RED DEER, ALBERTA–(Marketwire – Aug. 16, 2010) – Gamehost Income Fund (the “Fund”) (TSX:GH.UN)
Management and Trustees of Gamehost Income Fund (the “Fund”) are pleased to present results for the six months ended June 30, 2010 (the “Period”) and three months ended June 30, 2010 (the “Quarter”).
More of a Good Thing
During the Quarter the Fund acquired an additional 51% of the Deerfoot Joint Venture (the “Acquisition”) The Fund now owns 91% of the Deerfoot Joint Venture and controlling interest from the pre-Acquisition interest of 40%. Obtaining controlling interest in the Deerfoot Joint Venture necessitates a change in accounting and reporting methodology. Post-acquisition, the Fund reports 100% of the Deerfoot Joint Venture results. An offsetting 9% of the Deerfoot Joint Venture’s results are reported as a single line on the balance sheet and income statement indicating a non-controlling interest (NCI) in equity and net operating results respectively. The acquisition was funded by a $55 million convertible debenture offering and is immediately accretive to the Fund.
The New Order
Quarterly revenues inclusive of a NCI totaled $16.2 million compared to $12.1 million for the same quarter in 2009, a 34% increase credited largely to the Acquisition.
EBITDA inclusive of a NCI for the Quarter gained $1.2 million to $6.6 million compared to $5.4 million for the same quarter in 2009, a 22% increase credited mostly to the Acquisition. Versus the previous year EBITDA margins were lower for the Quarter by 5%. It should be expected that lower EBITDA margins will continue on an ongoing basis due to the Acquisition of the additional interest in the Deerfoot Joint Venture. The Deerfoot Joint Venture operates at lower EBITDA margins than other Fund properties due to its more complex operation of owner operated food, beverage and banquet operations. While the Deerfoot property may have the effect of reducing overall Fund EBITDA margins its contribution on a dollar basis is significant. The Deerfoot property produces nearly as much EBITDA as all other Fund properties combined. One-time costs of $0.6 million associated with the Acquisition were expensed during the Quarter further affecting EBITDA margins.
Piece Meal
Results for the Quarter at Boomtown Casino were flat to last year. We’ll take that all day long after a lengthy string of quarterly declines. Most of recent news about the oils sands, on which our Boomtown Casino thrives, is negative and has been intensified following the oil spill in the Gulf of Mexico. Nevertheless, the oil sands remain a critically important supply source for the world. The magnifying glass currently focused on the oil sands will eventually prove to be positive on many fronts as pressure mounts to improve the ecological impacts from extraction. The oil sands are a politically friendly source of energy for an energy dependent North America. The industry provides thousands of direct jobs in Alberta and increasingly indirect jobs including those in green technologies. For these reasons we believe firmly in continued and improving success of our Boomtown Casino.
Industrial activity in the Grande Prairie area is picking up and despite increased hotel capacity added to the market area over the last few years, quarterly results for our Service Plus hotel turned positive in the Quarter after too many quarters of decline. We are hopeful that what we are seeing at the Service Plus will soon be the story at Great Northern Casino. Results there were still down marginally year over year for the Quarter.
In Calgary, results are providing reason for optimism. Hotel and convention business at the Deerfoot Joint Venture showed quarterly growth year over year and quarter over quarter. More significantly, slot business volumes at the Deerfoot Joint Venture, our most important performance indicator, showed good year over year and quarter over quarter growth as well.
We are bullish on the long term prospects for the Deerfoot Joint Venture. The southeast quadrant of the city continues to be one of the hottest areas of commercial and residential growth in the city. The South Health Campus, a new 155,000 square metre hospital project located south of the Deerfoot Joint Venture on 44 acres is slated to be one of the largest health facilities in North America on completion. Phase 1 construction currently underway is valued at $1.25 billion. The project will draw a host of additional commercial and residential development to its surrounding area bringing thousands more people to the market area of the Deerfoot Joint Venture.
Corporation Bound
At the Annual Special General Meeting of the Fund held April 30, 2010 in Calgary, the Fund received approval on a plan of arrangement (the “Arrangement”) that will see the Fund convert to a corporation (“Gamehost Inc”) no later than January 2011. As a corporation, distributions will receive a more favourable tax treatment as eligible dividends compared to income distributions from the present trust model. The Arrangement together with the Acquisition and an improving economy sets the stage for sustaining distributions at their current rate of $0.0733 per unit for the foreseeable future.
