shareholders' net earnings								$   10.4	$   16.1	(35%)
	Items of note
		Pre-opening costs for Elements Casino						0.7	-
		Restructuring severance costs						1.1	0.7
		Uneconomic lease provision due to Kent casino closure						-	0.8
		Jackpot and marketing fund liabilities reversed due to Kent casino closure						-	(0.3)
		Other						0.5	-
		Income taxes on the above items of note						(0.6)	(0.4)
Adjusted shareholders' net earnings ^(1)								$   12.1	$   16.9	(28%)
^(1)Adjusted shareholders' net earnings is a non-IFRS measure as described in the disclaimer section of this press release.
Adjusted shareholders' net earnings per common share
		Basic						$   0.19	$   0.24
		Diluted						$   0.19	$   0.24
Weighted average shares outstanding
	Basic							64,402	69,010
	Diluted							65,401	70,902

After adjusting for the above items of note, the Company's adjusted shareholders' net earnings decreased by $4.8 million in the first quarter of 2016, when compared to the same period in 2015.

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 (including participation in Ontario's gaming modernization program and possible expansion of gaming in Greater Victoria), 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 impact of new conditions imposed on certain VIP players in British Columbia, the impact of unionization activities, the Company's position on its claim against BCLC with respect to the collection of marketing contributions, the Company's beliefs about the outcome of its notices of objection challenging the Canada Revenue Agency's reassessments and its tax position on its facility development commission prevailing, 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 (including those that impact VIP play); 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; actual and possible reassessments of the Company's prior tax filings by tax authorities; the results of the Company's notices of objection and subsequent appeals challenging reassessments received by the Canada Revenue Agency; the Company's tax position on its facility development commission prevailing; the results of the Company's litigation with BCLC; the interpretation of the Company's rights under the Mayfair casino operating agreement and the BCLC relocation policy; 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 timing and results of collective bargaining negotiations; adverse changes in the Company's labour relations; 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 2015, 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.  Adjusted 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, restructuring and other, and foreign exchange loss (gain) and other.  Adjusted 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 Adjusted 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.  Adjusted EBITDA is also used by the investors and analysts for the purpose of valuing the Company.  Adjusted shareholders' net earnings, as defined by the Company, means shareholders' 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 pre-opening costs for the Ontario East Gaming Bundle, restructuring severance costs, uneconomic lease provision due to Kent casino closure, jackpot and marketing fund liabilities reversed due to Kent casino closure, other 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

GREAT CANADIAN GAMING CORPORATION [TSX:GC]
95 Schooner Street
Coquitlam, BC
V3K 7A8
[phone]
Website: www.gcgaming.com  

SOURCE Great Canadian Gaming Corporation

For enquiries: [email protected] or Ms. Tanya Ruskowski, Executive Assistant to the President and Chief Executive Officer and the Chief Financial Officer, [phone]; For media enquiries: Mr. Chuck Keeling, Vice-President, Stakeholder Relations and Responsible Gaming, [phone]