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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good afternoon, ladies and gentlemen. Welcome to the Great Canadian Gaming Corp. fourth quarter and year end results 2007 conference call.
I would now like to turn the meeting over to Mr. Thomas Bell, Vice President Corporate Development, Investor Relations of the Great Canadian Gaming Corporation. Please go ahead, Mr. Bell.
THOMAS BELL, VP, CORP. DEV., IR, GREAT CANADIAN GAMING CORP: Good afternoon, everyone. Welcome to Great Canadian Gaming Corporation's conference call to review the Company's financial results for the fourth quarter and fiscal year ended December 31, 2007. Once again, I am Thomas Bell, Vice President of Corporate Development and Investor Relations. With me on the call this afternoon are Vincent Trudel, our Chief Operating Officer, and Milton Woensdregt, our Chief Financial Officer. Following our prepared remarks, we will open up the call to a question and answer session for analysts and institutional investors.
Now before I begin, I must caution all participants that this conference call may contain forward-looking statements, which reflect management's expectations regarding the Company's future growth, results of operations, performance, business prospects, and opportunities. Whenever possible, such words as anticipate, believe, expect, intend, or similar expressions, will be used to identify these forward-looking statements. These statements reflect management's current beliefs, and are based on information currently available to the Company.
Forward-looking statements involve significant risks, uncertainties, and assumptions. A number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and prospective investors should not place undue reliance on these forward-looking statements. Although the forward-looking statements that may be made in this conference call are based on what management believes to be reasonable assumptions, the Company cannot assure prospective purchasers of the Company's securities, that actual results will be consistent with these forward-looking statements.
These statements are made as of the date of this call, and the Company assumes no obligation to update or revise them to reflect new events or circumstances. Vince and Milt will provide some details on our fourth quarter and full year results, review some of our significant recent accomplishments, and provide additional detail on our development pipeline, and the future outlook for the Company.
First, I would like to make a few comments about the meaningful progress Great Canadian has achieved over the last 12 months. When we reported our operating results a year ago, we were in the process of a comprehensive initiative to grow our revenues and improve our operating margins. In this regard, we have brought our hospitality functions in-house, effected head count reductions, and implemented improvements to our marketing programs. All of these steps have successfully enhanced our operating efficiencies.
In addition to our efforts to improve our operating margins, in February of 2007 we secured a new permanent debt facility. This facility provided Great Canadian with the flexibility to establish development plans for what has become one of the most robust pipelines of expansion projects among regional gaming operators in North America.
We are extremely pleased with the progress made in 2007 to improve our operating structure and entertainment offerings. We will continue to pursue additional strategies to further drive revenue, EBITDA growth, and we look forward to discussing our progress against these initiatives with you throughout 2008.
At this time, I would turn the call over to Milton Woensdregt, Great Canadian's Chief Financial Officer, who will discuss the financial performance for the 2007 fourth quarter and fiscal year.
MILTON WOENSDREGT, CFO, GREAT CANADIAN GAMING CORP: Thanks very much, Tom. Welcome everyone to the call, and thanks very much for joining us. I am pleased today to bring to you our 2007 fourth quarter and year end results.
First, I will review the financial results presented in today's release and filings, and after that, Vincent will provide some detailed commentary on the operations of several of our properties. Then I will conclude by providing an update on our current and planned development initiatives. In 2007, we focused our energies on growing revenues, enhancing operating efficiencies, and implementing strategic gaming and service expansions across our portfolio of properties.
As a result, Great Canadian generated record levels of both revenues and EBITDA in 2007. Revenues of $397.2 million represented 3% improvement over a year ago levels, and EBITDA of $111 million marks a 13% year-over-year improvement. EBITDA as a percentage of revenues improved by 240 basis points, from 25.5% in 2006, to 27.9% in 2007.
