EXHIBIT 99.1
[LAKES ENTERTAINMENT, INC. LOGO] NEWS RELEASE
LAKES ENTERTAINMENT, INC.
130 CHESHIRE LANE
MINNETONKA, MN 55305
952-449-9092
952-449-9353 (fax)
WWW.LAKESENTERTAINMENT.COM
TRADED: NASDAQ "LACO"
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION CONTACT:
Timothy J. Cope 952-449-7030
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE:
Wednesday, October 8, 2003
LAKES ENTERTAINMENT, INC. PROVIDES A COMPANY OVERVIEW
MINNEAPOLIS, OCTOBER 8, 2003 -- LAKES ENTERTAINMENT, INC. (NASDAQ "LACO") today
released a company report which reviews the business and financial aspects of
the business. The overview report is attached as part of this release.
Lakes Entertainment, Inc. currently has development and management agreements
with four separate Tribes for four new casino operations, one in Michigan, two
in California and one with the Nipmuc Nation on the East Coast. Lakes
Entertainment also has agreements for the development of one additional casino
on Indian-owned land in California through a joint venture with MRD Gaming,
which is currently being disputed by the Tribe. Additionally, the Company owns
approximately 80% of World Poker Tour, LLC, a joint venture formed to film and
produce poker tournaments for television broadcast.
Lakes Entertainment, Inc. common shares are traded on the Nasdaq National Market
under the trading symbol "LACO".
- --------------------------------------------------------------------------------
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 plan 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, 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 contracts;
continued indemnification obligations to Grand Casinos; highly competitive
industry; possible changes in regulations; reliance on continued positive
relationships with Indian tribes and repayment of amounts owned 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.
- --------------------------------------------------------------------------------
1
[LAKES ENTERTAIMMENT, INC. LOGO]
- --------------------------------------------------------------------------------
October 1, 2003
LAKES ENTERTAINMENT, INC.
Contact: Timothy Cope (NASDAQNM: LACO)
President and CFO
(800) 946-9464
tcope@lakesentertainment.com CORPORATE OVERVIEW
- --------------------------------------------------------------------------------
CORPORATE HIGHLIGHTS
LAKES ENTERTAINMENT, INC. ("LAKES") DEVELOPS,
CONSTRUCTS AND MANAGES CASINOS AND RELATED
FACILITIES IN EMERGING GAMING JURISDICTIONS.
o CONTRACTS IN PLACE: Lakes has
development and management agreements in
place for four new casinos. Lakes has
been selected to be the exclusive
developer and manager of an Indian-owned
gaming resort in southwestern Michigan
(only 75 miles east of Chicago), one
near Sacramento, California, one near
San Diego, California, and one on the
East Coast.
o PROVEN MODEL: The members of the Lakes
team, many of whom were part of the
Grand Casinos team, have considerable
experience and successful track records
in completing similar projects,
skillfully managing Indian-owned
casinos, and sharing the risks and
rewards from participating throughout
the contract period of gaming projects
(typically 5-7 years once a casino
opens).
o ATTRACTIVE NICHE OPPORTUNITIES: Lakes'
focus is on Indian-owned casinos and
emerging gaming markets, the fastest
growing segments of the gaming industry.
o MOTIVATED, CAPABLE LEADERSHIP TEAM:
Directors & Officers own approximately
32% of the Company's stock (including
tions), and are highly motivated to
increase shareholder value. The
Company's leaders have extensive
experience in the gaming industry, and
have built a strong management team
proficient in all aspects of developing
and successfully operating casinos.
o DIVERSIFICATION / PROMISING WPT LAUNCH:
Lakes has approximately 80% ownership in
World Poker Tour, LLC, a joint venture
with an experienced television producer.
Since its first season began airing on
the Travel Channel in March 2003, the
World Poker Tour has been met with very
strong initial ratings, and the contract
was recently extended for one additional
season, with Travel Channel being
granted five one-year options to renew.
o STRONG BALANCE SHEET: Lakes has a very
strong balance sheet, with assets
totaling nearly $170 million and nearly
no debt. The Company has been monetizing
some of these assets as planned, such as
real estate in Las Vegas, to provide
additional cash liquidity to fund the
execution of the next phase of its
gaming development business model.
Successful execution of its strategy is
expected to bring significant tangible
benefits for the Company and its
shareholders.
STOCK DATA
as of 10/1/03
Share Price (10/1/03) $9.99
52 Week High (9/25/03) $10.41
52 Week Low (10/18/02) $3.96
Price Change, 52 Week 81.0%
Price Change, YTD 74.7%
Common Stock:
Shares Issued: 10.6M sh
Trading Float: 8.5M sh
Equity Market Cap: $106 million
Ave. Daily Volume (3 mo.): 7.730
Beta 0.65
Dividend NIL
Director & Officer Ownership: 32%
incl. Options
Institutional Ownership: 48 holders
50% of float
Institutional Buying (prior qtr): 101K sh
FINANCIAL CAPSULE
as of most recent qtr. 6/29/03
Cash & Equivalents: $23.4M
Total Assets: $167.9M
Total Liabilities: $8.0M
Book Value: $160.0M
Book Value per Share: $15.04
Price/Book Ratio (10/1/03): 0.7x
Debt/Equity: 0.0
Current Ratio, 3/30/03 0.9
Current Ratio, 6/29/03 3.7
(C) 2003 Lakes Entertainment, Inc. - All Rights Reserved
2
- --------------------------------------------------------------------------------
COMPANY Lakes Entertainment is a gaming development and
OVERVIEW casino management company formed at the end of
1998 through a distribution to shareholders of
Grand Casinos, Inc.
