MINNEAPOLIS, Aug 11, 2010 (BUSINESS WIRE) -- Lakes Entertainment, Inc. (NASDAQ: LACO) today announced results for the
three months and six months ended July 4, 2010.
Second Quarter Results
Net earnings for the second quarter
of 2010 were $3.9 million, compared to $2.8 million in the second
quarter of 2009. The loss from operations was $3.5 million for the
second quarter of 2010, compared to earnings from operations of $1.5
million for the second quarter of 2009. Basic and diluted earnings were
$0.15 per share for the second quarter of 2010 compared to $0.11 per
share for the second quarter of 2009.
Lakes Entertainment reported second quarter 2010 revenues of $4.8
million, compared to prior-year second quarter revenues of $7.1 million.
This decrease was primarily related to a reduction in management fees
earned from the Four Winds Casino Resort due in part to an unusually low
table games hold during the second quarter of 2010 and also due to new
competition that entered the Four Winds Casino Resort market during the
third quarter of 2009. Also contributing to the decline in Lakes' second
quarter 2010 revenues were a decrease in management fees earned related
to the Cimarron Casino project, due to the termination of that agreement
in May 2010 and a decrease in management fees from the Red Hawk Casino.
For the second quarter of 2010, Lakes' selling, general and
administrative expenses were $3.3 million compared to $3.8 million in
the second quarter of 2009. Selling, general and administrative expenses
consisted primarily of payroll and related expenses, travel expenses and
professional fees, all of which decreased compared to the prior year's
second quarter.
Net unrealized gains (losses) on notes receivable relate to the
Company's notes receivable from Indian tribes for casino projects that
are not yet open, which are adjusted to estimated fair value based upon
the current status of the related tribal casino projects and evolving
market conditions. In the second quarter of 2010, net unrealized losses
on notes receivable were $1.5 million, compared to net unrealized gains
of $2.5 million in the prior year period. The net unrealized losses in
the second quarter of 2010 consisted of losses related to the Jamul
Indian Village ("Jamul Tribe") near San Diego, California due primarily
to ongoing issues in the credit markets. The net unrealized gains in the
second quarter of 2009 were related to the project with the Jamul Tribe
and the Iowa Tribe of Oklahoma ("Iowa Tribe") due primarily to
improvements in the credit markets during that quarter.
Lakes recognized impairment losses of $0.7 million and $1.7 million,
during the second quarter of 2010 and the second quarter of 2009,
respectively, related primarily to continued uncertainty surrounding the
completion of the Jamul project.
Amortization of intangible assets related to the operating casinos was
$2.8 million for the second quarter of 2010 compared to $2.5 million for
the second quarter of 2009.
Other income (expense), net for the second quarter of 2010 was $1.8
million compared to $1.3 million for the second quarter of 2009.
The income tax benefit for the second quarter of 2010 was $5.6 million
compared to a provision of less than $0.1 million for the second quarter
of 2009. Lakes' income tax benefit in the current year period consists
of current income tax benefit of $5.7 million and a current provision of
approximately $0.1 million of interest on a Louisiana tax audit matter.
As a result of changes in estimated annual income including the recently
announced $25 million payment from Penn Ventures, LLC ("Penn"), which
will be recognized as income in the third quarter of 2010, the majority
of Lakes' estimated annual income is now expected to be recognized
during the second half of 2010. Therefore, the current period tax
benefit primarily represents the adjustment needed to reflect the
appropriate year-to-date provision for the six months ended July 4, 2010.
Six Month 2010 Results
Net loss for the six months ended
July 4, 2010 was $0.8 million, compared to net earnings of $3.8 million
for the six months ended June 28, 2009. The loss from operations was
$3.5 million for the first six months of 2010, compared to earnings from
operations of $1.4 million for the prior year period. Basic and diluted
losses were $0.03 per share for the six months ended July 4, 2010
compared to earnings per share of $0.15 for the six months ended June
28, 2009.
