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8-K - FORM 8-K - GOLDEN ENTERTAINMENT, INC. | c63764e8vk.htm |
Exhibit 99.1
NEWS RELEASE Lakes Entertainment, Inc. 130 Cheshire Lane, Suite 101 Minnetonka, MN 55305 952-449-9092 952-449-9353 (fax) www.lakesentertainment.com (NASDAQ: LACO) |
FOR FURTHER INFORMATION CONTACT:
Timothy Cope 952-449-7030
Timothy Cope 952-449-7030
FOR IMMEDIATE RELEASE:
March 30, 2011
March 30, 2011
LAKES ENTERTAINMENT ANNOUNCES
RESULTS FOR FOURTH QUARTER AND FULL YEAR 2010
RESULTS FOR FOURTH QUARTER AND FULL YEAR 2010
MINNEAPOLIS March 30, 2011 Lakes Entertainment, Inc. (NASDAQ: LACO) today
announced results for the three months and twelve months ended January 2, 2011.
Fourth Quarter Results
Net losses for the fourth quarter of 2010 were $28.1 million, compared to $2.4 million in the
fourth quarter of 2009. Losses from operations were $39.5 million for the fourth quarter of 2010,
compared to $3.2 million for the fourth quarter of 2009. Basic and diluted losses were $1.07 per
share for the fourth quarter of 2010 compared to $0.09 per share for the fourth quarter of 2009.
Lakes Entertainment reported fourth quarter 2010 revenues of $4.7 million, compared to 2009
fourth quarter revenues of $5.3 million. This decline was due to the elimination of management
fees from the Cimarron Casino project, as a result of the termination of that agreement in May
2010, as well as a decline in management fees associated with the Red Hawk Casino project compared
to the fourth quarter of 2009. The decline was partially offset by an increase in management fees
earned from the Four Winds Casino Resort during the fourth quarter of 2010 compared to the
prior-year period.
For the fourth quarter of 2010, Lakes selling, general and administrative expenses were $2.3
million compared to $2.9 million in the fourth quarter of 2009. Selling, general and
administrative expenses consisted primarily of payroll and related expenses, travel expenses and
professional fees. Decreases in each of these categories resulted in the $0.6 million decline in
selling, general and administrative expenses during the fourth quarter of 2010, compared to the
fourth quarter of 2009.
Lakes concluded that the notes receivable from the Shingle Springs Tribal Gaming Authority were
impaired as of January 2, 2011, resulting in an impairment charge on notes receivable of $21.0
million during the fourth quarter of 2010. Lakes does not currently estimate that these amounts
will be repaid within the contract terms due to the continued harsh economic climate in northern
California and increased competition from a neighboring casino expansion in the Red Hawk market which have negatively impacted cash flows for the property.
There were no impairment charges on notes receivable during the fourth quarter of 2009.
Lakes recognized other non-cash impairment losses of $18.8 million during the fourth quarter of
2010 and $1.3 million during the fourth quarter of 2009. The fourth quarter 2010 impairment losses
included $16.7 million related to intangible assets associated with the Shingle Springs project.
These intangible assets were impaired because their carrying value exceeded estimated future cash
flows. Also included were
impairments related to land held for development during the fourth quarters of 2010 and 2009 of
$1.6 million and $0.5 million, respectively, related to the continued uncertainty surrounding the
development of the Vicksburg project in Mississippi. Fourth quarter impairment losses of $0.5
million in 2010 and $0.8 million in 2009, related to continued uncertainty surrounding the
completion of the project with the Jamul Indian Village near San Diego, California (Jamul).
Amortization of intangible assets related to the operating casinos was $2.8 million for the fourth
quarter of 2010 and for the fourth quarter of 2009.