On December 31, 1998 Grand Casinos merged with the
gaming division of Hilton Hotels to form Park
Place Entertainment (NYSE: PPE). Grand Casinos'
Indian casino management business along with
various other assets was spun off into a new
public company called Lakes Gaming, Inc.,
subsequently renamed Lakes Entertainment, Inc.
("Lakes"). Lakes common shares are traded on the
NASDAQ National Market System under the trading
symbol "LACO."
CASINO DEVELOPMENT PROJECTS
By focusing on emerging gaming markets, the
Company operates in one of the fastest-growing
segments of casino gambling in the United States.
The Company offers years of expertise in all
casino disciplines for consulting, development,
construction and operation of management projects.
Lakes' current development and management
agreements are with four separate tribes for four
new casino operations in various stages of the
development process:
o MICHIGAN: Lakes has a contract with the
Pokagon Band of Potawatomi Indians to
open a casino in New Buffalo Township,
Michigan. The casino will be located
just off Interstate 94, near the first
exit in southwestern Michigan and only
about 75 miles east of Chicago. This
location represents great potential as
it will be the only land-based casino in
a market that currently consists of five
gaming riverboats that do approximately
$1 billion in business annually.
o CALIFORNIA: Lakes holds contracts to
develop and manage two casinos to be
owned by Indian tribes in California--
one near San Diego with the Jamul Indian
Village, and the other near Sacramento
with the Shingle Springs Band of Miwok
Indians. The Company has agreements for
the development of one additional casino
on Indian-owned land in California
through a joint venture with MRD Gaming,
which is currently being disputed by the
tribe.
o EAST COAST: Lakes has a contract with
the Nipmuc Nation, which is in the
process of seeking the necessary tribal
recognition status from the U.S. federal
government.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 3 Corporate Profile
ADDITIONAL GAMING BUSINESS ACTIVITIES In addition
to its casino development projects, Lakes has
expanded into several other gaming-related
business opportunities to diversify the Company
and as complementary extensions of the Company's
core gaming expertise:
[PHOTO]
o WORLD POKER TOUR: Lakes owns
approximately 80% of World Poker Tour,
LLC, a joint venture with Steven
Lipscomb, an award-winning television
creator and film-maker, to launch the
World Poker Tour (WPT) and establish
poker as a significant televised
mainstream sport. The WPT had a
successful launch in 2003, airing its
first 13-episode season on the Travel
Channel on Wednesday evenings and
quickly gaining impressive exposure,
with approximately 5 million viewers per
week. The newly negotiated WPT contract
provides for a second season and grants
the Travel Channel five one-year
options. WPT represents very little risk
to Lakes, and is expected to be
accretive to earnings in 2004.
o NEW TABLE GAMES: Lakes has recently
created a new division to buy, license
and/or market new table game concepts
for licensing to casinos. The Company is
currently testing a number of new games,
and there may be revenue from this
effort beginning during 2004.
- --------------------------------------------------------------------------------
CASINO The Company's primary near term goal is to open
PROJECT several large, full-function, profitable casinos.
UPDATES New gaming developments require considerable
levels of government and other regulatory
approvals. In addition, proposed casinos usually
face legal challenges from activist groups or
other opposition, which need to be resolved before
these projects can begin construction and
operation.
Lakes has made steady progress with its new casino
projects during the past 18 to 24 months. As
mentioned, the Company has a portfolio of casino
projects under contract, each in various stages of
this process. Although progress has been slower
than anticipated, Lakes and their partners
continue to proceed with design, development and
architectural plans so they can start building as
soon as possible after any final approvals are
received.
o POKAGON / MICHIGAN: The Company's
project with the Pokagon Band of
Potawatomi Indians in southwestern
Michigan has made significant progress
in removing the last roadblock to begin
construction. Although a Michigan group
filed a lawsuit against the Bureau of
Indian Affairs (BIA) to block the
project, a number of favorable rulings
have since been received. In March 2002,
a United States District Court Judge
dismissed the majority of claims in the
lawsuit. The only remaining claim
relates to secondary impacts on the
surrounding communities. Additional
information supporting the BIA's
position has been prepared and will be
submitted to the Court for requested
final approval. While no assurances can
be given, the Company believes this
issue will be resolved in time to allow
construction to start as soon as early
2004.
o SHINGLE SPRINGS / CALIFORNIA: The
Company's project with the Shingle
Springs Band of Miwok Indians is near
Sacramento, California, and includes a
newly planned interchange on Highway 50
to help the Band achieve economic
diversification and unrestricted access
to their land. In December 2002, the
California Transportation Commission
approved the proposed interchange, and
an agreement with the Department of the
Interior has been reached to allow
construction of the project to begin
once all other issues are resolved.
There is also a pending legal challenge
to the California regulatory approval.