These improvements were led by strong results at our flagship properties, Boulevard Casino in Coquitlam, BC, and River Rock Casino Resort in Richmond, BC, both of which have experienced recent improvements to their hospitality and entertainment offerings, more effective marketing initiatives, and increased patronage generated by their show theaters. In addition, our BC Racinos contributed an 11% increase in revenues, and a 46% increase in EBITDA to our 2007 operating results, reflecting the introduction of table games and a strong slot performance at Fraser Downs in Surrey, BC, the addition of 150 slot machines at Hastings Racecourse in Vancouver, BC, and improved racing revenues. These year-over-year improvements were offset in part by a decline in our Nova Scotia property, the reasons for which Vincent will review in a few moments, and smaller declines at our Great American Properties in Washington state.
During the fourth quarter of 2007, Great Canadian recorded revenues of $100.7 million, representing an improvement of $2.6 million, or 3%, from the fourth quarter of 2006. EBITDA in the fourth quarter of 2007 was $27.9 million, a $2.5 million improvement, or 10% from the fourth quarter of 2006. As we have reported in prior quarters, our EBITDA rose faster than our quarterly revenue growth, indicating we continue to benefit from our focus on achieving operating efficiencies on a growing revenue base.
As a result of these ongoing efforts, our EBITDA as a percentage of revenues improved by 180 basis points to 27.7%, compared to 25.9% in the fourth quarter of 2006. Human resources expenses as a percentage of revenues declined 130 basis points in the fourth quarter, and 110 basis points for the full year, reflecting our continued efforts to improve our labor efficiencies. Total human resources and property marketing and administration expenses remained flat for both the fourth quarter and full year of 2007, despite inflationary pressures, and this is reflected in our improved levels of EBITDA as a percentage of revenue.
Net earnings increased to $13 million in the fourth quarter, and $35.8 million for the full year, compared to losses of $11.5 million, and $18.6 million respectively a year ago. I would like to point out that last year's results, that is 2006 results, reflected $9.9 million in goodwill impairment, and $4.6 million in restructuring charges incurred in the fourth quarter, while the 2006 full year results also reflected a $20.4 million after-tax, or $30.9 million pre-tax financing charge associated with the redemption of our Series A and Series B senior secured notes.
After excluding these unusual charges and adjusting for additional future income tax recoveries, due to decreases in an active statutory tax rates that occurred in both years, adjusted net earnings for the 2007 fourth quarter and full year rose 60% to $4.8 million, and 63% to $22 million respectively.
Net cash provided by operating activities as set out in the consolidated statements of cash flows improved significantly due to increased EBITDA levels, and reductions in noncash working capital, particularly income taxes. In 2007, we generated cash from operations of $96.6 million, an increase of over 200% from the $31.1 million we generated in 2006.
Our cash outflow from investing activities decreased in 2007 to $21.2 million, from $71.1 million in 2006, due to the significant construction projects that were in progress in the prior year. These included the renovations at the Nova Scotia casinos, and the development of Chances Community Gaming Center in Dawson Creek, and the Red Robinson Show Theater at the Boulevard Casino in Coquitlam BC in 2006. The main construction projects undertaken in 2007 included the River Rock Conference Center that opened up in July, the Fraser Downs table and slot expansion that opened in November, and the Phase I Hastings Racecourse slot room that also opened in November.
In July of 2007, Great Canadian commenced a normal course issuer bid, and to-date the Company has purchased 2,902,800 of its common shares, for an aggregate consideration of $40.5 million. These purchases were financed through existing cash balances. The Company is authorized to purchase up to an additional 3.5 million of it's common shares, under our issuer bid through to July 22, 2008, or earlier.
The improvements in our fourth quarter operating results were led by Boulevard Casino, where gaming revenues rose 8%, to $13.8 million, and EBITDA grew by 32%, to $8.7 million. This growth is primarily due to higher slot play, attributed to the public's growing awareness of our Red Robinson Show Theater, which as anticipated, is drawing more patrons into the casino on show nights, and for repeat visits.
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