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Lakes Entertainment releases second quarter results30 July 2015(PRESS RELEASE) -- Lakes Entertainment, Inc. today announced results for the three and six months ended June 28, 2015. Second Quarter Results Lakes Entertainment reported second quarter 2015 net revenues of $15.3 million, compared to prior-year second quarter net revenues of $14.1 million. Net revenues were related to the operation of Rocky Gap Casino Resort near Cumberland, Maryland (“Rocky Gap”). The increase in net revenues was primarily related to an increase in gaming revenues during the second quarter of 2015 compared to the second quarter of 2014 which resulted primarily from increases in video lottery terminal volume and table games hold percentages. Net losses for the second quarter of 2015 were approximately $0.2 million, compared to net earnings of approximately $0.1 million for the second quarter of 2014. Earnings from operations were less than $0.1 million for the second quarter of 2015 compared to earnings from operations of $0.3 million for the second quarter of 2014. Basic and diluted losses per share were $0.01 for the second quarter of 2015 compared to basic and diluted earnings of less than $0.01 for the second quarter of 2014. During the second quarter of 2015, property operating expenses for Rocky Gap were $8.5 million compared to $8.2 million during the second quarter of 2014 and were primarily related to gaming operations, rooms, food and beverage and golf. The increase in property operating expenses resulted primarily from an increase in gaming-related expenses, most notably gaming taxes, due to the increase in gaming related revenue in the current year quarter. For the second quarter of 2015, selling, general and administrative expenses were $5.5 million compared to $5.7 million during the second quarter of 2014. Included in these amounts were Lakes corporate selling, general and administrative expenses of $1.8 million and $1.9 million during the second quarters of 2015 and 2014, respectively. Lakes’ corporate selling, general and administrative expenses consist primarily of payroll and related expenses and professional fees. Second quarter 2015 professional fees included $0.4 million associated with the previously announced pending merger with Sartini Gaming, Inc. (“Golden Gaming”), related to the agreement which was executed in January of 2015. Rocky Gap selling, general and administrative expenses, which consist primarily of payroll and related expenses, marketing expense and facilities expense, were $3.7 million and $3.8 million during the second quarters of 2015 and 2014, respectively. During the second quarter of 2014, Lakes entered into an agreement to sell its interest in Dania Casino & Jai Alai in Dania Beach, Florida for a total of $2.6 million. Per the agreement, on April 21, 2014, Lakes received $1.0 million in exchange for 40% of Lakes’ interest in the project. Upon the receipt of the payment during the second quarter of 2014, Lakes recognized a $1.0 million gain on sale of cost method investment since this asset had previously been written off. The remaining 60% of the investment was sold during the fourth quarter of 2014. On June 17, 2015, Lakes settled a lawsuit brought by Quest Media Group, LLC (“Quest”) by paying Quest $0.3 million. The lawsuit related to an agreement entered into between Lakes Ohio Development, LLC (a wholly owned subsidiary of Lakes) and Quest. No further claims can be made by Quest related to this matter. The $0.3 million is included in impairments and other losses for the three months ended June 28, 2015. There were no impairments and other losses during the three months ended June 29, 2014. Depreciation and amortization was $0.9 million for the second quarters of 2015 and 2014. Six Month Results Net losses for the six months ended June 28, 2015 were $1.9 million, compared to net losses of $1.7 million for the six months ended June 29, 2014. Loss from operations was $1.3 million for each of the first six months of 2015 and 2014. Basic and diluted losses were $0.14 per share for the first half of 2015 compared to basic and diluted losses of $0.13 per share for the first half of 2014. Lakes Entertainment reported net revenues of $28.1 million for the first six months of 2015, compared to net revenues of $26.4 million in the prior year period. Net revenues were related to the operation of Rocky Gap. The increase in net revenues was primarily related to an increase in gaming revenues during the first half of 2015 compared to the first half of 2014 which resulted primarily from increases in video lottery terminal volume and table games hold percentages. During the first six months of 2015, property operating expenses for Rocky Gap which related primarily to gaming operations, rooms, food and beverage and golf were $16.1 million compared to $15.5 million in the prior-year period. The increase in property operating expenses resulted primarily from an increase in gaming-related expenses, most notably gaming taxes, due to the increase in gaming related revenue in the current year. For the six months ended June 28, 2015, selling, general and administrative expenses were $11.7 million compared to $11.5 million for the six months ended June 29, 2014. Included in these amounts were Lakes corporate selling, general and administrative expenses of $4.2 million, during the first six months of 2015 and $4.0 million during the first six months of 2014. Rocky Gap selling, general and administrative expenses were $7.5 million during each of the first six months of 2015 and 2014. Lakes’ corporate selling, general and administrative expenses consist primarily of payroll and related expenses and professional fees as well as $1.3 million and $0.8 million of business development costs during the first six months of 2015 and 2014 respectively. The $1.3 million in business