Although there is no assurance that the
Tribe can resolve their litigation
issues, the Company is moving forward to
complete the remaining approval steps
during the second half of 2003. The
Company believes the casino can open for
business approximately twelve months
after the casino construction begins.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 4 Corporate Profile
The recent successful opening of the
Thunder Valley Casino has shown that
there is a substantial gaming market in
the Sacramento area with approximately 8
million people within 100 miles of the
casino site.
o JAMUL INDIAN VILLAGE / CALIFORNIA: The
Company's project with the Jamul Indian
Village in San Diego County continues to
move forward with the land in trust
application process, and an
Environmental Impact Statement has been
prepared and submitted to the Bureau of
Indian Affairs (BIA) for approval. If
approved, the casino would be located on
tribal land adjacent to State Highway
94, which provides direct access to
downtown San Diego approximately 20
miles to the west, where it intersects
with Interstate 5. The Company is
cautiously optimistic that the
land-in-trust application will be
approved in the first half of 2004 so
the project can move into the next stage
in the development, financing and
construction process. The proposed
casino will be situated in a proven
gaming market consisting of over 2
million people within 25 miles of the
casino site.
o NIPMUC NATION / EAST COAST: The Company
has a development and management
agreement with the Nipmuc Nation of
Massachusetts. The Nipmuc Nation is
currently challenging a negative finding
by the U.S. Department of the Interior
regarding its status as a federally
recognized tribe. The BIA is reviewing
the Nation's petition, and the tribe is
optimistic that they will receive a
positive final finding of recognition in
2004. If final approval is received, the
Nipmuc Nation will pursue putting land
in trust, and entering into an agreement
for a Class III gaming project with the
state where the land is located. Gaming
sites include potential locations within
the states of Massachusetts,
Connecticut, Rhode Island and New
Hampshire. Once the Nation is federally
recognized, it also has the option of
conducting Class II gaming.
The regulatory approval process is time consuming
and at times can be frustrating, however, the long
regulatory approval process also serves as a
significant barrier to entry for competitors. As
the Company's casino development projects come to
fruition and move into the construction and
management phase, they will represent very
significant sources of long-term shareholder
value.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 5 Corporate Profile
LAKES - CASINO DEVELOPMENT PROJECTS
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
Current
Development Project/ Loan
(Location) Demographics Planned Size Amount Status
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
POKAGON BAND OF POTAWATOMI 6 million population 125,000 ft(2) $40.6M Revised EIA submitted for
INDIANS within 100 mile radius casino space Notes Judge's final approval
(MI, IN, IL) (expected as early as late
(NEW BUFFALO, MI) 3,000 slots 2003)
Chicago, 75 miles
100 table games Construction possible as
5 Indiana gaming early as early 2004
river-boats ($1B rev), 30
mi. Anticipated opening of
casino approximately 12
months after casino
construction begins
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
SHINGLE SPRINGS BAND OF 8 million population 80,000 ft(2) $17.5M Seeking final approval
MIWOK INDIANS within 100 mile radius casino space Notes (expected as early as
(CA) Q4-2003); litigation
(SHINGLE SPRINGS, CA) 2,000 slots process then expected to
Sacramento, 30 miles follow
100 table games
Lake Tahoe, 65 miles Construction possible as
early as Q1-2004
Proven gaming market
shown by Thunder Valley Anticipated opening of
Casino success casino approximately 12
months after casino
construction begins
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
JAMUL INDIAN VILLAGE 2 million population 75,000 ft(2) $10.8M Seeking approval of
within 25 mile radius and casino space Notes land-in-trust as early as
(NORTH JAMUL, CA) 11 million within 100 Q1-2004 ; litigation
mile radius (CA) 2,000 slots process then expected to
follow
San Diego, 20 miles 80 table games
Construction possible as
Same gaming market as early as Q4-2004 to Q1-2005
Viejas, Barona and Sycuan
casinos Anticipated opening of
casino approximately 12
months after casino
construction begins
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
NIPMUC NATION OF Final location to be (to be determined) $4.2M Seeking Federal
MASSACHUSETTS determined Notes recognition of Tribe.
(MA, CT, RI, NH) If successful, proceed
(EAST COAST) with land-in-trust process
and state compact
- ----------------------------- --------------------------- ------------------- ---------- ----------------------------
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 6 Corporate Profile
LAKES - OTHER DEVELOPMENT PROJECTS
- ---------------------------------------- ------------------------ ------------------- ------------------------------
Development Project Activity Lakes Benefit Status
- ---------------------------------------- ------------------------ ------------------- ------------------------------
WORLD POKER TOUR Signed contract with 80% ownership in Aired its first 13-episode
The Travel Channel for the joint venture season on the Travel
second season, with 5 Channel, Wed evenings.
one-year options to
review Filming the second season
- ---------------------------------------- ------------------------ ------------------- ------------------------------
NEW TABLE GAMES Lakes has purchased Future licensing Continuing with in-casino
options for the rights revenue streams testing phase.
to license four new
casino games Revenues are anticipated to
start during 2004
- ---------------------------------------- ------------------------ ------------------- ------------------------------
- --------------------------------------------------------------------------------
COMPANY By continuing to establish a new presence in
STRATEGY several emerging U.S. gaming markets, supplemented
with complementary activities with the World Poker
Tour and new gaming ventures, management believes
that the outlook for the Company is increasingly
bright. The Company goal is to maximize its
strengths and experience in casino gaming to
create long-term value for the Company and its
shareholders. The key elements of the Lakes'
strategy are briefly described below:
STAY THE COURSE
Due to the highly political and regulated nature
of gaming in the United States, new casino
projects have a lengthy development cycle. For
those skilled at navigating all of the regulatory
and approval processes, it also represents great
potential rewards. Lakes' management believes the
Company is very well-positioned to capture some of
these rewards by continuing to focus on its core
strengths in gaming development and casino
management. As the Company's casino projects gain
necessary approvals, complete construction and
begin operations, loan repayments from the tribes
will commence, and the Lakes' casino management
contracts would be expected to generate
significant revenues, cash flow and profits for
the Company, its shareholders and other
stakeholders.
MANAGE RISK AND PREPARE FOR NEXT PHASE
Lakes' management anticipates that the Company
will continue to face a number of challenges. An
important element of the Lakes strategy is to
proactively manage the Company's exposure to risk.
