Gamehost Income Fund - Reports 2009 second quarter financial results



    RED DEER, AB, Aug. 14 /CNW/ - Gamehost Income Fund (the "Fund") (TSX:
GH.UN) Management and Trustees of Gamehost Income Fund (the "Fund") present
results for the three months ended June 30, 2009 (the "Quarter").
    The Stampede Joint Venture has placed itself into voluntary receivership.
The decision to do so came only after negotiations to secure sufficient relief
from the lender and landlord to the Stampede Joint Venture failed. Subsequent
to the failure of these negotiations, the Stampede Joint Venture received a
demand notice from the lender for full repayment of all outstanding loans.
Alternate financing options were not available and near and longer term
projected cash flow for the Stampede Joint Venture is not encouraging.
Voluntary receivership was seen as the best alternative for minimizing further
losses to the joint venturers. New start ups have their challenges in any
economy, but the Stampede Joint Venture had the misfortune of opening into the
teeth of the recession. We are disappointed in the turn of events, but agree
the decision will eliminate the drag the asset would likely continue to be on
Fund earnings. An orderly transition of the assets and operation to the
receiver will take place on August 17, 2009.
    A write down of the Stampede Joint Venture asset was recorded by the
Stampede Joint Venture during the Quarter and the Fund recorded a
proportionate share of this write down through consolidation as a non-cash
charge to earnings of $5.6 million.
    The Fund has also provided a $5.0 million unsecured limited liability
guarantee to the lender to the Stampede Joint Venture to indemnify it in the
event the Stampede Joint Venture does not perform its contractual obligations.
Negotiations are ongoing with the lender. The likelihood and amount of any
payment under this guarantee can not be reliably estimated at this time.
Traditional bank debt is being arranged in the event all or part of this
guarantee becomes due
    Results for the Quarter indicate decreased economic activity in the
marketplace on most fronts, not the least of which was the Alberta
Government's decision to implement a tax on both cigarettes and liquor at the
beginning of April. Quarterly revenues totaled $13.0 million down 3.8% from
the $13.5 million posted in Q2 2008, and down 5.9% from the previous quarter
when revenue totaled $13.8 million. On the plus side, the Alberta Government
has since withdrawn the liquor tax, just in time for the hotter summer months,
and our Table Games continue to produce markedly higher revenues than
historically posted.
    Earnings before interest, taxes, depreciation and amortization ("EBITDA")
for the Quarter totaled $5.3 million down 15.6% from $6.3 million recorded in
Q2 2008 and down 15.9% from the previous quarter's $6.3 million. EBITDA
margins for the Quarter were 40.9% off 5.8% from a year earlier and off 4.9%
from 45.8% in the previous quarter. Excluding fees incurred during the Quarter
relating to research into corporate structure options for the Fund post
January 2011, EBITDA margins were 42.5%. Efforts to maintain operating margins
are hard fought with pressure on revenues. Management has been successful at
reducing expenses along the way.
    With Stampede Casino no longer included in operations, we expect to see a
lift in our EBITDA margins moving forward.
    Throughout the Quarter, the Fund made consistent payments of $0.0733 per
unit. Capital expenditures and lower earnings inflated the Fund's payout ratio
for the Quarter to 106.8%. The year to date payout ratio sits at 94.6% in line
with historical rates. The Board is closely monitoring this.
    We have seen encouraging indicators in some revenue streams and
locations, and although forecasts for the general economy remain weak, we are
positioned well to navigate the potholes that all of us are seeing in the
road. Essentially, results for the Quarter for all of the Fund's properties
were lower. It seems no one is isolated from the economic pressures in
Alberta, and while each of our markets has its own specific challenges the
trends are generally similar. Q2 is traditionally a softer quarter for the
Fund, but June was especially difficult. We are witnessing a rebound in July.
    In Grande Prairie, oil and predominantly natural gas play a major role in
the lives of consumers in the region. Uncertainty in this sector has continued
to keep activity slow in the region. Management at our properties are focused
on value added promotions, giving customers a better bang for their
entertainment bucks and providing our 'beyond' expectation customer service.
We believe we are seeing a floor in this market from which we can begin to
grow revenues again.
    The more diverse economy of the city of Calgary is not immune to the
challenges seen in the north. Unemployment figures have risen and
discretionary spending has trimmed back. The Deerfoot Inn and Casino is
weathering the economic storm better than many others. The property is
extremely well maintained and the broad array of amenities it has to offer
continues to positively serve the property during these more difficult times.

    Fort McMurray is expected to rise from this downturn in better shape than
many. Reports suggest that the slowdown is allowing leaders and executives an
opportunity to regroup and be selective after many years of unprecedented
growth and development in this region. Even with this downtime, Fort McMurray
still outpaces many comparable cities in both retail activity and housing. Nor
have we forgotten that Fort McMurray holds one of the world's largest oil
reserves, and demand for this commodity is not going away. Our Boomtown casino
continues to produce outstanding results, and will be even better prepared to
run the race when this slowdown ends.


