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 On the plus side, the Alberta Government has since withdrawn the liquor tax, just in time for the hotter summer months, and our Table Games continue to produce markedly higher revenues than historically posted.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)
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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
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$ 94,148,928 $102,212,226
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----------------------------
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
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63,781,025 70,193,340
Fund unit holders' equity 30,367,903 32,018,886
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$ 94,148,948 $102,212,226
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----------------------------
Interim Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
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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
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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)
(note 10) (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
(note 18) 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
-------------------------- -------------------------
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See accompanying notes to financial statements
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.
%SEDAR: 00019487E