Great Canadian Gaming announces third quarter 2012 results

RICHMOND, BC, Nov. 7, 2012 /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, 2012 ("third quarter of 2012").

THIRD QUARTER 2012 HIGHLIGHTS

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

• Revenues of $101.8 million, a 1% increase when compared to the prior year
• EBITDA⁽¹⁾ decreased by $2.8 million, or 7% of which $1.1 million related to non-recurring severance expenses
• Net loss of $0.9 million compared to net earnings of $7.9 million in the prior year, primarily due to non-recurring expenses totalling $14.4 million associated with the debt refinancing and settlement of the related derivative liabilities
• Adjusted net earnings⁽¹⁾ of $12.1 million, a $0.5 million increase when compared to the prior year
• Completed long-term debt and derivative liability refinancing by issuing $450.0 million of 10-year, 6.625% Senior Unsecured Notes on July 24, 2012
• Purchased for cancellation 10 million common shares under a substantial issuer bid for a total of $100.0 million on August 21, 2012

		Third Quarter						First Nine Months of
			2012		2011	% Chg			2012		2011	% Chg
Revenues		$	101.8	$	101.0	1%		$	305.9	$	292.5	5%
EBITDA ^(1)		$	35.8	$	38.6	(7%)		$	110.1	$	107.9	2%
EBITDA as a % of Revenues			35.2%		38.2%				36.0%		36.9%
Net (loss) earnings ^(2)		$	(0.9)	$	7.9			$	(30.1)	$	23.9
Net (loss) earnings per common share
	Basic	$	(0.01)	$	0.10			$	(0.38)	$	0.29
	Diluted	$	(0.01)	$	0.09			$	(0.38)	$	0.28
Total assets								$	849.2	$	966.6	(12%)
Long-term debt & Derivative liabilities, excluding current portion								$	439.7	$	400.5	10%
^(1) EBITDA and adjusted net earnings are non-IFRS measures as described in the Disclaimer section of this press release.
^(2)Net (loss) earnings has decreased by $8.8 million in the third quarter and $54.0 million in the first nine months of 2012, when compared to the same periods in 2011.  These decreases were primarily due to items of note as disclosed on page 6 of this press release.

 

For the third quarter of 2012, revenues were $101.8 million, a $0.8 million, or 1%, increase from the third quarter of 2011.  EBITDA was $35.8 million, a $2.8 million, or 7%, decrease from the third quarter of 2011.

The increase in consolidated revenues was primarily due to the improvement at the River Rock Casino Resort ("River Rock") when compared to the prior year.  This improvement was largely offset by revenue decreases at the other properties, which are most pronounced at Boulevard Casino, the BC Racinos, and Casino Nova Scotia.

The $2.8 million decrease in EBITDA in the third quarter of 2012 was primarily due to decreased revenues at certain properties, combined with the increase in human resources costs, which included non-recurring severance expenses of $1.1 million.

Net (loss) earnings decreased by $8.8 million in the third quarter of 2012, when compared to the third quarter of 2011.  This decrease was primarily due to non-recurring foreign exchange losses of $8.1 million and non-recurring interest and financing costs of $6.3 million associated with both the debt refinancing and settlement of the related derivative liabilities.

"River Rock continued to positively impact Great Canadian's financial results during the third quarter of 2012," stated Mr. Rod N. Baker, President and Chief Executive Officer.  "This property continues to witness the benefits of 'The Hotel at River Rock', which has produced increasingly strong performance since its opening just over a year ago.  As a result of both The Hotel and other enhancements to River Rock's hospitality and gaming offerings, table drop and slot coin-in at the property have also produced improvements.

"While River Rock generated top-line growth, several of the Company's other properties continue to experience revenue challenges within their respective markets.  These challenges are particularly prominent at Boulevard Casino, the BC Racinos, and Casino Nova Scotia. To mitigate the impact of these challenges, we continue to focus on maintaining the efficiency of our operations and long-term growth strategies, including investments in property development.  On November 1, 2012, the Company opened 'Chances Chilliwack', a community gaming centre in Chilliwack, BC, featuring 150 slot machines.  Great Canadian's community gaming centres have proven to be an efficient source of new revenue growth, and we are optimistic about the future of this facility.