| Consolidated Balance Sheets | ||||||
| (unaudited) | (audited) | |||||
| June 30, 2010 | December 31, 2009 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 16,418,683 | $ | 9,973,895 | ||
| Restricted cash | 87,206 | 67,700 | ||||
| Accounts receivable | 1,424,565 | 827,504 | ||||
| Inventories | 483,060 | 305,488 | ||||
| Prepaid expenses | 854,938 | 175,278 | ||||
| 19,268,452 | 11,349,865 | |||||
| Property, plant and equipment | 90,869,281 | 31,007,914 | ||||
| Licenses | 19,000,000 | – | ||||
| Goodwill | 48,852,216 | 42,579,216 | ||||
| $ | 177,989,949 | $ | 84,936,995 | |||
| Liabilities and unit holder equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $ | 4,541,580 | $ | 2,198,254 | ||
| Revolving credit lines | 6,000,000 | 6,000,000 | ||||
| Demand loans | 24,313,111 | 17,250,076 | ||||
| Unit holder distributions payable | 2,148,493 | 1,547,184 | ||||
| 37,003,184 | 26,995,514 | |||||
| Debentures payable | 47,687,395 | – | ||||
| Future income taxes | 1,065,038 | 1,523,866 | ||||
| 85,755,617 | 28,519,380 | |||||
| Class B limited partnership equity | 38,192,112 | 25,977,980 | ||||
| 123,947,729 | 54,497,360 | |||||
| Non-controlling interest | 8,197,324 | – | ||||
| Unit holders’ equity | 45,844,896 | 30,439,635 | ||||
| $ | 177,989,949 | $ | 84,936,995 | |||
| Consolidated Statements of Income and Comprehensive Income | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| six months ended June 30 | three months ended June 30 | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||
| Revenue | ||||||||||||||
| Hotel – rooming | $ | 4,223,213 | $ | 3,479,046 | $ | 2,549,639 | $ | 1,466,941 | ||||||
| Table games | 4,172,658 | 4,323,203 | 2,342,158 | 2,108,937 | ||||||||||
| Slot machines | 10,454,404 | 9,658,047 | 5,954,153 | 4,874,959 | ||||||||||
| Food and beverage services | 6,611,110 | 5,353,704 | 3,940,741 | 2,565,099 | ||||||||||
| Lease and rental | 196,792 | 175,094 | 98,191 | 88,654 | ||||||||||
| Other | 2,262,258 | 1,989,106 | 1,318,448 | 1,000,365 | ||||||||||
| 27,920,435 | 24,978,200 | 16,203,330 | 12,104,955 | |||||||||||
| Operating Expenses | ||||||||||||||
| Cost of goods sold | 2,055,665 | 1,663,916 | 1,219,019 | 807,411 | ||||||||||
| Human resources | 7,664,510 | 6,484,301 | 4,529,471 | 3,248,550 | ||||||||||
| Marketing and promotions | 1,263,245 | 1,001,162 | 795,407 | 515,287 | ||||||||||
| Operating | 3,347,423 | 2,956,106 | 1,934,069 | 1,499,900 | ||||||||||
| Corporate and general administration | 1,565,131 | 1,102,482 | 1,154,049 | 646,710 | ||||||||||
| Amortization of property, plant & equipment | 1,009,626 | 946,465 | 574,989 | 473,779 | ||||||||||
| 16,905,600 | 14,154,432 | 10,207,004 | 7,191,637 | |||||||||||
| Operating income | 11,014,835 | 10,823,768 | 5,996,326 | 4,913,318 | ||||||||||
| Other income and (expenses) | ||||||||||||||
| Gain (loss) on sale of assets | 22,163,015 | – | 22,163,015 | – | ||||||||||
| Interest charges | (1,442,758 | ) | (380,420 | ) | (1,222,392 | ) | (172,906 | ) | ||||||
| Income before taxes and minority interest | 31,735,092 | 10,443,348 | 26,936,949 | 4,740,412 | ||||||||||
| Future income tax recovery (expense) | 458,828 | 1,775,893 | 490,830 | 1,745,139 | ||||||||||
| 32,193,920 | 12,219,241 | 27,427,779 | 6,485,551 | |||||||||||
| Allocation to Class B limited partners | (14,155,569 | ) | (5,403,719 | ) | (12,047,837 | ) | (2,868,107 | ) | ||||||
| 18,038,351 | 6,815,522 | 15,379,942 | 3,617,444 | |||||||||||
| Net and comprehensive income (loss) | ||||||||||||||
| Continuing operations | ||||||||||||||
| Fund unit holders’ | $ | 17,853,926 | $ | 6,815,522 | $ | 15,195,517 | $ | 3,617,444 | ||||||
| Non-controlling interest | 184,425 | – | 184,425 | – | ||||||||||
| 18,038,351 | 6,815,522 | 15,379,942 | 3,617,444 | |||||||||||
| Discontinued operations | – | (3,441,921 | ) | – | (3,269,993 | ) | ||||||||
| $ | 18,038,351 | $ | 3,373,601 | $ | 15,379,942 | $ | 347,451 | |||||||
| Net income/unit and comprehensive income/unit – Basic | ||||||||||||||
| Continuing operations | $ | 1.516 | $ | 0.579 | $ | 1.291 | $ | 0.307 | ||||||
| Discontinued operations | – | (0.292 | ) | – | (0.278 | ) | ||||||||
| $ | 1.516 | $ | 0.287 | $ | 1.291 | $ | 0.030 | |||||||
| Net income/unit and comprehensive income/unit – Diluted | ||||||||||||||
| Continuing operations | $ | 1.377 | $ | 0.579 | $ | 1.074 | $ | 0.307 | ||||||
| Discontinued operations | – | (0.292 | ) | – | (0.278 | ) | ||||||||
| $ | 1.377 | $ | 0.287 | $ | 1.074 | $ | 0.030 | |||||||
This press release may contain forward-looking statements. Forward-looking statements may contain words such as “anticipates”, “believes”, “could”, “expects”, “indicates”, “plans” or other similar expressions that suggest future outcomes or events. Use of these statements reflect reasonable assumptions made on the basis of management’s current beliefs with information known by management at the time of writing. Many factors could cause actual results to differ from the results discussed in forward-looking statements. Actual results may not be consistent with these forward-looking statements.
The Fund is an unincorporated open-ended limited purpose trust established under the laws of the Province of Alberta. The Fund’s activities are currently confined to the Province of Alberta, Canada. Operations include the Boomtown Casino in Ft. McMurray, the Great Northern Casino, Service Plus Inns & Suites and a strip mall all located in Grande Prairie. The Fund is also a 91% joint venture partner in the Deerfoot Inn & Casino in Calgary.
Complete consolidated financial statements and MD&A for the three and six months ended June 30, 2010 are available on the company’s website at www.gamehost.ca and will be filed in their entirely along with the Fund’s other interim filings, when they are available, on SEDAR at www.sedar.com.