SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One):
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| þ | | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the Fiscal Year Ended December 31, 2004
or
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| o | | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission file Number: 0-22334
LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN
(Title of the Plan)
LODGENET ENTERTAINMENT CORPORATION
(Name of Issuer of the Securities Held Pursuant to the Plan)
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| DELAWARE | | 46-0371161 |
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| (State of Incorporation) | | (IRS Employer Identification Number) |
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3900 West Innovation Street, Sioux Falls, South Dakota 57107
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(Address of Principal Executive Offices)
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(605) 988-1000
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(Registrant’s Telephone Number, including Area Code)
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INDEX
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| Form 11-K cover page for the LodgeNet Entertainment Corporation 401(k) Plan | | | Cover |
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All other schedules are omitted since the required information is not present, or is not present in the amounts sufficient to require submission of a schedule; or because the information required is included in the financial statements and notes thereto.
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Signature
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | LodgeNet Entertainment Corporation 401(k) Plan
(Name of Plan)
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| Date: June 27, 2005 | /s/ Scott C. Petersen | |
| | Scott C. Petersen | |
| | President, Chief Executive Officer | |
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Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of the
LodgeNet Entertainment Corporation 401 (k) Plan
In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of LodgeNet Entertainment Corporation 401 (k) Plan (the “Plan”) at December 31, 2004 and 2003, and the changes in net assets available for benefits for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
May 13, 2005
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LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of net assets available for benefits
As of December 31
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| | | 2004 | | | 2003 | |
| Investments, at fair value | | $ | 19,846,335 | | | $ | 15,834,510 | |
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| Net assets available for benefits | | $ | 19,846,335 | | | $ | 15,834,510 | |
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The accompanying notes are an integral part of these financial statements.
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LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Statement of changes in net assets available for benefits
For the year ended December 31
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| | | 2004 | |
Investment income | | | | |
| Interest and dividend income | | $ | 302,360 | |
| Net appreciation of investments | | | 1,403,358 | |
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| Total investment income | | | 1,705,718 | |
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Contributions | | | | |
| Participant | | | 2,118,331 | |
| Employer | | | 792,754 | |
| Rollover | | | 70,088 | |
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| Total contributions | | | 2,981,173 | |
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Distributions to participants | | | (675,066 | ) |
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| Net increase | | | 4,011,825 | |
| NET ASSETS AVAILABLE FOR BENEFITS: | | | | |
| Beginning of year | | | 15,834,510 | |
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| End of year | | $ | 19,846,335 | |
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The accompanying notes are an integral part of these financial statements.
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LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
Notes to financial statements
December 31, 2004 and 2003
1 Description of the Plan
The following is not a comprehensive description of LodgeNet Entertainment Corporation 401(k) Plan (the Plan) and, therefore, does not include all situations and limitations covered by the Plan. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions.
General and Eligibility
The Plan is a contributory defined contribution plan covering all eligible full and part-time employees of LodgeNet Entertainment Corporation (the “Company”). Employees become eligible to make 401(k) pre-tax contributions to the Plan beginning on January 1, April 1, July 1 or October 1 immediately following completion of three consecutive months of service and attaining age 18. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal Revenue Code (the “Code”).
Plan Operations
The Company functions as the plan sponsor and administrator. FASCorp is utilized as record keeper and SunTrust Bank is utilized as trustee and asset custodian of the Plan.
Contributions
The maximum percentage of compensation an employee may contribute to the Plan is 50 percent, with an annual maximum contribution as provided by the Code. Participants may also rollover amounts representing distributions from other qualified plans into the Plan. Amounts contributed are invested at the discretion and direction of plan participants in any of the Plan’s investment options, one of which is to invest in the common stock of the Company.
The Company may make a discretionary match of participant contributions equal to 50 percent of the first 6 percent of each participant’s eligible contribution for the plan year. Amounts contributed are allocated among the investment funds in the same manner as participant contributions. During 2004, the Company made this discretionary match.