Net unrealized gains and losses on notes receivable relate to the Companys notes receivable from
Indian tribes relating to casino projects that are not yet open, which are adjusted to estimated
fair value based upon the current status of such projects and evolving market conditions. In the
fourth quarter of 2010, net unrealized gains on notes receivable were $0.8 million, compared to net
unrealized losses of $1.4 million in the prior year period. The net unrealized gains in the fourth
quarter of 2010 consisted of gains related to the Jamul project due primarily to improvements in
the credit markets. The net unrealized losses in the fourth quarter of 2009 were primarily related
to the Jamul project because of further delays in the expected opening date of this project.
Other income (expense), net for the fourth quarter of 2010 decreased to $1.0 million from $2.2
million for the fourth quarter of 2009.
The income tax benefit for the fourth quarter of 2010 was $10.4 million compared to a provision of
$1.5 million for the fourth quarter of 2009. On March 17, 2011, Lakes and the Louisiana Department
of Revenue entered into a Settlement Agreement whereby Lakes agreed to pay the Louisiana Department
of Revenue $9.0 million in full and final payment related to a tax litigation matter. In return,
the Louisiana Department of Revenue agreed to dismiss the suit and discharge Lakes from all
proceedings and liabilities relating to this matter. The current-period
tax benefit consists primarily of an $8.5 million tax benefit related to the adjustment to reduce
the liability previously recorded for this matter to the $9.0 million settlement amount.
Twelve Month 2010 Results
Net losses for the twelve months ended January 2, 2011 were $13.8 million, compared to net earnings
of $3.7 million for the twelve months ended January 3, 2010. Losses from operations were $40.8
million for 2010, compared to $1.0 million for 2009. Basic and diluted losses were $0.52 per share
for the twelve months ended January 2, 2011 compared to earnings per share of $0.14 for the twelve
months ended January 3, 2010.
Lakes Entertainment reported revenues of $24.6 million for the twelve months ended January 2,
2011, compared to prior-year year revenues of $26.2 million. This decrease was primarily due to a
reduction in management fees earned from the Cimarron Casino project, as a result of the
termination of that agreement in May 2010, as well as a decrease in management fees earned from the
Red Hawk Casino. Partially offsetting the decline was an increase in management fees earned in
2010 from the Four Winds Casino Resort.
During 2010, Lakes selling, general and administrative expenses were $11.8 million compared to
$14.2 million during 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.
Lakes concluded that the notes receivable from the Shingle Springs Tribal Gaming Authority were
impaired as of January 2, 2011 resulting in an impairment charge on notes receivable of $21.0
million during 2010. Lakes does not currently estimate that these amounts will be repaid within
the contract term due to the continued harsh economic climate in northern California and increased competition from a neighboring casino expansion in the Red Hawk
market which have negatively impacted cash flows for the property. There were no
Impairment charges on notes receivable during 2009.
Lakes recognized other non-cash impairment losses of $22.8 million and $4.2 million, during the
twelve months ended January 2, 2011 and the twelve months ended January 3, 2010, respectively. The
current-year impairment losses included $16.7 million related to the intangible assets associated
with the Shingle Springs project. These intangible assets were impaired because their carrying
value exceeded expected future cash flows. Also contributing to the current-year impairments were losses of $2.0 million
related to the termination of the agreements with the Iowa Tribe of Oklahoma as well as losses of
$2.5 million related to the continued uncertainty surrounding the completion of the Jamul project.
Also included were impairments related to land held for development during 2010 and 2009 of $1.6
million and $0.5 million, respectively, related to the continued uncertainty surrounding the
development of the Vicksburg project in Mississippi. The remaining 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 $11.1 million for 2010
compared to $10.4 million for 2009.
For 2010, net unrealized gains on notes receivable were $1.6 million, compared to $1.9 million in
the prior year. The net unrealized gains in the current year consisted of 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 and net gains of $0.7 million related to the Jamul project due primarily
to improvements in the credit markets. The net unrealized gains in the prior year period were
related to the Jamul project due primarily to improvements in the credit markets during that period
which were partially offset by losses related to further delays in the expected opening date of
this project.