In the near-term, these risks are likely to
include the ability to receive all of the
necessary regulatory approvals, and successfully
address the usual legal challenges. Once past
these hurdles, the Company is poised to quickly
begin construction so the casinos can be opened as
soon as possible, and the proven Lakes casino
management team can further execute its plan to
deliver attractive operating results.
BUILD FOR THE FUTURE
As the Company continues to foster relationships
within the Native American gaming community, it is
expected to leverage its strengths and market
presence to create a platform for new
gaming-related business opportunities. As the
Company successfully executes its focused growth
strategy, there will likely be additional
attractive, long-term opportunities.
The Company has outlined three key initiatives to
support its business strategy and create long-term
value for its shareholders:
1. REDUCING RISK AND UNCERTAINTIES: Risk
cannot be completely eliminated, but
Lakes' management continuously seeks
ways to mitigate specific components of
the Company's risk. For example,
indemnification obligations and
litigation, carried over from the
Company's Grand Casinos days, previously
cast a shadow on the Lakes risk profile
but have now to a significant degree
been resolved. On May 16, 2003,
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 7 Corporate Profile
Lakes announced that it has satisfied
all known material indemnification
obligations to Grand Casinos, Inc. in
connection with the 1998 Grand/PPE
merger. This not only reduced the
Company's risk exposure, but also freed
up an additional $5.9 million in cash,
released from the trust escrow account.
In addition, the Company has
significantly improved its cash position
during the first half of 2003, providing
the funding base for moving forward as
projects are approved. The Company's
main priority is to open the casinos
under contract, as summarized in the
chart on page five.
2. GROWING THE ASSET BASE: As a particular
casino opens, loan repayment and
revenues from the Company's management
contracts would be expected to begin,
which would significantly expand the
Lakes' asset base and enable future
expansion of the Company's strategy. As
Lakes currently prepares to move into
the construction and management phases
of its business cycle, the Company has
converted some of its existing assets
into cash by, for example, by selling
some of the Company's real estate
holdings.
3. DIVERSIFICATION: In addition to its
casino development projects, Lakes plans
to continue to expand into other
opportunities to diversify the Company's
activities and bring in new revenue
streams. A recent example is the World
Poker Tour, a relatively low-risk /
low-cost method of substantially
increasing the Company's public profile,
increasing revenue, and opening new
doors for future projects and products.
The Company's new table games division
also leverages Lakes' core gaming
expertise to generate new revenue
streams in the future.
In summary, the Company believes it is now positioned
exceptionally well-- to leverage its contracts and
strengths in casino development and management, and
expand its scope of opportunities in the emerging
gaming marketplace.
- --------------------------------------------------------------------------------
COMPANY One of the keys to Lakes' success lies in its
ASSETS AND strong financial base; the Company has funded its
STRONG CASH activities so far without taking on any debt. As
POSITION of the end of the most recent quarter (June 29,
2003), the Company had $168 million in assets,
only $8 million in liabilities, and no debt. The
Company has built a large asset base to support
the development and regulatory approval phase of
its various casino projects and to fulfill the
Company's financial obligation as the projects
reach the operational stage.
As the Company prepares to move into the
construction and management phases of its business
cycle, some of these assets are being converted
into cash. Additional cash is expected to be
generated from the actual management of the casino
operations (profit sharing) and the repayment to
Lakes of notes receivable from the tribes once a
casino opens, creating significant value for
Lakes' shareholders. The major components of the
Company's balance sheet assets include the
following:
o CASH AND EQUIVALENTS: As of June 29,
2003, the Company had $23.4 million of
unrestricted cash and equivalents. By
July 2, 2003, the Company's cash
position increased substantially to
approximately $40.0M as $16.0M in
additional cash was received related to
the sale of the Shark Club property.
o LAND HELD UNDER CONTRACT FOR SALE:
Includes real estate previously sold by
Lakes for which some of the cash has not
yet been received. As of June 29, 2003,
this consisted of the Travelodge
property in Las Vegas as recorded on the
balance sheet at an adjusted carrying
value of approximately $4.8M. The
Company's collateral is the property and
lease rights which would revert back to
Lakes in the event of default by the
purchaser (Metroflag Polo, LLC).
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 8 Corporate Profile
o LAND HELD FOR DEVELOPMENT: On occasion,
Lakes purchases parcels of land to be
held for transfer to tribes for their
future development and use. Currently
the Company owns approximately $13.9M of
land that is related to the Shingle
Springs and Jamul projects.
o NOTES RECEIVABLE: Largely comprised of
loans made to Indian tribes related to
the Company's various gaming projects.
These notes are typically paid back to
Lakes in monthly installments with
interest once a tribe's casino opens and
distributable profits are available from
its operation. If the casino project for
which the loan is made does not open,
Lakes would not be paid back. Specific
terms of these notes vary by tribe, but
are generally subject to certain
distribution priorities and subordinated
to other financial obligations of the
tribes.
o OTHER ASSETS: The Company's other assets
currently include approximately $8
million in investments in unconsolidated
affiliates reflecting Lakes' remaining
interest in the Polo property, the
Company office building of approximately
$6 million, deferred tax assets of
approximately $9 million, and a
remaining net asset balance in various
other assets and liabilities of
approximately $3 million.