The Company may make additional discretionary contributions to the Plan. In a year in which the Company chooses to make discretionary contributions, the contributions will be allocated based upon a participant’s proportionate share of total compensation for all participants. There were no additional discretionary contributions in 2004.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s matching contribution and additional discretionary contribution portions of participant accounts plus actual earnings thereon is based on years of service. A participant is 100 percent vested after five years of credited service based on the following percentages:
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| | | Percent vested | |
| Less than one year of service | | | 0 | % |
| One year but less than two | | | 20 | |
| Two years but less than three | | | 40 | |
| Three years but less than four | | | 60 | |
| Four years but less than five | | | 80 | |
| Five years or more | | | 100 | |
If a participant dies or becomes disabled while still employed by the Company, his or her entire plan account balance becomes 100 percent vested.
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Forfeitures
Forfeitures of the nonvested account balances result from participants who withdraw from the Plan before becoming fully vested in employer contributions and earnings thereon. Forfeitures are used to reduce future employer contributions. No forfeitures were utilized in 2004, and forfeitures available for future utilization were approximately $35,000 at December 31, 2004.
Participant Loans
Participants may borrow funds from the Plan up to 50 percent of their vested balance at an interest rate of 1 percent over the prime interest rate. The prime interest rate will be determined as of the first business day of each month. Loans will not be granted in amounts less than $1,000 or greater than $50,000. Loans are evidenced by a promissory note and have a repayment period of up to five years, unless the loan qualifies as a home loan for which the repayment term is up to 15 years. At December 31, 2004, interest rates on loans range from 5.00 percent to 9.00 percent, and are due at various dates through August 2019.
Distribution of Benefits
Upon retirement, death, disability, termination of employment or attainment of age 62, a participant, or a participant’s beneficiary in the case of death, may receive the vested portion of the amount credited to the participant’s account by a lump-sum payment.
Account Balances
Each participant’s account is credited with the participant’s contributions and an allocation of Company contributions and Plan earnings. Plan earnings are allocated based on participant account balances as defined. Participants may invest their contributions, and redirect their account balances among the various fund options, including a Company stock fund, on a daily basis. Company contributions are invested in the same investment options as the participant contributions. There are no restrictions on transfers among the various investment options.
2 Summary of Significant Accounting Policies
The following significant accounting policies were used to prepare the financial statements in accordance with accounting principles generally accepted in the United States of America.
Basis of Accounting
The financial statements have been prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
Investments, other than loans, are recorded at fair value as determined by SunTrust Bank, the trustee of the Plan, by reference to quoted market prices as of December 31, 2004 and 2003. Participant loans are valued at estimated fair value, consisting of principal outstanding and any related accrued interest.
Investment income is recorded when earned. Dividend income is recorded on ex-dividend date. The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of investments, which consists of the realized gains or losses and the unrealized appreciation (depreciation) on investments.
Plan Expenses
Administrative expenses of the Plan are paid by the Company.
Benefits
Benefits are recorded when paid.
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Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires the Company to make certain estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates.
Risk and Uncertainties
The Plan provides for investments that, in general, are exposed to various risks, such as interest rates, market conditions and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the values of investment securities, it is possible that changes in risk factors in the near term could materially affect participants’ account balances and the amounts reported in the financial statements.
3 Investments
The following presents investments that represent 5 percent or more of the Plan’s net assets at December 31:
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| | | 2004 | | | 2003 | |
| Mutual Funds | | | | | | | | |
| SunTrust Retirement 500 Index Fund Class B | | $ | 2,686,610 | | | $ | 2,333,963 | |
| MFS Massachusetts Investors Growth Fund | | | 2,564,097 | | | | 2,123,926 | |
| Templeton Growth Fund | | | 2,140,471 | | | | 1,568,616 | |
| T. Rowe Price Growth Stock Fund — R | | | 1,773,518 | | | | — | |
| SunTrust Retirement Stable Asset Fund | | | 1,622,296 | | | | 1,246,943 | |
| STI Classic Life Vision Growth & Income Fund | | | 1,271,043 | | | | 1,101,828 | |
| American Century Income and Growth Advisor | | | 1,045,416 | | | | 824,754 | |
| STI Classic Growth and Income Fund | | | 800,191 | | | | 627,045 | |
| Janus Adviser Capital Appreciation Fund | | | — | | | | 1,503,098 | |
| All other mutual funds investments, individually less than 5% of Plan assets | | | 4,087,944 | | | | 3,018,446 | |
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| Total mutual funds | | | 17,991,586 | | | | 14,348,619 | |
| LodgeNet Entertainment Corporation Common Stock | | | 1,088,445 | | | | 938,203 | |
| Participant loans receivable | | | 766,304 | | | | 547,688 | |
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| | | | 19,846,335 | | | | 15,834,510 | |
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Net appreciation of investments for the year ended December 31, 2004 consisted of the following:
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| Mutual funds | | $ | 1,388,938 | |
| Common stock | | | 14,420 | |
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| | | $ | 1,403,358 | |
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4 Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated March 25, 2004, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
5 Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of the Plan’s termination, participants will become fully vested in their accounts and assets will be distributed in accordance with the Plan document.
