Gamehost Inc. ('Gamehost', the 'Company') (TSX:GH)
Management and Directors of Gamehost Inc. ("Gamehost", the "Company", the
"Corporation") are pleased to present results for the twelve months ended
December 31, 2010 (the "Period") and three months ended December 31, 2010 (the
"Quarter").
Fresh New Start
Effective December 31, 2010, Gamehost Income Fund converted to a high yielding
dividend paying corporation, Gamehost Inc. (the "Conversion"). All issued and
outstanding units of the former Fund were exchanged for Shares.
Effective May 1, 2010, Gamehost acquired (the "Acquisition") an additional 51%
of the Deerfoot Inn & Casino (the "Deerfoot"). The change in ownership position
required Gamehost to change the method used to report results of the Deerfoot.
Gamehost's Financial Statements and Management Discussion and Analysis ("MD&A")
report 100% of the Deerfoot results from the effective date of the Acquisition
compared to a proportionate 40% interest prior. A single line entry representing
the non-controlling interest (NCI) of 9% of equity and net operating results are
recorded on the balance sheet and income statement respectively reducing the net
post-Acquisition results from the Deerfoot to the Company's ownership of 91%.
Deerfoot Boost
Quarterly operational revenue for the Company inclusive of a NCI totaled $18.2
million compared to $11.8 million for the same quarter in 2009, a 54% increase.
Annual operational revenue for the Company inclusive of a NCI totaled $63.7
million compared to $48.1 million for 2009, a 32% increase.
Earnings for the Quarter before interest, taxes, depreciation and amortization
("EBITDA") of the Company excluding NCI gained $2.5 million to $7.4 million
compared to $4.9 million for the same quarter in 2009, a 49.8% increase. For the
Period, EBITDA of the Company excluding NCI gained $5.3 million to $26.9 million
compared to $21.6 million for 2009. The Acquisition is the major factor in the
overall year over year increase. A three percentage point decline in EBITDA
margin to 40.6% in the Quarter versus the third quarter is explained by the
cyclical effect of the holiday season's strong banquet sales which have higher
operating costs than other revenue streams. Costs related to the Company's
transition to new reporting standards ("IFRS") and Conversion costs contributed
to lower margins for the Quarter. Lower overall ongoing EBITDA margin
percentages should be expected and are attributable to the Deerfoot's higher
operating costs as compared to the Company's other properties. Otherwise, the
Company has managed margins across all properties tightly by keeping costs in
line with flatter sales. All individual properties reported flat to improved
EBITDA margin percentages for the Period. With costs trimmed and Conversion
costs behind us, watch for higher margins as revenues improve in 2011.
Healthcare Headlines
On July 20, 2010, Alberta's Premier, Ed Stelmach announced the provincial
government was moving ahead with a new 200 bed acute-care hospital for the City
of Grande Prairie. The site for this $520 million hospital, to begin
construction in 2011, is located directly behind and adjacent to the Company's
Service Plus hotel and Great Northern Casino. This project is expected to boost
guest room sales and casino traffic during construction and following completion
of the project. The new hospital will also spawn additional commercial and
residential development in the immediate area also to the Company's benefit. The
province plans to break ground in April 2011. Our Service Plus hotel will bid on
the contract to house construction crews.
Work continues on the $1.25 billion South Health Campus in Calgary, located
south of the Deerfoot. This project, like the one in Grande Prairie, will
increase the market area for the Deerfoot substantially as it is built out and
ancillary development follows. The project is slated for a late 2012 opening.
Some additional business volume has materialized from the project and is
expected to pick up as the project moves from its present infrastructure phase,
which is being largely handled by local contractors, to the fixturing phase
which should involve more out of province contracting.
Grossed Up Not Out
The Acquisition and Conversion provided an effective response to the end of the
otherwise favoured tax status of the trust model at the end of this calendar
year. The Acquisition has boosted cash flows which will offset corporate taxes
as they become payable. The Conversion together with the Acquisition and an
improving economy set the stage for sustained distributions at their current
rate of $0.0733 per unit for the foreseeable future. Cash distributions in 2011
will be treated for shareholder tax purposes as eligible dividend income.
Eligible dividends, following a gross up calculation receive an enhanced
dividend tax credit. Shareholders, therefore, will benefit from a more
favourable tax rate as a result.