LAKES - SUMMARY OF ASSETS AND CASH POSITION
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Lakes Balance Sheet Asset Status Cash Position/Update
Asset Key Components as of June 29, 2003 as of July 1, 2003*
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
CASH AND EQUIVALENTS Unrestricted Cash & Equivalents $23.4M Increased substantially, as
approx. $16M in additional cash
was received since June 29 from
the sale of the Shark Club
property as detailed below:
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Restricted $0
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
LAND HELD UNDER CONTRACT Travelodge property in $4.8M Land Held Under
FOR SALE Las Vegas sold for $3.5M plus Contract; scheduled to close
Land previously sold by $1.3M note receivable by December 28, 2004
Lakes for which
payment has not
yet been received
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
LAND HELD FOR DEVELOPMENT Shark Club land owned in $15M in Land Held For $15M cash received on
Land purchased by Lakes Las Vegas, Nevada Development July 1, 2003
for future development or
resale
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Other property held for future $14.4M in Land Held For
transfer to Indian tribes Development
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
NOTES RECEIVABLE Shark Club land in Las Vegas, $1M Notes Receivable $1M cash received on
Most of Lakes N/R are Nevada July 1, 2003
loans made to tribes to
assist with the initial
casino development
process; these notes are
typically paid back with
interest in monthly
installments after a
casino opens.
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Pokagon Band $40.6M Notes Receivable
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Jamul Band $10.8M Notes Receivable
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Shingle Springs Band $17.5M Notes Receivable
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Nipmuc Nation $4.2M Notes Receivable
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
OTHER ASSETS Deferred Tax Assets $9.2M
In addition to those
shown above
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Property Equipment, net $6.7M
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
Misc. assets not shown above $20.3M
- ---------------------------- -------------------------------- ------------------------------ ---------------------------------
* Note: the status as of July 1, 2003 shown above is derived from the
Company's recent press releases and public filings with the SEC. You are
encouraged to refer to the Company's SEC filings for more detailed
information.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 9 Corporate Profile
- --------------------------------------------------------------------------------
INDIAN Indian gaming is one of the fastest-growing segments
GAMING of casino gambling in the United States. There are
MARKET currently more than 200 tribes operating
approximately 350 Indian gaming facilities in 30 U.S.
states, established under the U.S. Indian Gaming
Regulatory Act of 1988. According to a recent study,
Indian gaming generated more than $12 billion in
direct gaming revenue and an additional $1 billion in
direct non-gaming revenue in 2001.1
Dr. Alan Meister, of the economics research and
strategy firm InteCap, further concludes that Native
American gaming and casinos not only benefit American
Indian tribes, but also benefit the overall U.S.
economy, contributing directly or indirectly over $32
billion to total U.S. economic output in 2001. Tribal
casinos have created more than 490,000 gaming and
non-gaming jobs, paying a total of $12.4 billion in
annual wages nationwide.
In California and Michigan, the two key areas
targeted in the near-term by Lakes, Indian gaming is
very well developed and continues to flourish.
California has by far the largest Indian gaming
industry of any state, generating over $3.2 billion
in both gaming and non-gaming revenues in 2001, or
nearly a quarter of all Indian gaming revenue in the
United States. Tribal gaming generated far more job
growth for the year ending September 2002 than any
private or public sector employer in California,
according to the California State Employment
Development Department. There were 46 Indian gaming
facilities in 2001, with a total of more than 42,000
slot machines and 780 table games.
Michigan's Indian gaming industry is the third
largest in America, with tribal casinos generating
over $970 million in both gaming and non-gaming
revenues in 2001. Indian gaming facilities in
Michigan can offer all forms of class III gaming with
the exception of sports wagering. Most of the casinos
currently offer blackjack, poker, craps, roulette,
` bingo, keno, electronic gaming devices, and
pari-mutuel wagering. There were 18 Indian gaming
facilities in 2001, with more than 15,700 electronic
gaming devices and 300 table games.2
- --------------------------------------------------------------------------------
WORLD As part of its diversification strategy, Lakes owns
POKER approximately 80% of World Poker Tour, LLC (WPT), a
TOUR joint venture with Steven Lipscomb, an award-winning
television creator and filmmaker. Interestingly,
Lakes founder and CEO, Lyle Berman, is one of the
world's top poker players and was inducted into the
Poker Hall of Fame in 2002.
[PHOTO]
In March of 2003, the WPT signed an agreement with
the Travel Channel, LLC to broadcast the first season
of the WPT series. The Travel Channel is available in
more than 70 million homes and is a service of
Discovery Networks, U.S. WPT receives a series of
fixed license payments from Travel Channel, subject
to satisfaction of production milestones and other
conditions. Revenue is recognized ratably as
production milestones and other conditions are met.
The license fees from this initial season covered
substantially all of the incurred production costs.
WPT uses new technology and on-air graphics to let
the TV viewer know what cards a player is holding.
This adds a dramatic element to the game, as it draws
television viewers into the minds of poker's most
elite and colorful players. When a player moves
"all-in" for example, the viewer will know whether or
not he is bluffing. Varying camera angles and the
ability to see hole cards, combined with expert
commentary and a live audience, gives WPT poker the
feel of a mainstream sporting event.
- --------
1 Dr. Alan Meister, "The Economic Impact of Indian Gaming in the United States"
(Report by InteCap, Inc., April 2002).
2 Ibid.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 10 Corporate Profile
INITIAL RATINGS SUCCESS
With approximately 50 million poker players in the
United States and more than 100 million worldwide,
more people play poker than play golf, billiards, or
tennis. Recently, poker has experienced a resurgence
of interest in the U.S. partly due to the successful
launch of the WPT. The WPT has become an instant hit
and a ratings success for the Travel Channel with
approximately 5 million viewers per week quickly
becoming the highest-rated programming on the network
so far in 2003. The show continued to capture new
fans throughout its run, as well as captivating many
of the nation's 50 million poker enthusiasts.
