Great Canadian Gaming Announces Fourth Quarter and Annual 2019 Results

03/03/2020 14:10

TORONTO, March 3, 2020 /CNW/ - Great Canadian Gaming Corporation [TSX:GC] ("Great Canadian," or "the Company") today announced its financial results for the three month period ended December 31, 2019 (the "fourth quarter") and the twelve month period ended December 31, 2019 ("2019", or the "full year").

FOURTH QUARTER AND 2019 HIGHLIGHTS

Revenues⁽¹⁾ of $357.4 million in the fourth quarter and $1,355.6 in the full year, an increase of 8% and 15%, respectively, when compared to the same periods in the prior year.
Adjusted EBITDA^(1)(2)(3)of $152.0 million in the fourth quarter and $557.3 in the full year, which included a $21.1 million and $83.7 million positive impact from IFRS 16 adoption, respectively. Adjusted EBITDA of $117.8 and $466.0 million in the same prior year periods.
Shareholders' net earnings from continuing operations⁽¹⁾⁽³⁾ of $45.8 million or $0.81 per common share in the fourth quarter, and $174.4 million or $3.00 per common share in the full year, which included a negative impact from IFRS 16 adoption of $2.5 million or $0.04 per common share in the fourth quarter and $7.9 million or $0.13 per common share in the full year. Shareholders' net earnings from continuing operations⁽¹⁾ of $26.3 million or $0.44 per common share in the prior fourth quarter and $146.1 million or $2.40 per common share in the prior year.
On December 13, 2019 Great Canadian announced the appointment of Matthew Anfinson as the Company's Chief Operating Officer ("COO").
The Company purchased for cancellation 1,886,396 common shares under its current normal course issuer bid, at a weighted average price per share of $42.14 in the fourth quarter. Subsequent to December 31, 2019, the Company purchased 172,724 common shares at a weighted-average price per share of $42.29, which completed the remaining balance available under the current issuer bid.
On March 2, 2020, the Company closed a senior unsecured debenture offering for proceeds of $180.0, less transaction costs of $7.4. The debenture offering includes an over-allotment option to increase proceeds by an additional $27.0, less applicable transaction costs, and will expire 30 days after the close date. The debentures will bear interest from the date of issuance at 5.25% per annum, payable semi-annually in arrears commencing June 30, 2020 and will mature on December 31, 2026.
On February 14, 2020, the Company filed an issuer bid circular, pursuant to which it will offer to purchase for cancellation up to $500.0 of its outstanding common shares from shareholders. The offer is expected to expire on March 20, 2020, unless otherwise extended or withdrawn. The Company plans to fund any purchases under the issuer bid with a combination of cash on hand and proceeds drawn on its senior secured revolving facility.


⁽¹⁾	Excluded results of the U.S. region, which have been presented as discontinued operations.
⁽²⁾	Adjusted EBITDA is a non-IFRS measure, as described in the disclaimer section of this press release, and excludes discontinued operations.
⁽³⁾	2019 financial results reflect the adoption of IFRS 16, Leases ("IFRS 16"), as described in the Financial Review section of this press release. Comparative information has not been adjusted for IFRS 16.

"2019 was a productive year with construction activities ramping up on several significant developments that will continue through 2020 and 2021. In December 2019, we also successfully on-boarded our new Chief Operating Officer, Matt Anfinson, who brings the skills and experience required to optimize on operational opportunities at current facilities, as well as develop strategies to successfully launch our new properties under development," stated Rod Baker, the Company's Chief Executive Officer.

"We are also pleased with our recent efforts to enhance the Company's capital structure as we move into a busy 2020, including the previously announced accordion increase to the Company's senior secured revolving facility, closing the senior unsecured debenture offering, as well as the substantial issuer bid offer to shareholders," added Mr. Baker.

FINANCIAL REVIEW

Revenues increased during the fourth quarter and 2019, when compared to the same periods in the prior year. The increases were attributable to the expansion of gaming and non-gaming amenities in the Ontario properties. Revenues for the twelve months ended December 31, 2019 included an additional 22 and 120 days of operations from the GTA and West GTA gaming bundles since their acquisitions on January 23, 2018 and May 1, 2018, respectively.

Adjusted EBITDA increased during the fourth quarter and 2019, when compared to the same periods in the prior year, mainly due to the accounting impact of IFRS 16, the new lease accounting standard adopted on January 1, 2019. Readers are cautioned that the financial results for the comparative period in 2018 have not been adjusted for IFRS 16. The increase in Adjusted EBITDA was also attributable to the above mentioned increased revenues in the Ontario region, partially offset by increased operating costs related to expanded operations in Ontario.