Lakes Entertainment reported revenues of $11.8 million for the six
months ended July 4, 2010, compared to prior-year period revenues of
$14.3 million. This decrease was primarily due to a reduction in
management fees earned from the Four Winds Casino Resort due to new
competition that entered the Four Winds Casino Resort market during the
third quarter of 2009 in addition to unusually low table games hold
during the second quarter of 2010. Also contributing to the decline in
Lakes' 2010 revenues were a decrease in management fees earned related
to the Cimarron Casino project, due to the termination of that agreement
in May 2010 as well as a decrease in management fees from the Red Hawk
Casino.
For the first six months of 2010, Lakes' selling, general and
administrative expenses were $6.5 million compared to $7.8 million for
the first six months of 2009. Selling, general and administrative
expenses consisted primarily of payroll and related expenses, travel
expenses and professional fees, all of which decreased compared to the
prior year period.
For the six months ended July 4, 2010, net unrealized gains on notes
receivable were $0.3 million, compared to $2.3 million in the prior year
period. The net unrealized gains in the current year period included
losses related to the Jamul Tribe of $0.6 million, due primarily to
ongoing issues in the credit markets. Also contributing to the current
year gains were gains related to the Iowa Tribe of $0.9 million which
resulted from the previously announced termination agreement with the
Iowa Tribe in May 2010. The net unrealized gains in the prior year
period were related to the project with the Jamul Tribe and the Iowa
Tribe due primarily to improvements in the credit markets during that
period.
Lakes recognized impairment losses of $3.4 million and $2.3 million,
during the six months ended July 4, 2010 and the six months ended June
28, 2009, respectively. The current year losses related to the
termination of the agreements with the Iowa Tribe as well as losses
related to the continued uncertainty surrounding the completion of the
Jamul project. The prior year period losses were due primarily to the
continued uncertainty surrounding the completion of the Jamul project.
Amortization of intangible assets related to the operating casinos was
$5.6 million for the first six months of 2010 compared to $5.0 million
for the first six months of 2009.
Other income (expense), net for the first six months of 2010 was $3.3
million compared to $2.8 million for the first six months of 2009.
The income tax provision for the six months ended July 4, 2010 was $0.6
million compared to $0.4 million for the six months ended June 28, 2009.
Lakes' income tax provision in the current year period is primarily due
to current tax benefit of $0.1 million offset by provision of
approximately $0.6 million related to discrete items.
Lyle Berman, Chief Executive Officer of Lakes stated, "A significant
portion of the decline in second quarter revenue related to our fees
from the management of the Four Winds Casino Resort. The decline was due
in part to an unusually low table games hold percentage, attributed to
one guest that occurred during the first part of the second quarter.
However, overall, the property continues to perform well." Mr. Berman
continued, "The Red Hawk Casino continues to face challenges in its
market due to the harsh economic conditions in California."
Further commenting, Tim Cope, President and Chief Financial Officer of
Lakes, stated, "Several recent events have had a positive impact on our
available cash position. During the second quarter we received
approximately $7.2 million related to the settlement of our Auction Rate
Securities and repayment of the related line of credit and an additional
$8.3 million representing a refund related to the previously
contemplated Kansas project. Also, we recently announced that during the
third quarter we entered into a termination agreement with Penn and
received $25 million in exchange for our prior interest in two potential
casinos in Ohio. We continue to have an investment in Rock Ohio
Ventures, LLC and its proposed casino developments in Cincinnati and
Cleveland. We look forward to making additional investments in these
projects and continue to evaluate other projects which we believe will
add value to our company in the future."
About Lakes Entertainment
Lakes Entertainment, Inc. currently has development and management or
financing agreements with three separate Tribes for casino operations in
Michigan, and California, for a total of three separate casino sites.