In 2003, WPT aired its first 13-episode season on
the Travel Channel on Wednesday evenings. The first
series culminated with a $25,000 buy-in championship
at Las Vegas' Bellagio, which aired on June 25, 2003.
More than 100 players battled for a prize pool of
more than $2.6 million including a first place prize
of more than $1.0 million.
[PHOTO]
RENEWAL FOR 2004 SEASON
Based on the positive initial response and strong
ratings, the Travel Channel and WPT have reached an
agreement to provide a second season of WPT events
that are expected to air in 2004, including granting
to the Travel Channel 5 one-year renewal options. In
addition to the payments from the Travel Channel, a
number of other potential sources of revenue are
being pursued by the WPT including, as example:
1. Various forms of sponsorships
2. Worldwide syndication
3. Retail merchandise sales, including DVD's
4. Brand licensing
5. Additional tournaments and made for Travel
Channel specials
WPT represents very little risk to Lakes, and is
expected to be accretive to the Company's earnings in
2004.
- --------------------------------------------------------------------------------
COMPANY In January 2002, Lakes completed the purchase of its
OPERATIONS 65,000 ft2 corporate office building, eliminating the
risk of a long-term lease commitment, and providing
the Company with the facilities necessary to support
the next phase of its business plan. The Lakes'
headquarters currently occupies approximately 16,000
ft2 of space in this building, located in Minnetonka,
Minnesota, a western suburb in the Minneapolis-St.
Paul metropolitan area, with the remaining space
occupied by lease tenants.
The Company has assembled a strong team of gaming
industry experts, well-versed in all aspects of
casino development, construction and management, many
of whom were involved with the success of Grand
Casinos, Inc. The Lakes' team has individual
specialists on staff that mirror each of the
functional areas found in a casino, including the
following:
o GAMING OPERATIONS
o CONSTRUCTION & DEVELOPMENT
o FINANCE / ACCOUNTING
o LEGAL / REGULATORY
o SECURITY
o SYSTEMS / IT
o FOOD & BEVERAGE
o RETAIL
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 11 Corporate Profile
o MARKETING
o HUMAN RESOURCES
This team represents a tremendously valuable asset
that Lakes can use to its advantage now and in the
future.
- --------------------------------------------------------------------------------
MANAGEMENT LYLE BERMAN, (62) CHAIRMAN AND CEO
TEAM Lyle Berman, Chairman of the Board and Chief
Executive Officer of Lakes Entertainment, is well
known as one of the early visionaries in the
development of casinos outside of the traditional
gaming markets of Las Vegas and Atlantic City. In
1990, Mr. Berman participated in the founding of
Grand Casinos, Inc. Under the leadership and
direction of Mr. Berman, Grand Casinos became a
leader in the "emerging gaming" segment of the
casino entertainment industry, and in less than
five years opened eight casino resorts in four
states. In 1995, Grand Casinos was named the
Fastest Growing Company in America by Fortune
magazine. In 1998, Grand Casinos' Mississippi
assets were merged with the gaming division of
Hilton Hotels Corporation to form Park Place
Entertainment Corporation, and Grand Casinos'
Indian casino management business was spun off
into a new public company called Lakes Gaming,
Inc., subsequently renamed Lakes Entertainment,
Inc. Mr. Berman is a graduate of the University of
Minnesota with a degree in Business
Administration, and began his career with Berman
Buckskin, his family's leather business. When
Berman's was sold to W.R. Grace in 1979, he
continued as President and CEO and led the company
to become one of the country's largest retail
leather chains, with over 200 stores nationwide.
Mr. Berman led a management buyout of Berman's in
1987, and in 1988, the company was sold to
Melville Corporation and combined to form Wilsons
The Leather Experts. In 1996, Mr. Berman
participated along with current Wilsons'
management to buy back Wilsons from Melville
Corporation, and then took Wilsons public through
an IPO in 1997. Mr. Berman also served as Chief
Executive Officer of Rainforest Cafe, Inc. from
1993 until December 2000. Mr. Berman was honored
with the B'nai B'rith "Great American Traditions
Award" in 1995, received the "Gaming Executive of
the Year" Award in 1996, and was inducted into the
Poker Hall of Fame at Binion's Horseshoe in Las
Vegas in 2002.
TIMOTHY J. COPE, (52) PRESIDENT AND CFO
Timothy Cope is the President, Chief Financial
Officer and Director of Lakes Entertainment, Inc.
and has been with the organization since the
company was formed in December 1998. Prior to that
time, Mr. Cope held the positions of Executive
Vice President, Chief Financial Officer and
Director of Grand Casinos, Inc., the company he
joined in 1993. While at Grand Casinos, Mr. Cope
was involved with the development, financing and
management of eight different casino resorts. Mr.
Cope has over twenty-five years of broad based
gaming resort experience with such companies as
Bally's Entertainment and MGM Grand, in various
operational areas including table games, slots,
keno, cage and credit, food and beverage, and
hotels along with the finance and accounting
areas. Mr. Cope is a licensed Certified Public
Accountant in the state of Nevada and holds a
Bachelor of Science Degree in Business
Administration from the University of Nevada,
Reno. In addition, Mr. Cope holds certificates in
computer programming and industrial engineering.
He has served as Treasurer and Chairman of the
Board of what was then the Bally's Employees
Federal Credit Union, President and Director of
the Better Business Bureau of Northern Nevada and
has worked with many service, church and
non-profit organizations throughout the course of
his career.
