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
FOR IMMEDIATE RELEASE:
August 6, 2014
LAKES ENTERTAINMENT ANNOUNCES
RESULTS FOR SECOND QUARTER 2014
MINNEAPOLIS – August 6, 2014 – Lakes Entertainment, Inc. (NASDAQ: LACO) todayannounced results for the three and six months ended June 29, 2014.
Second Quarter Results
Net earnings for the second quarter of 2014 were $0.1 million, compared to net earnings of $0.2 million for the second quarter of 2013. Earnings from operations were $0.3 million for the second quarter of 2014 compared to a loss from operations of $1.2 million for the second quarter of 2013. Basic and diluted earnings per share were less than $0.01 for the second quarter of 2014 compared to basic and diluted earnings per share of $0.01 for the second quarter of 2013.
Lakes Entertainment reported second quarter 2014 net revenues of $14.1 million, compared to prior-year second quarter net revenues of $8.5 million. Second quarter 2014 net revenues were related to the operation of Rocky Gap Casino Resort near Cumberland, Maryland, (“Rocky Gap”). Lakes acquired this property in August 2012 and gaming operations began on May 22, 2013. During the second quarter of 2013, net revenues of $4.8 million were related to the operation of Rocky Gap. Also included in prior-year second quarter net revenues were $3.7 million in management fees related to the management of the Red Hawk Casino, near Sacramento, California, owned by the Shingle Springs Band of Miwok Indians. There were no management fees earned during the second quarter of 2014 due to the August 29, 2013 termination of the management agreement for the Red Hawk Casino.
During the second quarters of 2014 and 2013, property operating expenses for Rocky Gap were $8.2 million and $3.4 million, respectively, and primarily related to gaming operations, rooms, food and beverage and golf. The increase in property operating expenses resulted primarily from the inclusion of gaming-related expenses in the entire current year quarter. Gaming commenced in May 2013, therefore, gaming expenses were included for only a portion of the prior-year second quarter.
For the second quarter of 2014, selling, general and administrative expenses were $5.7 million compared to $4.6 million for the second quarter of 2013. Included in these amounts were Lakes corporate selling, general and administrative expenses of $1.9 million and $2.0 million during the second quarters of 2014 and 2013, respectively. Lakes corporate selling, general and administrative expenses consist primarily of payroll and related expenses and professional fees as well as $0.4 million of business development costs. Rocky Gap selling, general and administrative expenses were $3.8 million and $2.6 million during the second quarters of 2014 and 2013, respectively. The increase in Rocky Gap selling, general and administrative expenses was due primarily to increases in marketing and advertising expenses, and payroll and related expenses related to the addition of gaming during May 2013.
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. The remaining purchase price will be paid in three equal semi-annual installments of approximately $0.5 million and 20% of Lakes’ original ownership will be transferred upon each remaining payment. 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.
During the second quarter of 2013, Lakes recognized preopening expenses of $0.9 million related to the Rocky Gap project. There were no preopening expenses during the current year period.
Depreciation and amortization was $0.9 million for the three months ended June 29, 2014 compared to $0.5 million for the three months ended June 30, 2013. The increase was due primarily to depreciation on Rocky Gap fixed assets.
Six Month Results
Net losses for the six months ended June 29, 2014 were $1.7 million, compared to net losses of $0.1 million for the six months ended June 30, 2013. Loss from operations was $1.3 million for the first six months of 2014 compared to a loss from operations of $3.1 million for the first six months of 2013. Basic and diluted losses were $0.06 per share for the first half of 2014 compared to basic and diluted losses of less than $0.01 per share for the first half of 2013.
Lakes Entertainment reported net revenues of $26.4 million for the first six months of 2014, compared to net revenues of $11.9 million in the prior year period.Net revenues in the current year period were related to the operation of Rocky Gap. During the prior year period, net revenues of $5.4 million were related to the operation of Rocky Gap. Also included in the prior-year period net revenues were $6.4 million in management fees related to the management of the Red Hawk Casino. There were no management fees earned during the current year period due to the August 29, 2013 termination of the management agreement for the Red Hawk Casino.
During the first six months of 2014, property operating expenses for Rocky Gap which related primarily to gaming operations, rooms, food and beverage and golf were $15.5 million compared to $4.0 million in the prior-year period. The increase in property operating expenses was due primarily to the addition of gaming in May of 2013.