Shareholders' net earnings from continuing operations of $45.8 million in the fourth quarter increased by $19.5 million, when compared to the same period in the prior year, primarily due to increased Adjusted EBITDA in Ontario, and lower interest and financing costs on the Company's Senior Secured Credit Facilities after the redemption of the 6.625% $450.0 million Senior Unsecured Notes and the associated early redemption premium of $9.9 million incurred in the fourth quarter of 2018, partially offset by increased amortization related to capital investments for the Ontario developments, increased income taxes, and the net effect of adopting IFRS 16.

Shareholders' net earnings from continuing operations of $174.4 million in the full year increased by $28.3 million, when compared to the same period in the prior year, primarily due to increased Adjusted EBITDA in Ontario, the gain on sale of a parcel of vacant land in B.C., partially offset by increased amortization related to capital investments for the Ontario developments, increased income taxes, and the net effect of adopting IFRS 16.

Implementation of IFRS 16:
IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all material leases.

The following are the key changes in the fourth quarter and the full year, when compared to the same periods in 2018, due to adoption of IFRS 16:

As at December 31, 2019, the Company had right-of-use assets of $985.7 million and lease liabilities, including current portion, of $960.2 million, which primarily consist of the Company's property leases.
Adjusted EBITDA was increased by $21.1 million in the fourth quarter and $83.7 million in the full year due to certain lease payments, previously recognized as "property, marketing and administration" expense, being recorded against lease liabilities.
Amortization expense was increased by $13.5 million in the fourth quarter and $53.3 million in the full year due to amortization of right-of-use assets, and interest and financing costs, net, was increased by $13.1 million in the fourth quarter and $50.9 million in the full year due to interest accretion on lease liabilities.
Net earnings was decreased by $4.6 million in the fourth quarter and $17.5 million in the full year.
Shareholders' net earnings was decreased by $2.5 million in the fourth quarter and $7.9 million in the full year.

See Great Canadian's Consolidated Financial Statements and Management's Discussion & Analysis for the year ended December 31, 2019 for further information.

OUTLOOK

"The casino building portion at the Pickering Casino Resort with the various dining amenities is near completion and is expected to open by the end of the first quarter of 2020. In Ontario, we are on track for the hotel and entertainment venue at the Pickering Casino Resort to open by the end of 2020, and continue to make progress on Casino Woodbine expansion, Great Blue Heron Casino hotel, and West GTA development programs. As we make progress on the development of our Ontario properties, we continue to explore opportunities to reinvest in our properties in B.C. and Atlantic. In particular, we plan to make capital investments to enhance our B.C. properties in the upcoming years. We remain committed to finding opportunities to enhance guest experiences at all our properties."

"Great Canadian continues to enhance its capital structure as demonstrated by the extension of the Company's Senior Secured Credit Facilities for another year, the increase in the revolving facility subsequent to year-end, and the amendments made to the revolving credit facility of OGWGLP during the fourth quarter of 2019. The amendments to our credit facilities provide improved financial stability that will enhance the Company's ability to achieve its strategic objectives. Furthermore, the senior unsecured debentures closed in 2020 will provide the Company a diversified financing structure by rebalancing interest rate exposure and varying loan maturity profile."

"We continued to increase shareholder interest as demonstrated by the recent completion of the current normal course issuer bid where the maximum available 3,971,976 common shares were repurchased. Furthermore on February 14, 2020, we filed a substantial issuer bid offer to repurchase additional common shares."

"As at December 31, 2019, the Company remains in a stable financial position with cash of $329.7 million, available capacity of $347.6 million on the Senior Secured Credit Facilities, $703.0 million on OTG's revolving and capital expenditures credit facilities, $87.4 million on the revolving credit facility of OGWGLP, and $18.1 million on the revolving credit facility of OGELP, each subject to compliance with any applicable financial covenants. Subsequent to December 31, 2019, capacity of the revolving facility under the Company's Senior Secured Credit Facilities increased by $150.0 million, subject to covenants," concluded Mr. Baker.

CONFERENCE CALL

Great Canadian will host a conference call for investors and analysts today, March 3, 2020, at 5:00 PM Eastern Time in order to review the financial results for the quarter and year ended December 31, 2019. To participate in the conference call, please dial 416-764-8688, 778-383-7413, or toll free at 1-888-390-0546. Questions will be reserved for analysts and institutional investors. 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
Founded in 1982, Great Canadian Gaming Corporation is an Ontario based company that operates 25 gaming, entertainment and hospitality facilities in Ontario, British Columbia, New Brunswick, and Nova Scotia. Fundamental to the Company's culture 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 supports over 1,400 charitable and non-profit organizations across Canada. 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 at www.gcgaming.com or www.sedar.com (available on March 3, 2020) for detailed financial information and analysis.

GREAT CANADIAN GAMING CORPORATION
Financial Highlights
(Expressed in millions of Canadian dollars, except for per share information)
The financial results below are unaudited and prepared by management. Expressed in millions of Canadian dollars, except for per share information.

