Gamehost Income Fund - Reports 2009 third quarter financial results

RED DEER, AB, Nov. 16 /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 September 30, 2009 (the "Quarter") and nine months ended September 30, 2009 (the "Period"). Readers should note the financial reporting of the Stampede Joint Venture as discontinued operations. Detailed discussion and reporting is focused on our continuing Alberta operations of Boomtown Casino in Fort McMurray, Great Northern Casino, Service Plus Inns & Suites and strip mall all located in Grande Prairie and the Fund's joint venture interest in Deerfoot Inn & Casino in Calgary.

At first it was just our feet. Now the water is up to our knees. Results for the Quarter indicate general economic conditions for the consumer worsened from last quarter. Quarterly revenues for continuing operations totaled $11.3 million down 15.0% from $13.3 million posted in Q3 2008, and down 6.5% from the previous quarter's revenue of $12.1 million.

Continuing operations earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Quarter totaled $4.9 million. Included in EBITDA for the Quarter are $0.3 million in legal expenses related to corporate restructuring options and tax management for the Fund post 2011. Excluding these non-recurring charges, EBITDA for continuing operations for the Quarter in year over year comparison is $5.2 million down $1.2 million or 18% from $6.4 million a year earlier. EBITDA margins are lower by 1.7% to 46.2% from 47.9%. EBITDA was largely flat to the previous quarter, excellent results considering the drop in revenues and a testament to the successful management of costs. EBITDA margins improved over the previous quarter by 1.7% to 46.2% from 44.5%. Yes it's wet, but the water is getting clearer. We think it's about as deep as it's going to get.

Operating results at Fund properties from Fort McMurray to Calgary tell similar stories with a few local nuances. Clearly, economic activity remains sluggish across the province and is having a negative effect on employment and consumer confidence. Is hard to find good news, but there are some pieces that provide reason for optimism.

While overall activity has retreated at Boomtown Casino there are clues to suggest it won't last. The latest Statistics Canada figures reported job growth in the region. The new U.S. ambassador to Canada, David Jacobson, visited the oil sands producing area only a few weeks after being sworn in. This would suggest the region has a place of great significance today and in the future on the world energy stage.

Year over year the number of active drilling rigs operating in Alberta is down more than 50%. The Grande Prairie region is highly dependant on the oil and more prominently the natural gas industries. It's not surprising that our properties in Grande Prairie are feeling the pinch. The rate of descent, however, has definitely slowed in the last few months and we look forward to a leveling out before beginning another ascent. We commend our property managers who have done an excellent job at maintaining operating margins though strict cost control.

The Deerfoot Joint Venture facility is still immensely popular with the surrounding communities which continue to grow at the fastest pace in the city. Our customers remain loyal, however, business and corporate travel is down which has affected guest room sales at the property. The Deerfoot Joint Venture hotel marketed as a mid tier property and ADR's have been held at appropriate levels. Gaming and food & beverage sales have held up relatively well at the property.

Despite an intense and concerted effort, during its brief fourteen months of operation the Fund's 20% participating interest in the Stampede Joint Venture resulted in accumulated operating losses of $1.7 million including $0.7 million during the current Period. Management of the Stampede Joint Venture elected for a voluntary receivership and on August 17, 2009 assets of the Stampede Joint Venture were transferred to the receiver. On the transfer, a loss on the sale of assets of $4.0 million was charged against net income. Together, losses on the Stampede Joint Venture total $5.7 million. The Fund had also provided a guarantee to the Stampede Joint Venture lender of $5.0 million which has been recorded as a charge against income. The Fund has no further responsibilities in connection with the Joint Venture. All applicable obligations have been recorded in the financial statements at the end of the Period. In the Fund's interim financial statements and MD&A the Stampede Joint Venture is identified as discontinued operations and reported separately from the Fund's other operating assets. Fund management was heavily involved in making a go of the Stampede Joint Venture which took an inordinate amount of time and effort. Unfortunate as the story ended, it will no longer be a drag on human and financial resources of the Fund.

Fat, excess, saddlebags... call it what you like, we're not carrying quite as much of it around as we used to. Throughout the Quarter, the Fund maintained regular cash distributions of $0.0733 per unit. This coupled with reduced cash inflow has reduced our normally significant interim cash surplus. During the Quarter the Fund paid out a guarantee provided to the Stampede Joint Venture's lender. $4.1 million of the funds to honour the guarantee were obtained through bridge financing with the balance of $0.5 million taken from operating cash flow. This pushed the Fund's payout ratio on distributable cash to 96.4% for the Quarter and 97.6% for the Period. A planned refinancing will replace the cash from operations. The Board reviews the distribution rate monthly.

The Fund is busy working on strategies in preparation for the change in the tax status of all trusts in post 2011. We are focused on maximizing the profitability of our core operations while keeping an eye on potential strategic opportunities.