Other income (expense), net for 2010 was $28.1 million compared to $6.1 million for 2009. During
the third quarter of 2010, Lakes entered into a termination agreement with Penn Ventures, LLC and
received $25 million in exchange for the Companys interest in two potential casinos in Ohio. As a
result, other income (expense), net for 2010 includes a gain of $23.1 million related to this
agreement.
The income tax provision for 2010 was $1.2 million compared to $1.4 million for 2009. The
current-year provision primarily consists of changes in valuation allowance of $10.8 million and
$1.1 million related to state taxes, partially offset by $8.5 million of tax benefit for the
reduction of the liability related to the ongoing tax litigation matter with the State of Louisiana
discussed above, and current tax benefit of $2.2 million. In fiscal 2009, the provision consisted
primarily of changes in the valuation allowance for deferred tax assets.
Tim Cope, President and Chief Financial Officer of Lakes stated, While we have concluded that
it is probable that substantial amounts due from the Shingle Springs Tribe will not be repaid
within the contract term, the Shingle Springs Tribe will remain legally obligated to repay any
remaining amounts due to Lakes subsequent to the conclusion of the contract. The general overall economy in northern California continues to be one of the worst in
the country and the Red Hawk Casino continues to feel its effects. Red Hawk however,
is taking proactive steps to improve the casinos performance by implementing a variety
of new marketing initiatives. Feedback from extensive guest research has enabled the
property to offer a new variety of liberal slot and table game products and increase
player rewards, as well as continue to emphasize quality dining with exceptional new
value menus. The renewed emphasis at Red Hawk is clearly on providing great guest
service, a great gamble and superior food offerings in an overall fun and exciting
atmosphere. Recent trends indicate that guests are responding favorably to these
initiatives and 2011 operating results are showing improvements compared to the fourth
quarter. We are committed to achieving consistently strong operating results at this
property while focusing on guest loyalty, trip frequency and employee pride
and we are working closely with
the Shingle Springs Tribal Gaming Authority to ensure that this property is operated as efficiently
as possible for the benefit of the Shingle Springs Tribe and Lakes. Mr. Cope continued, We are
pleased with the Settlement Agreement reached between Lakes and the State of Louisiana regarding
the tax litigation matter which allowed us to reduce our recorded liability related to this matter
and remove the uncertainty that had existed relating to this issue.
Further commenting, Lyle Berman, Chief Executive Officer of Lakes, stated, We continue to have a
balance sheet with no debt, which provides us flexibility when considering potential new business
opportunities. Our cash position is strong and we continue to move forward with our investment in
Rock Ohio Ventures, LLC and its proposed casino developments in Cincinnati and Cleveland. Since
the end of 2010 we have invested an additional $6.0 million in these projects and we look forward
to making further investments as development progresses. We also continue to evaluate other
projects which we believe will add value to our company.
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.
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 companys filings with the Securities and Exchange Commission.