	Three months ended December 31,					Twelve months ended December 31,
	2019⁽¹⁾		2018⁽²⁾		% Chg	2019⁽¹⁾		2018⁽²⁾		% Chg
Revenues	$	357.4	$	331.4	8%	$	1,355.6	$	1,179.8	15%

Human resources	109.8		106.7		3%	430.8		357.0		21%
Property, marketing and administration	96.3		107.6		(11%)	370.2		359.5		3%
Share of profit of equity investment⁽³⁾	(0.7)		(0.7)		0%	(2.7)		(2.7)		0%
	205.4		213.6		(4%)	798.3		713.8		12%
Adjusted EBITDA	$	152.0	$	117.8	29%	$	557.3	$	466.0	20%

Adjusted EBITDA as a % of Revenues	42.5%		35.5%			41.1%		39.5%

Less:
Amortization	41.0		23.8			152.8		83.0
Share-based compensation	4.2		3.1			12.2		13.0
Interest and financing costs, net	22.6		28.6			87.3		62.7
Business acquisition, restructuring and other⁽³⁾	3.8		3.5			3.6		17.8
Gain on sale of land	-		-			(6.6)		-
Foreign exchange gain	(0.4)		0.3			(2.3)		(1.0)
Income taxes	18.4		10.4			65.4		55.8
Net earnings from continuing operations	$	62.4	$	48.1	30%	$	244.9	$	234.7	4%
Net earnings attributable to discontinued operations⁽²⁾	$	-	$	1.1		$	52.1	$	5.1
Net earnings	$	62.4	$	49.2	27%	$	297.0	$	239.8	24%

Net earnings from continuing operations attributable to:
Shareholders of the company	$	45.8	$	26.3		$	174.4	$	146.1
Non-controlling interests	16.6		21.8			70.5		88.6
	$	62.4	$	48.1	30%	$	244.9	$	234.7	4%

Net earnings attributable to:
Shareholders of the company	$	45.8	$	27.4		$	226.5	$	151.2
Non-controlling interests	16.6		21.8			70.5		88.6
	$	62.4	$	49.2	27%	$	297.0	$	239.8	24%

Shareholders' net earnings per common share from continuing operations
Basic	$	0.81	$	0.44		$	3.00	$	2.40
Diluted	$	0.79	$	0.42		$	2.91	$	2.31

Shareholders' net earnings per common share
Basic	$	0.81	$	0.46		$	3.89	$	2.49
Diluted	$	0.79	$	0.44		$	3.78	$	2.39

Weighted average number of common shares (in thousands)
Basic	56,267		59,858			58,171		60,805
Diluted	57,615		62,450			59,836		63,217

						December 31,		December 31,
						2019		2018		% Chg
Cash						$	329.7	$	336.8	(2%)
Total assets						$	2,851.9	$	1,601.8	78%
Long-term debt						$	869.8	$	631.6	38%


⁽¹⁾	2019 financial results reflect the adoption of IFRS 16, as described in the Financial Review section of this press release. Comparative information has not been adjusted for IFRS 16.
⁽²⁾	The results of the U.S. region, including proceeds from the disposition of Great American, have been presented as discontinued operations. Comparative information has been re-presented to show the discontinued operations separately from continuing operations.
⁽³⁾	In calculating Adjusted EBITDA for the twelve months ended December 31, 2018, "share of profit of equity investment" does not include the loss of $1.1 relating to the Company's share of Ontario Gaming West GTA Limited Partnership's ("OGWGLP") transition costs incurred for the West GTA Gaming Bundle prior to the acquisition on May 1, 2018, in which OGWGLP was accounted for as an equity method investee. The loss of $1.1 has been classified under "business acquisition, restructuring and other

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 historical trends and other factors. Forward-looking statements are frequently but not always identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "targeted", "planned", "possible" or similar expressions or statements that events, conditions or results "will", "may", "could" or "should" occur or be achieved. 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 impact of conditions imposed on certain high limit players, the impact of unionization activities and labour organization, the Company's beliefs about the outcome of its notices of objection and subsequent appeals challenging the Canada Revenue Agency's reassessments and its tax position on its facility development commission prevailing, the determination and calculation of the Company's expected facility investment commission amounts in respect of its British Columbia facilities and the Company's projected future investments to obtain facility investment commission, the terms and expected benefits of the normal course issuer bid, the Company's expected share of BC horse racing industry revenue in future years, the Company and its affiliates meeting threshold revenue growth amounts in the Ontario gaming industry in future years, the Company's projected timeline for future development, and expectations and implications of changes in legislation and government policies, volatile gaming holds, the effects of competition in the market and potential difficulties in employee retention and recruitment. Such forward-looking information is not a guarantee of future performance and may involve a number of risks and uncertainties.