development costs incurred during the current year were related to the pending merger with Golden Gaming. Effective January 25, 2015, Lakes sold all of its 10% interest in Rock Ohio Ventures to DG Ohio Ventures, LLC for approximately $0.8 million. Because this investment had been written down to zero during 2014, Lakes recognized a gain on sale of cost method investment of approximately $0.8 million during the first quarter of 2015. During the second quarter of 2014, Lakes entered into an agreement to sell its interest in Dania Casino & Jai Alai in Dania Beach, Florida for a total of $2.6 million. Per the agreement, on April 21, 2014, Lakes received $1.0 million in exchange for 40% of Lakes’ interest in the project. Upon the receipt of the payment during the second quarter of 2014, Lakes recognized a $1.0 million gain on sale of cost method investment since this asset had previously been written off. The remaining 60% of the investment was sold during the fourth quarter of 2014. On June 17, 2015, Lakes settled a lawsuit brought by Quest by paying Quest $0.3 million. The lawsuit related to an agreement entered into between Lakes Ohio Development, LLC (a wholly owned subsidiary of Lakes) and Quest. No further claims can be made by Quest related to this matter. The $0.3 million is included in impairments and other losses for the six months ended June 28, 2015. Also included in impairments and other losses for the six months ended June 28, 2015 is an impairment charge of $0.4 million related to the sale agreement for Lakes’ corporate office building, in Minnesota, which was entered into in first quarter of 2015 and which closed during the second quarter of 2015. There were no impairments and other losses during the six months ended June 29, 2014. Depreciation and amortization was $1.8 million for the six months ended June 28, 2015 compared to $1.7 million for the six months ended June 29, 2014. Lyle Berman, Chief Executive Officer of Lakes stated, “During January 2015, we announced a merger agreement with Golden Gaming. We are currently working through the final process to close the transaction. The combination of Lakes’ strong balance sheet and our Rocky Gap property, with Golden Gaming’s casinos and distributed gaming platform and taverns, will make this combined company unique in the marketplace. We believe Lakes’ cash will facilitate refinancing as well as growth and that the company will be well positioned for expansion in Nevada and other jurisdictions. We look forward to closing this transaction and we continue to believe it will provide value to Lakes’ shareholders.” Further commenting, Tim Cope, President and Chief Financial Officer of Lakes stated, "Rocky Gap exceeded expectations during the second quarter of 2015 and exceeded results compared to the second quarter of 2014. The gaming facility features 579 video lottery terminals, 16 table games, two poker tables and a casino bar along with a lobby food and beverage outlet. Additional video lottery terminals are being added during the third quarter which are planned to bring total machines to approximately 630. The AAA Four Diamond Award® winning property also includes a hotel, event center, restaurants, spa, the only Jack Nicklaus signature golf course in Maryland as well as a wide variety of outdoor and water activities.” LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) (Unaudited) June 28, 2015 December 28, 2014 Assets Current assets: Cash and cash equivalents $42,459 $35,416 Short-term investments 40,593 46,638 Income taxes receivable 2,093 - Other 3,059 1,807 Total current assets 88,204 83,861 Property and equipment, net 27,846 32,739 Other assets: Gaming license 1,805 1,875 Land held for development 960 960 Income taxes receivable - 2,155 Other 411 439 Total other assets 3,176 5,429 Total assets $119,226 $122,029 Liabilities and shareholders' equity Current liabilities: Current portion of long-term debt, net of discount $1,361 $1,368 Other 3,743 4,104 Total current liabilities 5,104 5,472 Long-term debt, net of current portion and discount 8,273 8,941 Total liabilities 13,377 14,413 Total shareholders' equity 105,849 107,616 Total liabilities and shareholders' equity $119,226 $122,029 LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations and Comprehensive Earnings (Loss) (In thousands, except per share data) Three months ended Six months ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Revenues: Gaming $11,810 $11,068 $22,410 $21,388 Room 1,662 1,630 2,869 2,944 Food and beverage 1,742 1,566 3,090 2,825 Other operating 767 642 1,098 977 License fees and other 46 30 90 63 Gross revenues 16,027 14,936 29,557 28,197 Less promotional allowances 698 829 1,462 1,780 Net revenues 15,329 14,107 28,095 26,417 Costs and expenses: Gaming 6,558 6,413 12,623 12,367 Room 215 173 373 283 Food and beverage 1,254 1,190 2,319 2,223 Other operating 516 419 742 661 Selling, general and admin. 5,539 5,723 11,674 11,463 Gain on sale of cost method investments - (1,000) (750) (1,000) Impairments and other losses 351 - 682 - (Gain) loss on disposal of property and equipment - (1) (2) 24 Depreciation and amortization 880 864 1,759 1,717 Total costs and expenses 15,313 13,781 29,420 27,738 Earnings (loss) from operations 16 326 (1,325 ) (1,321 ) Other income (expense): Interest income 48 38 93 71 Interest expense (262) (308) (536) (626) Other 36 1 36 165 Total other income (expense), net(178) (269) (407) (390) Earnings (loss) before income taxes(162) 57 (1,732) (1,711) Income tax provision 17 - 172 - Net earnings (loss) (179) 57 (1,904) (1,711) Other comprehensive earnings 3 15 2 1 Comprehensive earnings (loss) $(176) $72 $(1,902) $(1,710) Weighted-average common shares outstanding Basic 13,392 13,375 13,391 13,369 Dilutive impact of stock options- 250 - - Diluted 13,392 13,625 13,391 13,369 Loss per share Basic $(0.01) $0.00 $(0.14) $(0.13) Diluted $(0.01) $0.00 $(0.14) $(0.13) |