# # #
LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets
January 2, 2011 | January 3, 2010 | |||||||
(In thousands) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 45,233 | $ | 3,751 | ||||
Accounts receivable |
1,696 | 1,457 | ||||||
Current portion of notes receivable
from Indian casino projects |
2,405 | 6,671 | ||||||
Investment securities, including rights |
| 24,317 | ||||||
Other |
1,983 | 2,478 | ||||||
Total current assets |
51,317 | 38,674 | ||||||
Property and equipment, net |
5,103 | 5,334 | ||||||
Long-term assets related to Indian casino projects: |
||||||||
Notes receivable, net of current
portion and allowance |
30,857 | 46,100 | ||||||
Notes receivable at fair value |
11,129 | 13,254 | ||||||
Intangible assets |
15,873 | 45,064 | ||||||
Other |
6,490 | 6,137 | ||||||
Total long-term assets related to Indian
casino projects |
64,349 | 110,555 | ||||||
Other assets: |
||||||||
Investment in unconsolidated investees |
2,367 | 12,441 | ||||||
Land held for development |
3,470 | 4,900 | ||||||
Deferred taxes and other |
40 | 1,833 | ||||||
Total other assets |
5,877 | 19,174 | ||||||
Total assets |
$ | 126,646 | $ | 173,737 | ||||
Liabilities and shareholders equity |
||||||||
Current liabilities: |
||||||||
Line of credit payable |
$ | | $ | 16,346 | ||||
Non-revolving line of credit payable |
| 2,000 | ||||||
Current portion of contract
acquisition costs payable |
1,326 | 2,232 | ||||||
Income taxes payable |
7,822 | 17,069 | ||||||
Other |
1,683 | 2,454 | ||||||
Total current liabilities |
10,831 | 40,101 | ||||||
Long-term contract acquisition costs payable,
net of current portion |
5,830 | 10,197 | ||||||
Total liabilities |
16,661 | 50,298 | ||||||
Total shareholders equity |
109,985 | 123,439 | ||||||
Total liabilities and shareholders equity |
$ | 126,646 | $ | 173,737 | ||||
LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)
Condensed Consolidated Statements of Earnings (Loss)
Three months ended | Twelve months ended | |||||||||||||||
January 2, 2011 | January 3, 2010 | January 2, 2011 | January 3, 2010 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues: |
||||||||||||||||
Management fees |
$ | 4,654 | $ | 5,245 | $ | 24,530 | $ | 26,161 | ||||||||
License fees |
20 | 16 | 72 | 59 | ||||||||||||
Total revenues |
4,674 | 5,261 | 24,602 | 26,220 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Selling, general and administrative |
2,341 | 2,915 | 11,766 | 14,232 | ||||||||||||
Impairment charge on notes receivable |
20,975 | | 20,975 | | ||||||||||||
Impairment losses other |
18,832 | 1,289 | 22,834 | 4,166 | ||||||||||||
Amortization of intangible assets related to operating casinos |
2,784 | 2,787 | 11,139 | 10,417 | ||||||||||||
Depreciation |
64 | 68 | 260 | 279 | ||||||||||||
Total costs and expenses |
44,996 | 7,059 | 66,974 | 29,094 | ||||||||||||
Net unrealized gains (losses) on notes receivable |
836 | (1,372 | ) | 1,598 | 1,875 | |||||||||||
Loss from operations |
(39,486 | ) | (3,170 | ) | (40,774 | ) | (999 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Gain on divestiture of cost method investment |
| | 23,100 | | ||||||||||||
Interest income |
1,271 | 2,749 | 7,047 | 8,033 | ||||||||||||
Interest expense |
(329 | ) | (322 | ) | (2,007 | ) | (2,014 | ) | ||||||||
Equity in loss of unconsolidated investees |
| (231 | ) | (64 | ) | (248 | ) | |||||||||
Other |
36 | | 16 | 351 | ||||||||||||
Total other income (expense), net |
978 | 2,196 | 28,092 | 6,122 | ||||||||||||
Earnings (loss) before income taxes (benefit) |
(38,508 | ) | (974 | ) | (12,682 | ) | 5,123 | |||||||||
Income taxes (benefit) |
(10,394 | ) | 1,456 | 1,154 | 1,420 | |||||||||||
Net earnings (loss) |
$ | (28,114 | ) | $ | (2,430 | ) | $ | (13,836 | ) | $ | 3,703 | |||||
Earnings (loss) per share basic & diluted |
$ | (1.07 | ) | $ | (0.09 | ) | $ | (0.52 | ) | $ | 0.14 | |||||
Weighted-average common shares outstanding basic |
26,369 | 26,328 | 26,370 | 26,327 | ||||||||||||
Dilutive effect of common stock equivalents |
| | | 84 | ||||||||||||
Weighted-average common shares outstanding diluted |
26,369 | 26,328 | 26,370 | 26,411 | ||||||||||||