For the six months ended June 29, 2014, selling, general and administrative expenses were $11.5 million compared to $8.4 million for the six months ended June 30, 2013. Included in these amounts were Lakes corporate selling, general and administrative expenses of $4.0 million, during the first six months of 2014 and 2013. Rocky Gap selling, general and administrative expenses were $7.5 million and $4.4 million during the first six months of 2014 and 2013, respectively. Lakes corporate selling, general and administrative expenses consist primarily of payroll and related expenses and professional fees as well as $0.8 million of business development costs. The increase in Rocky Gap selling, general and administrative expenses was due primarily to increases in marketing and advertising expenses, and payroll and related expenses related to the addition of gaming during May 2013.
During the six months ended June 30, 2013, Lakes recognized preopening expenses of $1.2 million related to the Rocky Gap project. There were no preopening expenses during the current year period.
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. The remaining purchase price will be paid in three equal semi-annual installments of approximately $0.5 million and 20% of Lakes’ original ownership will be transferred upon each remaining payment. 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.
Depreciation and amortization was $1.7 million for the six months ended June 29, 2014 compared to $0.7 million for the six months ended June 30, 2013. The increase related to depreciation on Rocky Gap fixed assets.
The Company has existing net operating loss carry forwards of approximately $72 million that are available to offset future taxable income.
Tim Cope, President and Chief Financial Officer of Lakes stated, "We are pleased with the performance of Rocky Gap. Although ongoing construction projects had an impact on second quarter operations, the property still performed well. With the recent completion of these projects, including the addition of 150 new parking spaces, the expansion of the fitness center and the remodel of the golf shop, which were completed in early July, we have already seen an increase in visitation and we are looking forward to operating the remainder of the summer and fall seasons with these new offerings. The gaming facility features 577 video lottery terminals, 13 table games, two poker tables and a casino bar along with a lobby food and beverage outlet. 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.”
Further commenting, Lyle Berman, Chief Executive Officer of Lakes stated, “With an excess of $80 million in available funds on our balance sheet, we have been and continue to consider new ventures in order to maximize shareholder value. Mr. Berman continued, “We continue to maintain a 10% ownership interest in Rock Ohio Ventures, LLC’s 80% ownership in the Horseshoe Casino Cleveland, the Horseshoe Casino Cincinnati, the Thistledown Racino in North Randall, Ohio and Turfway Park, a racetrack located in Florence, Kentucky.”
About Lakes Entertainment
Lakes Entertainment, Inc. currently owns the Rocky Gap Casino Resort near Cumberland, Maryland. Lakes also has an investment in Rock Ohio Ventures, LLC’s casino and racino developments in Ohio, as well as Turfway Park in Florence, Kentucky.
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; Lakes operates in a highly competitive industry; possible changes in regulations; possible need for future financing to meet Lakes' expansion goals; risks of entry into new businesses; reliance on Lakes' management; and litigation costs. 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
(In thousands)
| | | (Unaudited) | | | | | |
| | | June 29, 2014 | | | December 29, 2013 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 38,164 | | | $ | 37,897 | |
Short-term investments | | | 45,450 | | | | 49,099 | |
Income taxes receivable | | | 2,155 | | | | 2,155 | |
Other | | | 2,419 | | | | 1,774 | |
Total current assets | | | 88,188 | | | | 90,925 | |
Property and equipment, net | | | 33,516 | | | | 31,659 | |