    
    Interim Consolidated Balance Sheets
    (unaudited)
    -------------------------------------------------------------------------
                                                                   Audited
                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash and cash equivalents                   $ 10,481,874  $ 12,045,414
      Restricted cash                                   35,130        58,962
      Accounts receivable                              671,279     1,215,303
      Inventories                                      286,524       304,239
      Prepaid expenses                                 348,783       261,109
      Due from related parties                               -        30,575
      Current assets of discontinued operations              -     1,044,104
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                                                    11,823,590    14,959,706
      Property, plant and equipment                 31,386,872    33,201,893
      Goodwill                                      42,579,216    42,579,216
      Long term assets of discontinued
       operations                                            -    11,473,837
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                                                  $ 85,789,678  $102,214,652
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    Liabilities and unit holder equity
    Current liabilities:
      Accounts payable and accrued liabilities    $  2,588,975  $  2,210,970
      Revolving credit lines                         6,000,000     4,000,000
      Demand loans                                  17,744,461    15,332,924
      Unit holder distributions payable              1,547,184     5,080,588
      Current liabilities of discontinued
       operations                                            -     8,762,218
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                                                    27,880,620    35,386,700
    Future income taxes                              1,483,984     1,800,682
    Long term liabilities discontinued
     operations                                              -        52,922
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                                                    29,364,604    37,240,304
    Minority unit holders' equity                   25,981,280    32,955,463
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                                                    55,345,884    70,195,767
    Fund unit holders' equity                       30,443,794    32,018,885
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                                                  $ 85,789,678  $102,214,652
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    Interim Consolidated Statements of Income and Comprehensive Income
    (unaudited)
    -------------------------------------------------------------------------
                              nine months ended         three months ended
                                 September 30              September 30
                          ---------------------------------------------------
                              2009         2008         2009         2008
    -------------------------------------------------------------------------
    Revenue
      Hotel - rooming     $ 5,010,512  $ 6,324,696  $ 1,531,466  $ 2,264,988
      Table games           6,186,201    5,595,285    1,862,998    1,884,796
      Slot machines        14,262,842   15,945,997    4,604,795    5,283,898
      Food and beverage
       services             7,692,932    8,382,568    2,339,228    2,637,235
      Lease and rental        271,354      243,297       96,260       79,592
       Other                2,869,993    3,530,822      880,887    1,158,163
    -------------------------------------------------------------------------
                           36,293,834   40,022,665   11,315,634   13,308,672
    -------------------------------------------------------------------------
    Operating Expenses
      Cost of goods sold    2,398,898    2,669,401      734,982      852,688
      Human resources       9,636,397   10,187,573    3,152,096    3,372,411
      Marketing and
       promotions           1,542,762    1,765,491      541,600      594,552
      Operating             4,372,730    4,748,599    1,416,624    1,687,381
      Corporate and
       general
       administration       1,649,763    1,479,586      547,281      429,886
      Amortization of
       property, plant
       and equipment        1,422,331    1,520,506      475,866      518,251
    -------------------------------------------------------------------------
                           21,022,881   22,371,156    6,868,449    7,455,169
    -------------------------------------------------------------------------
    Operating income       15,270,953   17,651,509    4,447,185    5,853,503

    Other income and
     (expenses)
      Interest charges       (584,698)    (967,277)    (204,278)    (305,756)
    -------------------------------------------------------------------------
                             (584,698)    (967,277)    (204,278)    (305,756)
    -------------------------------------------------------------------------
    Income before taxes
     and minority
     interest              14,686,255   16,684,232    4,242,907    5,547,747

    Future income tax
     recovery (expense)       316,698       54,135   (1,459,195)     (43,089)
    -------------------------------------------------------------------------
                           15,002,953   16,738,367    2,783,712    5,504,658

    Minority interest      (6,634,761)  (8,195,217)    (652,138)  (2,695,118)
    -------------------------------------------------------------------------

    Net and comprehensive
     income (loss)
      Continuing
       operations         $ 8,368,192  $ 8,543,149  $ 2,131,574  $ 2,809,539
      Discontinued
       operations          (5,369,968)    (252,693)  (2,220,400)    (162,588)
    -------------------------------------------------------------------------
                          $ 2,998,224  $ 8,290,456  $   (88,826) $ 2,646,951
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net Income/unit
     and comprehensive
     income/unit
      Continuing
       operations         $     0.711  $     0.793  $     0.181  $     0.261
      Discontinued
       operations              (0.456)      (0.023)      (0.189)      (0.015)
    -------------------------------------------------------------------------
                          $     0.255  $     0.770  $    (0.008) $     0.246
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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.

Complete consolidated interim financial statements and MD&A for the nine and three months ended September 30, 2009 will be available following the close of trading on November 16, 2009 on the company's website at www.gamehost.ca and thereafter on SEDAR at www.sedar.com.

%SEDAR: 00019487E

SOURCE GAMEHOST INCOME FUND

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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