Consolidated Statements of Income and Comprehensive Income
(audited) (unaudited)
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twelve months ended three months ended
December 31 December 31
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2010 2009 2010 2009
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Revenue
Hotel - rooming $10,120,214 $ 6,453,573 $ 2,789,797 $1,443,061
Table games 9,605,088 7,961,953 2,602,061 1,775,752
Slot machines 22,729,005 18,779,089 6,049,156 4,516,247
Food and beverage services 15,609,708 10,722,477 5,022,519 3,029,545
Lease and rental 392,052 372,865 96,373 101,511
Other 5,217,410 3,792,262 1,620,173 922,269
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63,673,477 48,082,219 18,180,079 11,788,385
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Operating Expenses
Cost of goods sold 4,816,802 3,332,268 1,513,307 933,370
Human resources 17,949,347 12,740,229 5,305,294 3,103,832
Marketing and promotions 2,767,782 2,119,726 793,018 576,964
Operating 7,522,170 5,972,307 2,201,935 1,599,577
Corporate and general
administration 2,831,039 2,301,981 666,115 652,218
Amortization of property,
plant & equipment 3,711,261 1,890,581 1,343,111 468,250
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39,598,401 28,357,092 11,822,780 7,334,211
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Operating income 24,075,076 19,725,127 6,357,299 4,454,174
Other income and (expenses)
Gain on revaluation of
assets 27,083,015 - - -
Interest charges (1,940,637) (813,899) (614,676) (229,201)
Debenture Interest (2,430,542) - (859,375) -
Guarantee payments - (4,551,000) - 449,000
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22,711,836 (5,364,899) (1,474,051) 219,799
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Income before taxes and
discontinued operations 46,786,912 14,360,228 4,883,248 4,673,973
Future income tax
recovery(expense) 219,511 276,816 (70,664) (39,882)
Discontinued operations - (4,627,574) - -
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Net and comprehensive income 47,006,423 10,009,470 4,812,584 4,634,091
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Net and comprehensive income
attributable to:
Class B LP unitholders' $20,447,245 $ 4,426,491 $ 2,004,254 $2,049,336
Fund unitholders' 25,789,396 5,582,979 2,527,892 2,584,755
Non-controlling interest 769,782 - 280,438 -
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$47,006,423 $10,009,470 $ 4,812,584 $4,634,091
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Net and comprehensive
income/unit basic
Continuing operations $ 2.191 $ 0.693 $ 0.215 $ 0.220
Discontinued operations - (0.219) - -
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$ 2.191 $ 0.474 $ 0.215 $ 0.220
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Net and comprehensive
income/unit -diluted
Continuing operations $ 1.965 $ 0.693 $ 0.205 $ 0.220
Discontinued operations - (0.219) - -
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$ 1.965 $ 0.474 $ 0.205 $ 0.220
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Weighted average # of
outstanding units - basic 21,107,553 21,107,553 21,107,553 21,107,553
Weighted average # of
outstanding units - diluted 24,772,097 21,107,553 26,271,872 21,107,553
March 2010 Dividend
Gamehost has declared a cash dividend for the month of March 2011 of $0.0733 per
common share. The dividend will be paid on April 15, 2011 to shareholders of
record on March 31, 2011. The ex-dividend date is March 29, 2011.
This dividend is considered an "Eligible Dividend" in accordance with Bill C-28
and, therefore, eligible for the enhanced gross-up and dividend tax credit
available to shareholders.
Gamehost is a corporation established under the laws of the Province of Alberta.
The Company's operations are all located in the Province of Alberta, Canada.
Operations of the Company include the Boomtown Casino in Ft. McMurray, the Great
Northern Casino, Service Plus Inns & Suites hotel and a strip mall all located
in Grande Prairie. The Company also holds a 91% ownership position in Deerfoot
Inn & Casino Inc. in Calgary.
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.
This press release is not a suitable source of information for readers who are
unfamiliar with the Gamehost. Readers more familiar with the Company should not
consider this press release a substitute for reading the financial statements
and MD&A. Consolidated financial statements and MD&A, both current and
historical, are available on the Company's website at www.gamehost.ca and will
be filed in their entirety along with the Company's other continuous disclosure
documents, when they are available, on SEDAR at www.sedar.com.
Gamehost common shares and convertible debentures trade on the Toronto Stock
Exchange (TSX) under the symbols GH and GH.DB respectively.
Gamehost (TSX:GH)
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