JOSEPH GALVIN, (63) COO AND EVP
Joseph Galvin has been the Company's Chief
Operating Officer since January 1999. Previously,
Mr. Galvin served with Grand Casinos, as Chief
Administrative Officer from November 1996 through
December 1998, and prior thereto, Vice President
of Security.
STEVEN LIPSCOMB (41) CEO OF WORLD POKER TOUR, LLC
Steven Lipscomb is an award-winning
producer/director of television and film, and the
co-founder and CEO of the World Poker Tour, LLC.
Mr. Lipscomb has extensive experience filming
professional poker. In 1999, he produced and
directed "On the Inside of The World
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 12 Corporate Profile
Series of Poker" for the Discovery channel. He also
filmed the "2001 Tournament of Champions of Poker,"
before going on to create and executive produce
"Cruisin' to a Million" for the Travel Channel, a
program showcasing a million-dollar poker tournament
on a cruise ship in the Mexican Riviera. Formerly an
attorney with Gibson, Dunn, & Crutcher, Lipscomb
received his B.A. with honors from Dartmouth College,
where he was president of his class, and his J.D.
from the University of Chicago, where he was a
Greenberg Scholar. He sold his own attorney referral
business to fund his first film.
- --------------------------------------------------------------------------------
RECENT MARCH 10, 2003
COMPANY Lakes announced that World Poker Tour (WPT), a
DEVELOPMENTS subsidiary company of Lakes, has signed an agreement
with the Travel Channel, L.L.C. (TRV), granting TRV
the right to broadcast the first season of the World
Poker Tour series. Lyle Berman, Chairman, CEO and
President of Lakes, stated, "We are extremely excited
about the WPT and the arrangement with the Travel
Channel. Combining the sport of poker which is played
by over 50 million people throughout the United
States, with one of the most widely viewed cable
channels will revolutionize poker in much the same
way that "'Who Wants to be a Millionaire'
revolutionized game shows." Berman continued, "the
license arrangement with the TRV should cover
substantially all of our anticipated first year
production costs. We see this as a great opportunity
to bring the game of poker to the television audience
with relatively little financial risk to Lakes."
Under the agreement, TRV shall have the exclusive
right, license, and privilege to exhibit, market,
distribute, transmit, perform and otherwise exploit
each of the first thirteen two-hour programs produced
by WPT for an unlimited number of times over the next
three years within the United States. WPT will
receive a series of fixed license payments from TRV,
subject in each case to satisfaction of production
milestones and other conditions.
APRIL 7, 2003
Lakes announced that it has signed a Letter of Intent
to sell the approximate 3.5 acre undeveloped Shark
Club site which had been previously designated for
development of the Chateau time share project with
Diamond Resorts in Las Vegas, Nevada. Under the terms
of the Letter of Intent, Lakes will sell the property
to an entity to be managed and operated by Marriott
Ownership Resorts, Inc. for a purchase price of $15.0
million in cash. In addition, Lakes will receive $1.0
million as repayment of a loan previously made to
Chateau by Lakes. Also see July 1, 2003.
APRIL 13, 2003
Press Release- Feeling Flush: Hugely Successful World
Poker Tour TV Series Features Richest Buy-In in Poker
History. Hot off a sizzling debut that's been
generating tremendous buzz and viewership, "World
Poker Tour," a 13-week series on The Travel Channel,
will film its championship event next week -- a
tournament with a $25,000 buy-in per player, the
richest in poker history. The Championship episode,
which will air in June, is attracting poker's most
elite and colorful pro players, but under the format
created by the World Poker Tour (WPT), anyone with a
cool $25,000 can claim a spot at the table. More than
50 players are already signed up and the estimated
prize pool at the start of the tourney at Las Vegas'
Bellagio is expected to be $2 million to $3 million.
MAY 14, 2003
Press Release- Lakes Entertainment, Inc. names
Timothy J. Cope to take on President role. Mr.
Cope, a gaming industry veteran, has been with
Lakes since its inception as Executive Vice
President, CFO and Director. He will continue on
as CFO and Director along with his new
responsibilities as President. Under the daily
leadership of Mr. Cope, the Company is poised for
the next phase of its business cycle. Mr. Cope
stated, "I am very excited about this opportunity
and I am committed to the success of Lakes
including the successful completion and opening of
our Native American-owned casino projects."
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 13 Corporate Profile
MAY 16, 2003
The Company announced that Lakes has satisfied all
known material indemnification obligations to Grand
Casinos, Inc. in connection with the 1998 merger of
Grand Casinos into a subsidiary of Park Place
Entertainment Corporation. As a result, on May 8,
2003 the trust account set up as security to support
Lakes' indemnification obligations to Grand Casinos
was terminated. Prior to the termination,
approximately $2.3 million was paid out of the trust
to Stratosphere in settlement of a claim in the
Stratosphere bankruptcy case involving allegedly
preferential payments. Following such payment, the
remaining restricted funds of approximately $5.9
million including interest were released to Lakes and
reclassified as unrestricted. Subsequent
indemnification obligations to Grand Casinos, if any,
would be paid directly by Lakes.
MAY 16, 2003
Lakes announced today the receipt of $16.6 million in
cash related to the previously announced sale of the
Polo Plaza property in Las Vegas, Nevada to Metroflag
Polo, LLC. This payment represents the cash portion
due at this time of the purchase price for the
property.
