LAKE CITY GAMING Corp.
profits soar after introduction of slot machines at B.C. casinos
Lake City is a gaming management company which currently operates casinos in Kamloops, Kelowna,and Vernon, B.C. through its wholly-owned subsidiary, Lake City Casinos Ltd. The company completed its initial public offering of 1,200,000 shares at $1.50 on the Vancouver Stock Exchange in August 1998.
All gaming in the province is conducted under section 207(1)(b) of the Criminal Code which requires that all gaming be managed and conducted directly by the provincial government. The British Columbia
Lotteries Commission (BCLC) is empowered by the B.C. government to conduct and manage the gaming industry. In May 1997, the government announced several initiatives to expand gaming in the province.
Casino operating hours were extended, maximum wagers were raised from $25 to $500, the permitted number of gaming tables at each casino was increased, and several new table games were introduced; however, the most significant initiative was the introduction of slot machines.
The addition of 155 slot machines to Lake City's Kelowna casino on October 28, 1997, and 89 machines to its Vernon facility on November 18, 1997, has had a dramatic impact on the company's
revenues and earnings; however, each of its facilities was too small to fully exploit the opportunity that slot machines presented. As a result, the company's focus has become the relocation of its present casinos to larger facilities. Since the Kamloops casino was too small to support any slot machines, it became the priority for expansion. On April 1, 1998, Lake City relocated its Kamloops casino to a 14,000 sq ft facility at the Stockmen's Hotel for a total capital cost of about $1.3 million. It was equipped with 275 slot machines and 20 gaming tables. The previous facility hosted only 12 tables. The relocation of Lake City's Vernon casino to a new 12,000 sq ft facility at the Village Green Hotel is expected to be completed by early December 1998. The expanded casino will house 177 slot machines and 20 gaming tables. The company has also entered into a letter of intent and received government approval to double the size of its Kelowna casino by relocating it to a 20,000 sq ft free-standing building at the Grand Okanagan Lake-front Resort and Conference Centre. The new facility, which is expected to open in May 1999, will host 300 slot machines and 30 gaming tables, the maximum permitted by present legislation.
All of the slot machines and much of the other gaming equipment used at the company's casinos are actually owned, regulated, and maintained by the BCLC. In exchange for providing staffing, facilities,furniture, advertising, and security, Lake City receives 25% and 40% of the net revenue after the payout of prizes from the slot machines and table games, respectively. It also receives 3% of gross casino revenue to offset the capital costs associated with constructing and improving facilities. The government presently gives
about $130 million annually from its share of casino gaming proceeds to B.C. charities. The company's casinos target the Thompson/ Okanagan region's 400,000 permanent residents as well as the estimated 4
million tourists that visit the area each year. The average Canadian spends about $350 annually on legal forms of gambling including about $40 per visit to a casino.
Lake City plans to expand through the acquisition of existing casinos and the establishment of new ones where economically and politically feasible. The company's proposal to develop a 12,000 sq ft destination casino hosting 200 slot machines and 20 gaming tables in a partnership with the Penticton Lakeside Resort and Conference Centre has been approved in principle. Final approval is contingent upon successfully concluding negotiations with the BCLC. Construction of the facility could commence during the spring of 1999.
CONCLUSION
Since the introduction of slot machines at Lake City's casinos last fall, the company's revenues have risen consistently on a month to month basis. Based on present monthly revenues, Lake City is on track to achieve gross casino revenues of more than $70 million in fiscal 1999. Such a dramatic rise in revenues should result in a commensurate increase in the company's earnings. With the expansion of the Vernon and Kelowna casinos slated to be completed during the next six months, it appears likely that the company will substantially exceed this level of revenues.
_____________
download from www.stockdepot.com |