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6 Party-in-Interest Transactions
The trustee is authorized under contract provisions, or by ERISA regulations providing an administrative or statutory exemption, to invest in funds under its control and in the securities of the Company.
Participant contributions are invested in one or more of the investment fund options under the Plan, including stock of LodgeNet Entertainment Corporation and investment funds under the trustee’s control. In 2004, the amount of such purchases and sales of funds managed by the trustee and of the Company’s stock were as follows:
| | | | | | | | | |
| | | Purchases | | | Sales | |
| Sun Trust mutual funds | | $ | 1,293,717 | | | $ | 879,277 | |
| LodgeNet Entertainment Corporation Common Stock | | | 841,641 | | | | 703,752 | |
| STI Classic | | | 1,199,693 | | | | 731,796 | |
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LODGENET ENTERTAINMENT CORPORATION 401(k) PLAN
(Employer identification number: 46-0371161) (Plan number: 001)
Schedule H, line 4i — Schedule of Assets (Held At End of Year)
As of December 31, 2004
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| (a) | | (b) | | (c) | | (d) | | (e) |
| | | Identity of Issue, Borrower, | | Description of Investment, Including Maturity | | | | |
| | | Lessor or Similar | | Date, Rate of Interest, Collateral Par or | | | | |
| | | Party | | Maturity Date | | Cost ** | | Current Value |
| | American Century | | Income & Growth Advisor | | | | $ | 1,045,416 | |
| | Dreyfus | | Premier New Leaders Fund | | | | | 554,786 | |
| | Dreyfus | | Premier Small Cap Value — A | | | | | 151,393 | |
| | Dreyfus | | Premier Technology Growth Fund | | | | | 315,717 | |
| | Federated | | Capital Appreciation Fund A | | | | | 200,878 | |
| | Franklin | | Small-Mid Cap Growth Fund | | | | | 719,955 | |
| | MFS Massachusetts | | Investors Growth Fund | | | | | 2,564,097 | |
| | MFS Massachusetts | | Mid Cap Growth Fund | | | | | 256,700 | |
| | MFS Massachusetts | | Research International Fund — A | | | | | 281,839 | |
| * | | STI Classic | | Growth & Income Fund | | | | | 800,191 | |
| * | | STI Classic | | International Equity Index | | | | | 212,659 | |
| * | | STI Classic | | Investment Grade Bond | | | | | 528,807 | |
| * | | STI Classic | | Life Vision Aggressive Growth | | | | | 195,640 | |
| * | | STI Classic | | Life Vision Growth & Income Fund | | | | | 1,271,043 | |
| * | | STI Classic | | Life Vision Moderate Growth | | | | | 289,695 | |
| * | | STI Classic | | Short-Term Bond | | | | | 379,875 | |
| * | | SunTrust Retirement | | 500 Index Fund Class B | | | | | 2,686,610 | |
| * | | SunTrust Retirement | | Stable Asset Fund | | | | | 1,622,296 | |
| | Templeton | | Growth Fund | | | | | 2,140,471 | |
| | T. Rowe Price | | Growth Stock Fund — R | | | | | 1,773,518 | |
| * | | LodgeNet Entertainment Corporation | | Common Stock | | | | | 1,088,445 | |
| * | | Participant Loans | | Interest ranging from 5.00 percent to 9.00 percent, due at various dates through August 2019 | | | | | 766,304 | |
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| | Total investments | | | | | | | $19,846,335 | |
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| * | | Denotes party-in-interest to the Plan. |
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| ** | | Historical cost information is not required for participant-directed investments under ERISA. |
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