    
    Interim Consolidated Balance Sheets
    (unaudited)
    -------------------------------------------------------------------------
                                                                   Audited
                                                       June 30,  December 31,
                                                          2009          2008
                                                 ----------------------------
    Assets
    Current assets:
      Cash and cash equivalents                   $ 11,809,076  $ 12,935,729
      Restricted cash                                    4,170        58,962
      Accounts receivable                              627,114     1,265,275
      Inventories                                      349,717       357,509
      Prepaid expenses                                 559,486       311,656
      Due from related parties                         125,875        28,149
                                                 ----------------------------
                                                    13,475,438    14,957,280

    Property, plant and equipment                   38,094,274    44,675,730
    Goodwill                                        42,579,216    42,579,216
                                                 ----------------------------
                                                  $ 94,148,928  $102,212,226
                                                 ----------------------------
                                                 ----------------------------

    Liabilities and unit holder equity
      Current liabilities:
        Accounts payable and accrued liabilities  $  2,444,805  $  2,690,652
        Revolving credit lines                       7,356,127     5,367,004
        Current portion of capital leases               30,610        29,705
        Demand loans                                20,968,382    22,216,324
        Unit holder distributions payable            1,547,184     5,080,588
                                                 ----------------------------
                                                    32,347,108    35,384,273

    Capital leases                                      37,408        52,922

    Future income taxes                                 24,789     1,800,682

    Minority unit holders' equity                   31,371,720    32,955,463
                                                 ----------------------------
                                                    63,781,025    70,193,340

    Fund unit holders' equity                       30,367,903    32,018,886
                                                 ----------------------------
                                                  $ 94,148,948  $102,212,226
                                                 ----------------------------
                                                 ----------------------------



    Interim Consolidated Statements of Earnings and Comprehensive Income
    (unaudited)
    -------------------------------------------------------------------------
                               six months ended        three months ended
                                   June 30                   June 30
                         -------------------------- -------------------------
                              2009         2008         2009         2008
                         -------------------------- -------------------------

    Revenue
      Hotel - rooming     $ 3,480,518  $ 4,059,708  $ 1,467,442  $ 1,989,333
      Table games           5,101,400    3,760,591    2,508,190    1,850,307
      Slot machines        10,127,027   10,720,768    5,107,018    5,537,314
      Food and beverage
       services             5,843,180    5,797,491    2,782,430    2,901,747
      Lease and rental        179,825      163,705       90,705       79,545
      Other                 2,150,854    2,375,516    1,081,172    1,186,528
                         -------------------------- -------------------------
                           26,882,804   26,877,779   13,036,957   13,544,774
                         -------------------------- -------------------------

    Expenses
      Cost of goods sold    1,821,664    1,832,194      881,225      919,424
      Human resources       7,405,461    6,980,980    3,720,178    3,510,031
      Marketing and
       promotions           1,267,441    1,224,584      626,461      672,529
      Operating             3,498,642    3,160,904    1,767,964    1,637,533
      Corporate and
       general
       administration       1,213,715    1,055,198      705,668      481,121
                         -------------------------- -------------------------
                           15,206,923   14,253,860    7,701,496    7,220,638
                         -------------------------- -------------------------

    Earnings before
     the following:        11,675,881   12,623,919    5,335,461    6,324,136

      Interest charges        561,364      661,521      256,303      358,025

      Future income taxes
       (recoveries)        (1,775,893)     (97,224)  (1,745,139)    (121,091)

      Unrealized gains
       (loss) on fair
        valuation of
        financial assets
        and liabilities       (46,062)           -      (47,169)           -

      Impairment loss on
       long lived assets    5,607,754            -    5,607,754            -

      Amortization of
       property, plant
       and equipment        1,280,342    1,002,452      640,783      500,994

      Earnings allocation
       to minority
       interest             2,961,325    5,413,665      304,989    2,735,045
                         -------------------------- -------------------------

    Net earnings and
     comprehensive
     income               $ 3,087,051  $ 5,643,505  $   317,940  $ 2,851,163
                         -------------------------- -------------------------
    Earnings per unit,
     basic and fully
     diluted              $     0.287  $     0.524  $     0.030  $     0.265
                         -------------------------- -------------------------
                         -------------------------- -------------------------
    

    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 40% joint venture partner in the Deerfoot Inn & Casino in Calgary and a 20%
joint venture partner in the new Stampede Casino in Calgary.
    Complete consolidated interim financial statements and MD&A for the six
three months ended June 30, 2009 will be available following the close of
trading on August 14, 2009 on the company's website at www.gamehost.ca and
thereafter on SEDAR at www.sedar.com.





For further information:

For further information: Craig M. Thomas or Darcy J. Will, P (403)
346-4545, F (403) 340-0683, E info@gamehost.ca

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GAMEHOST INCOME FUND

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