Other assets: | | | | | | | | |
Investment in unconsolidated investee | | | 20,997 | | | | 20,997 | |
Gaming license | | | 1,945 | | | | 2,015 | |
Land held for development | | | 960 | | | | 1,130 | |
Other | | | 666 | | | | 535 | |
Total other assets | | | 24,568 | | | | 24,677 | |
Total assets | | $ | 146,272 | | | $ | 147,261 | |
| | | | | | | | | |
Liabilities and shareholders' equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 1,364 | | | $ | 1,251 | |
Other | | | 4,661 | | | | 3,610 | |
Total current liabilities | | | 6,025 | | | | 4,861 | |
Long-term debt, net | | | 9,602 | | | | 10,321 | |
Total liabilities | | | 15,627 | | | | 15,182 | |
Total shareholders' equity | | | 130,645 | | | | 132,079 | |
Total liabilities and shareholders' equity | | $ | 146,272 | | | $ | 147,261 | |
LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
| | | Three months ended | | | Six months ended | |
| | | June 29, 2014 | | | June 30, 2013 | | | June 29, 2014 | | | June 30, 2013 | |
Revenues: | | | | | | | | | | | | | | | | |
Management fees | | $ | - | | | $ | 3,650 | | | $ | - | | | $ | 6,378 | |
Gaming | | | 11,068 | | | | 3,188 | | | | 21,388 | | | | 3,188 | |
Room | | | 1,630 | | | | 615 | | | | 2,944 | | | | 879 | |
Food and beverage | | | 1,566 | | | | 703 | | | | 2,825 | | | | 901 | |
Other operating | | | 642 | | | | 410 | | | | 977 | | | | 507 | |
License fees and other | | | 30 | | | | 23 | | | | 63 | | | | 40 | |
Gross revenues | | | 14,936 | | | | 8,589 | | | | 28,197 | | | | 11,893 | |
Less promotional allowances | | | 829 | | | | 40 | | | | 1,780 | | | | 40 | |
Net revenues | | | 14,107 | | | | 8,549 | | | | 26,417 | | | | 11,853 | |
| | | | | | | | | | | | | | | | | |
Costs and expenses: | | | | | | | | | | | | | | | | |
Gaming | | | 6,413 | | | | 2,018 | | | | 12,367 | | | | 2,018 | |
Room | | | 173 | | | | 214 | | | | 283 | | | | 325 | |
Food and beverage | | | 1,190 | | | | 759 | | | | 2,223 | | | | 1,062 | |
Other operating | | | 419 | | | | 418 | | | | 661 | | | | 633 | |
Selling, general and administrative | | | 5,723 | | | | 4,613 | | | | 11,463 | | | | 8,380 | |
Gain on sale of cost method investment | | | (1,000 | ) | | | - | | | | (1,000 | ) | | | - | |
Preopening expenses | | | - | | | | 902 | | | | - | | | | 1,167 | |
Amortization of intangible assets related to Indian casino projects | | | - | | | | 265 | | | | - | | | | 529 | |
Loss on disposal of property and equipment | | | (1 | ) | | | 143 | | | | 24 | | | | 143 | |
Depreciation and amortization | | | 864 | | | | 460 | | | | 1,717 | | | | 717 | |
Total costs and expenses | | | 13,781 | | | | 9,792 | | | | 27,738 | | | | 14,974 | |
| | | | | | | | | | | | | | | | | |
Earnings (loss) from operations | | | 326 | | | | (1,243 | ) | | | (1,321 | ) | | | (3,121 | ) |
| | | | | | | | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | 38 | | | | 1,741 | | | | 71 | | | | 3,494 | |
Interest expense | | | (308 | ) | | | (264 | ) | | | (626 | ) | | | (472 | ) |
Other | | | 1 | | | | 10 | | | | 165 | | | | 10 | |
Total other income (expense), net | | | (269 | ) | | | 1,487 | | | | (390 | ) | | | 3,032 | |
Earnings (loss) before income taxes | | | 57 | | | | 244 | | | | (1,711 | ) | | | (89 | ) |
Income tax benefit | | | - | | | | - | | | | - | | | | - | |
Net earnings (loss) | | $ | 57 | | | $ | 244 | | | $ | (1,711 | ) | | $ | (89 | ) |
Other comprehensive income | | | 15 | | | | - | | | | 1 | | | | - | |
Comprehensive income (loss) | | $ | 72 | | | $ | 244 | | | $ | (1,710 | ) | | $ | (89 | ) |
| | | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding | | | | | | | | | | | | | | | | |
Basic | | | 26,749 | | | | 26,441 | | | | 26,738 | | | | 26,441 | |
Dilutive impact of stock options | | | 499 | | | | 202 | | | | - | | | | - | |
Diluted | | | 27,248 | | | | 26,643 | | | | 26,738 | | | | 26,441 | |
| | | | | | | | | | | | | | | | | |
Earnings (loss) per share | | | | | | | | | | | | | | | | |
Basic | | $ | 0.00 | | | $ | 0.01 | | | $ | (0.06 | ) | | $ | (0.00 | ) |
Diluted | | $ | 0.00 | | | $ | 0.01 | | | $ | (0.06 | ) | | $ | (0.00 | ) |
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