On Thursday, March 8, Great Canadian Gaming Corporation ('Great Canadian' or 'the Company') announced its financial results for the three-month period ('fourth quarter of 2011') and 12-month period ('2011') ended December 31, 2011
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2011 FOURTH QUARTER AND TWELVE MONTHS HIGHLIGHTS
(Amounts presented in millions of Canadian dollars, except for per share information)
- Two per cent decrease in revenues and 12 per cent decrease in EBITDA(1) in the fourth quarter of 2011
- One per cent increase in both revenues and EBITDA for the full year
- Recorded non-cash long-lived asset impairment charges of $4.4 million related to Hastings Racecourse in the fourth quarter of 2011
- Shareholders' net earnings of $2.3 million in the fourth quarter of 2011
- Shareholders' net earnings of $26.2 million for the full year, an increase of $34.3, when compared to 2010
For the fourth quarter of 2011, Great Canadian Gaming Corporation recorded revenues of $95.7 million, a $1.5 million decrease from the fourth quarter of 2010. EBTIDA was $30.9 million, a $4.1 million decrease from the fourth quarter of 2010.
The decline in consolidated revenues was primarily due to the flat gaming revenues at River Rock Casino Resort ('River Rock') compared to the prior year period along with the decreased revenues at both Boulevard Casino ('Boulevard') and the Company's BC Racinos.
Since the fourth quarter of 2009, River Rock had achieved meaningful gaming revenue increases each quarter as compared to the prior year quarter. As a result, River Rock's positive gaming revenues trend had helped to counterbalance the challenges at some of our other properties. In the fourth quarter of 2011, this was not the case. Specifically River Rock's table drop decreased four per cent in the fourth quarter of 2011 when compared to the fourth quarter of 2010. While River Rock's total revenues increased two per cent in the fourth quarter, this was primarily due to the addition of lower margin hospitality revenues associated with the property's new hotel tower, branded 'The Hotel at River Rock,' which opened on October 17, 2011.
At Boulevard, we saw continued challenges from the uncertain local economy, ongoing disruption from the provincial highway construction near the facility, and proximate competition. The Company is redeveloping Boulevard to provide its customers a hotel and conference space as well as improved connectivity to the property's existing amenities. These enhancements are expected to reach completion by the end 2013.
Revenues at the BC Racinos continued to be negatively affected by an industry wide decline in horse racing revenues. The consistent declines in racetrack revenues and the resulting uncertainty in Hastings Racecourse's ('Hastings') economic outlook, led to a $4.4 million non-cash impairment of Hastings' property, plant and equipment during the fourth quarter of 2011.
The decline in EBITDA in the fourth quarter of 2011 was primarily due to the decrease in revenues, increased human resources expense associated with staffing related adjustments to accommodate the increased visitation and gaming volumes at River Rock. The resulting EBITDA as a percentage of revenues for the fourth quarter of 2011 was 32.3 per cent, a 3.7 percentage point decrease from the fourth quarter of 2010.
Shareholders' net earnings (loss) increased by $31.8 million in the fourth quarter and by $34.3 million in the 12 months of 2011, when compared to the same periods of 2010. These increases were primarily due to decreases in the impairment of long-lived assets and goodwill, and lower restructuring and other expenses that were partially offset by increased amortization and interest and financing costs, net of interest income.
"Great Canadian's financial results for the fourth quarter of 2011 reflect continued challenges within the Company's local markets," stated Rod N. Baker, Great Canadian's president and chief executive officer. "These challenges are most pronounced at the Boulevard Casino and the BC Racinos, but River Rock's gaming revenues this quarter are also a reminder that the volatility in our gaming business can create unpredicted variability in our financial results.
"In February 2012, the Drummond Commission released a report that recommended a reduction to the Government of Ontario's practice of providing 'subsidies' to the horse racetracks in Ontario and an expansion of the availability of competing slot machines in the province. If these recommendations are implemented, they may have a negative effect on the profitability of our Georgian Downs and Flamboro Downs properties. For 2011, these properties generated a combined $17.4 million or 13% of our consolidated EBITDA. We will continue to monitor the developments that may stem from this report and will proactively manage the resulting impact on our Ontario properties as best we can.
"Despite the challenges encountered this quarter, the Company finished the year in a strong financial position, as evidenced by its improved cash balance and undrawn revolving credit facility that was increased to $350 million during the year." Mr. Baker concluded, "The Company's continued stable financial position provides us flexibility to meet these challenges and to take advantage of future value-added opportunities."
(GCGC)
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