"In October, Great Canadian signed an agreement with the City of Vancouver that permits the Company to continue operating Hastings Racecourse until at least November 2014.  This agreement provides British Columbia's horse racing industry with additional time to develop strategies that will strengthen its long term sustainability."

Mr. William Dimma, Chairman of the Board, said, "On August 21, 2012, in connection with the substantial issuer bid, the Company accepted for purchase 10 million of the validly tendered common shares at a purchase price of $10.00 per share for a total of $100.0 million.  Following this purchase and the debt refinancing completed in July, Great Canadian had $83.2 million of cash and cash equivalents at the close of the third quarter of 2012."

Mr. Dimma concluded, "Great Canadian's recent issuer bid allowed the Company to not only return $100.0 million to its shareholders, but to do so without sacrificing our financial flexibility.  This flexibility will remain invaluable as we analyze new opportunities for increasing shareholder value."

Great Canadian will host a conference call for investors and analysts today, November 7, 2012, at 2:00 PM Pacific Time to review the financial results for the period ended September 30, 2012. To participate in the conference call, please dial 647-427-7450, or toll free at 888-231-8191 (Passcode: 37336096). 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 is a multi-jurisdictional gaming, entertainment and hospitality operator with 17 gaming facilities, which include ten casinos, four horse racetrack casinos, three community gaming centres, and a Four Diamond hotel resort, located in British Columbia, Ontario, Nova Scotia and Washington State. As of September 30, 2012, the Company had approximately 4,100 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 7, 2012) or www.sedar.com (available on November 8, 2012) 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
			2012		2011	% Chg			2012		2011	% Chg
Gaming revenues		$	73.8	$	73.7	0%		$	223.5	$	213.5	5%
Facility Development Commission			7.6		8.1	(6%)			24.5		23.5	4%
Hospitality and other revenues			21.5		17.9	20%			60.7		51.5	18%
Racetrack revenues			4.3		5.2	(17%)			12.4		15.1	(18%)
			107.2		104.9	2%			321.1		303.6	6%
Less: Promotional allowances			(5.4)		(3.9)	38%			(15.2)		(11.1)	37%
Revenues			101.8		101.0	1%			305.9		292.5	5%
Human resources			42.3		39.5	7%			123.0		115.8	6%
Property, marketing and administration			23.7		22.9	3%			72.8		68.8	6%
			66.0		62.4	6%			195.8		184.6	6%
EBITDA			35.8		38.6	(7%)			110.1		107.9	2%
Human resources as a % of Revenues   before Promotional allowances			39.5%		37.7%				38.3%		38.1%
EBITDA as a % of Revenues			35.2%		38.2%				36.0%		36.9%
Amortization			12.8		14.7				38.7		43.7
Share-based compensation			0.6		0.9				3.4		4.3
Impairment of long-lived assets			-		-				54.2		-
Impairment of goodwill			-		-				3.2		-
Interest and financing costs, net			14.1		7.9				28.6		21.8
Litigation settlement			-		-				11.0		-
Equity investment loss and other			2.1		0.3				2.7		0.7
Foreign exchange loss and other			8.1		4.3				7.0		4.1
Income taxes			(1.0)		2.6				(8.6)		9.4
Net (loss) earnings		$	(0.9)	$	7.9			$	(30.1)	$	23.9
Net (loss) earnings per common share
	Basic	$	(0.01)	$	0.10			$	(0.38)	$	0.29
	Diluted	$	(0.01)	$	0.09			$	(0.38)	$	0.28
Weighted average number of common shares (in thousands)
	Basic		75,557		82,523				78,986		82,842
	Diluted		75,557		84,079				78,986		84,454

 