Lakes is currently managing the Four Winds Casino Resort for the Pokagon
Band of Potawatomi Indians and the Red Hawk Casino for the Shingle
Springs Band of Miwok Indians. Lakes is also involved in other business
activities, including the development of new table games for licensing
to Tribal and non-Tribal casinos.
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The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. Certain information included
in this press release (as well as information included in oral
statements or other written statements made or to be made by Lakes
Entertainment, Inc.) contains statements that are forward-looking,
such as statements relating to plans for future expansion and other
business development activities as well as other capital spending,
financing sources and the effects of regulation (including gaming
and tax regulation) and competition. Such forward-looking
information involves important risks and uncertainties that could
significantly affect anticipated results in the future and,
accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the company.
These risks and uncertainties include, but are not limited to, need
for potential future financing to meet Lakes' development needs;
those relating to the inability to complete or possible delays in
completion of Lakes' casino projects, including various regulatory
approvals and numerous other conditions which must be satisfied
before completion of these projects; possible termination or adverse
modification of management or development contracts; Lakes operates
in a highly competitive industry; possible changes in regulations;
reliance on continued positive relationships with Indian tribes and
repayment of amounts owed to Lakes by Indian tribes; possible need
for future financing to meet Lakes' expansion goals; risks of entry
into new businesses; and reliance on Lakes' management. For more
information, review the company's filings with the Securities and
Exchange Commission.
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| LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES |
| Condensed Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4, 2010 |
|
|
|
|
|
(Unaudited) |
|
January 3, 2010 |
| Assets |
|
(In thousands) |
|
|
|
Current assets:
|
|
|
|
|
|
Cash & cash equivalents
|
|
$
|
24,336
|
|
$
|
3,751
|
|
Accounts receivable
|
|
|
2,397
|
|
|
1,457
|
|
Current portion of notes receivable from Indian casino projects
|
|
|
6,616
|
|
|
6,671
|
|
Investment securities, including rights
|
|
|
-
|
|
|
24,317
|
|
Other
|
|
|
2,331
|
|
|
2,478
|
|
Total current assets
|
|
|
35,680
|
|
|
38,674
|
|
Property and equipment, net
|
|
|
5,209
|
|
|
5,334
|
|
|
|
|
|
|
|
Long-term assets related to Indian casino projects:
|
|
|
|
|
|
Notes receivable, net of current portion
|
|
|
48,900
|
|
|
46,100
|
|
Notes receivable at fair value
|
|
|
9,545
|
|
|
13,254
|
|
Intangible assets
|
|
|
38,106
|
|
|
45,064
|
|
Other
|
|
|
5,892
|
|
|
6,137
|
|
Total long-term assets related to Indian casino projects
|
|
|
102,443
|
|
|
110,555
|
|
Other assets:
|
|
|
|
|
|
Investment in unconsolidated investees
|
|
|
4,267
|
|
|
12,441
|
|
Land held for development
|
|
|
5,069
|
|
|
4,900
|
|
Deferred taxes and other
|
|
|
1,875
|
|
|
1,833
|
|
Total other assets
|
|
|
11,211
|
|
|
19,174
|
| Total assets |
|
$
|
154,543
|
|
$
|
173,737
|
|
|
|
|
|
|
| Liabilities and shareholders' equity |
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Line of credit payable
|
|
$
|
-
|
|
$
|
16,346
|
|
Non-revolving line of credit payable
|
|
|
2,000
|
|
|
2,000
|
|
Current portion of contract acquisition costs payable
|
|
|
2,547
|
|
|
2,232
|
|
Income taxes payable
|
|
|
15,504
|
|
|
17,069
|
|
Other
|
|
|
2,289
|
|
|
2,454
|
|
Total current liabilities
|
|
|
22,340
|
|
|
40,101
|
|
|
|
|
|
|
|
Long-term contract acquisition costs payable, net of current portion
|
|
|
8,856
|
|
|
10,197
|
|
|
|
|
|
|
| Total liabilities |
|
|
31,196
|
|
|
50,298
|
|
|
|
|
|
|
| Total shareholders' equity |
|
|
123,347
|
|
|
123,439
|
|
|
|
|
|
|
| Total liabilities and shareholders' equity |
|
$
|
154,543
|
|
$
|
173,737
|
|
|
|
|
|
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| LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES |
| Condensed Consolidated Statements of Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Three months ended |
|
|
Six months ended |
|
|
|
|
July 4, 2010 |
|
June 28, 2009 |
|
|
July 4, 2010 |
|
June 28, 2009 |
|
|
|
|
(In thousands, except per share data) |
| Revenues: |
|
(Unaudited) |
|
Management fees
|
|
$
|
4,784
|
|
|
$
|
7,048
|
|
|
|
$
|
11,721
|
|
|
$
|
14,314
|
|
|
License fees
|
|
|
18
|
|
|
|
16
|
|
|
|
|
35
|
|
|
|
28
|
|
|
|
Total revenues
|
|
|
4,802
|
|
|
|
7,064
|
|
|
|
|
11,756
|
|
|
|
14,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
3,253
|
|
|
|
3,767
|
|
|
|
|
6,488
|
|
|
|
7,809
|
|
|
Impairment losses
|
|
|
707
|
|
|
|
1,711
|
|
|
|
|
3,371
|
|
|
|
2,280
|
|
|
Amortization of intangible assets related to operating casinos
|
|
|
2,785
|
|
|
|
2,527
|
|
|
|
|
5,570
|
|
|
|
5,006
|
|
|
Depreciation
|
|
|
66
|
|
|
|
69
|
|
|
|
|
131
|
|
|
|
142
|
|
|
|
Total costs and expenses
|
|
|
6,811
|
|
|
|
8,074
|
|
|
|
|
15,560
|
|
|
|
15,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net unrealized gains (losses) on notes receivable |
|
|
(1,458
|
)
|
|
|
2,506
|
|
|
|
|
312
|
|
|
|
2,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) from operations |
|
|
(3,467
|
)
|
|
|
1,496
|
|
|
|
|
(3,492
|
)
|
|
|
1,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,847
|
|
|
|
1,753
|
|
|
|
|
4,094
|
|
|
|
3,615
|
|
|
Interest expense
|
|
|
(545
|
)
|
|
|
(417
|
)
|
|
|
|
(1,232
|
)
|
|
|
(812
|
)
|
|
Equity in loss of unconsolidated investees
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
|
(64
|
)
|
|
|
-
|
|
|
Other
|
|
|
560
|
|
|
|
(8
|
)
|
|
|
|
488
|
|
|
|
(16
|
)
|
|
|
Total other income (expense), net
|
|
|
1,825
|
|
|
|
1,328
|
|
|
|
|
3,286
|
|
|
|
2,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes (benefit) |
|
|
(1,642
|
)
|
|
|
2,824
|
|
|
|
|
(206
|
)
|
|
|
4,235
|
|
|
Income taxes (benefit)
|
|
|
(5,551
|
)
|
|
|
4
|
|
|
|
|
572
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) |
|
$
|
3,909
|
|
|
$
|
2,820
|
|
|
|
$
|
(778
|
)
|
|
$
|
3,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) per share - basic & diluted |
|
$ |
0.15 |
|
|
$ |
0.11 |
|
|
|
$ |
(0.03 |
) |
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding - basic |
|
|
26,369 |
|
|
|
26,328 |
|
|
|
|
26,367 |
|
|
|
26,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dilutive effect of common stock equivalents |
|
|
57 |
|
|
|
92 |
|
|
|
|
- |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding - diluted |
|
|
26,426 |
|
|
|
26,420 |
|
|
|
|
26,367 |
|
|
|
26,400 |
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SOURCE: Lakes Entertainment, Inc.
Lakes Entertainment, Inc.
Timothy Cope, 952-449-7030
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