GREAT CANADIAN GAMING CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Unaudited - Expressed in millions of Canadian dollars)
					September 30,		December 31,
					2012		2011
Assets
Current
		Cash and cash equivalents		$	83.2	$	134.7
		Restricted cash			7.0		7.1
		Accounts receivable			7.2		8.9
		Prepaids, deposits and other assets			8.3		6.6
					105.7		157.3
Property, plant and equipment					632.3		663.6
Intangible assets					76.9		119.7
Goodwill					20.1		23.5
Deferred tax assets					10.0		9.1
Other assets					4.2		2.9
				$	849.2	$	976.1
Liabilities
Current
		Accounts payable and accrued liabilities		$	54.1	$	59.0
		Income taxes payable			0.1		0.8
		Other liabilities			3.2		5.1
					57.4		64.9
Long-term debt					439.7		332.6
Derivative liabilities					-		66.3
Deferred credits, provisions and other liabilities					24.5		23.7
Deferred tax liabilities					51.1		66.2
					572.7		553.7
Shareholders' equity
Share capital and contributed surplus					312.5		356.5
Accumulated other comprehensive loss					(1.3)		(6.5)
(Deficit) retained earnings					(34.7)		72.4
					276.5		422.4
				$	849.2	$	976.1

 

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

---

Net (loss) earnings decreased by $8.8 million in the third quarter of 2012, when compared to the third quarter of 2011.  This decrease was primarily due to the after tax effect of decreased EBITDA of $2.8 million, which included non-recurring severance costs of $1.1 million, as well as non-recurring expenses of $14.4 million associated with the debt refinancing and settlement of the related derivative liabilities, which included:

a)     the foreign exchange loss of $8.1 million arising from the settlement of the derivative liabilities;

b)     the interest and financing expense of $3.9 million associated with the early redemption of the Company's Subordinated Notes as part of the debt refinancing; and

c)     the $2.4 million previously deferred financing transaction costs related to the Subordinated Notes and Term Loan B.

Net (loss) earnings decreased by $54.0 million in the first nine months of 2012, when compared to the first nine months of 2011.  This decrease was primarily due to the after tax effect of the non-cash impairment charges of $57.4 million associated with Georgian Downs and Flamboro Downs that was recorded in the first quarter of 2012, non-recurring expenses of $14.4 million associated with the debt refinancing and settlement of related derivative liabilities, and a non-recurring expense of $11.0 million related to the settlement of a long-standing legal dispute.  These items were partially offset by lower amortization expense and improved EBITDA.  The improved EBITDA included the effect of the non-recurring severance costs of $1.8 million.

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

			Third Quarter						First Nine Months of
				2012		2011	% Chg			2012		2011	% Chg
Net (loss) earnings			$	(0.9)	$	7.9			$	(30.1)	$	23.9
	Items of note
		Impairment of long-lived assets and goodwill		-		-				57.4		-
		Litigation settlement		-		-				11.0		-
		Net losses related to cross-currency interest rate and principal swaps		8.1		5.0				8.1		5.0
		Subordinated Notes redemption costs		3.9		-				3.9		-
		Previously deferred transaction costs associated with the Term Loan B and Subordinated Notes		2.4		-				2.4		-
		Equity investment loss		2.0		-				2.6		-
		Non-recurring severance costs		1.1		-				1.8		-
		Income taxes recovery on the above items of note		(4.5)		(1.3)				(21.8)		(1.3)
Adjusted net earnings^1			$	12.1	$	11.6	4%		$	35.3	$	27.6	28%

 (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 4% in the third quarter and by 28% in the first nine months of 2012, when compared to the prior periods in 2011.  These increases were primarily due to the growth in revenues and lower amortization expense.

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 its 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 and their profitability, 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 service agreements with lottery corporations; changes to gaming laws that may impact our operational service agreements; pending, proposed or unanticipated regulatory or policy changes; the Company's ability to obtain and renew required business licenses; 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 2011, 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 and 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, equity investment loss and other, litigation settlement, impairment of long-lived assets and goodwill, 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 (loss) 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 impairments of long-lived assets and goodwill, litigation settlement, net losses related to cross-currency interest rate and principal swaps, subordinated notes redemption costs, previously deferred transaction costs associated with the Term Loan B and subordinated notes, equity investment loss, non-recurring severance costs, and income taxes recovery 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

GREAT CANADIAN GAMING CORPORATION [TSX:GC]
Suite #350 - 13775 Commerce Parkway
Richmond, BC
V6V 2V4
[phone]
Website: www.gcgaming.com

 

 

SOURCE: Great Canadian Gaming Corporation

For investor enquiries:
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or
Ms. Tanya Ruskowski
Executive Assistant to the President and Chief Executive Officer and the Chief Financial Officer
[phone]

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Mr. Howard Blank
Vice-President, Communications, Entertainment & Responsible Gaming
[phone]