Lyle Berman, Chairman and CEO of Lakes stated,
"Although the Shark Club sale is not final, the
increase in available cash of over $22 million plus
another $16 million when the Shark Club sale is
completed, provides Lakes additional resources to
continue to support our Native American owned casino
projects. Our book value of approximately $15.00 per
share will include over $40.0 million in cash or
approximately $4.00 per share after the potential
Shark Club sale. Other than cash, our assets will be
comprised mainly of notes receivable of approximately
$71.0 million and land held for development of
approximately $14.0 million, each related to our
Indian gaming projects, approximately $8.0 million in
investments in unconsolidated affiliates reflecting
our remaining interest in the Polo property,
approximately $5.0 million for land held for sale
relating to the Travelodge parcel, deferred tax
assets of approximately $11 million and a remaining
net asset balance in various other assets and
liabilities of approximately $10.0 million." Berman
continued. "We remain focused on obtaining regulatory
and development approvals related to these projects,
and we are hopeful that construction on one or more
of the projects will begin before the end of the
year."
JULY 2, 2003
The Company announced that it completed the sale of
its Shark Club property in Las Vegas, Nevada to an
entity to be managed and operated by Marriott
Ownership Resorts, Inc. As consideration for this
sale, Lakes received $15.0 million in cash, plus $1.0
million as repayment of a loan previously made to
Chateau by Lakes. Lyle Berman, Chairman and CEO of
Lakes stated, "Now that the Shark Club sale is final,
our book value of approximately $15.00 per share
includes approximately $40.0 million in cash or
approximately $4.00 per share." Berman continued,
"The development and management of our casino
projects remains our primary business focus. We are
hopeful that construction on one or more of the
projects will begin before the end of the year with
the casino operations open for business approximately
twelve months after construction begins."
The summary table below reflects the approximate book
value of the company as discussed above (all amounts
are approximations in millions except as noted):
Cash $ 40
Notes Receivable 71
Land Held for Development 14
Investments in Unconsolidated Affiliates 8
Land Held for Sale 5
Deferred Tax Assets 11
Remaining Net Asset Balance 10
-----
Total Approximate Book Value $159M
Total Shares Outstanding 10.6M shares
Approximate Book Value Per Share $ 15 per share
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 14 Corporate Profile
JULY 24, 2003
The Company announced results for the second quarter
ended June 29, 2003. Net earnings for the quarter
were $0.8 million and basic and diluted earnings were
$0.07 per share. This compares with a net loss of
$7.2 million and basic and diluted losses of $0.67
per share for the quarter ended June 30, 2002.
Revenue for the quarter totaled $3.0 million. No
revenues were recognized during the prior year
period. Revenues for the current year quarter were
derived from license fees related to the 2003 World
Poker Tour (WPT) series, which has now completed its
first full season. Selling, general and
administrative expenses decreased from $9.6 million
for the three months ended June 30, 2002 to $1.7
million for the three months ended June 29, 2003.
This decrease is primarily due to a second quarter
2002 impairment of $4.0 million relating to a note
receivable from Living Benefits Financial Services,
LLC, as well as a second quarter 2002 $3.0 million
impairment charge taken on the Polo Plaza and
Travelodge properties. The decrease is also due to
the reversal of an unused Stratosphere litigation
accrual of $3.2 million during the second quarter of
2003. The decrease was partially offset by an
increase in costs incurred associated with World
Poker Tour.
Lyle Berman, Chairman and CEO of Lakes, stated, "Our
cash balance has increased significantly due to the
completion of a number of transactions. During the
second quarter of 2003 we received cash in the amount
of $16.6 million related to the sale of the Polo
Plaza property in Las Vegas, Nevada. Additionally,
the trust account which was set up in 1998 as
security to support Lakes' indemnification
obligations to Grand Casinos was terminated. As a
result of the termination of the trust account, Lakes
received the remaining funds of approximately $5.9
million. During the third quarter, on July 1, 2003,
the sale of the Shark Club property in Las Vegas,
Nevada was completed for which Lakes received $15.0
million, plus $1.0 million as repayment of a loan
previously made by Lakes. These receipts put Lakes in
a position to continue funding development of our
Native American-owned casino projects with a book
value of approximately $15 per share which, including
the Shark Club receipts, amounts to nearly $4.00 per
share in cash. Our focus continues to be on the
successful development of our Native American-owned
casino projects and we are hopeful that construction
on one or more of the projects can begin within the
next six months."
AUGUST 2, 2003
The Company announced that World Poker Tour (WPT), a
subsidiary company of Lakes, has signed an agreement
with the Travel Channel, LLC (TRV), granting TRV the
exclusive right to broadcast the second season of the
World Poker Tour series within the United States. The
new agreement also provides TRV with consecutive,
exclusive options to broadcast five additional
seasons of the program. Under the new agreement, WPT
will receive a series of fixed license payments for
the second season. These payments will commence in
2004 and are subject to satisfaction of production
milestones and other conditions. WPT is also entitled
to a portion of the revenues from other sources
including international distribution, merchandising
and certain sponsorships, and WPT is currently
exploring these opportunities. Lakes anticipates that
second season revenues from all sources will allow
World Poker Tour to be profitable in 2004 and future
years, thereby being incremental to Lakes' earnings
and reducing financial risks associated with this
venture. The agreement also provides TRV with
consecutive, exclusive options to broadcast five
additional seasons of the program within the United
States.
Lyle Berman, Chairman and CEO of Lakes, stated, "The
World Poker Tour developed a wide television audience
and a tremendous following during its first exciting
season. We are very pleased that an agreement with
TRV has been reached for a second season and we look
forward to thirteen more exciting episodes to be
aired in 2004." Mr. Berman continued, "This new
arrangement with the TRV along with the other
potential revenue opportunities, puts the project in
a position to be self-sufficient and profitable in
future years. Therefore, we continue to look at the
World Poker Tour as an excellent opportunity with
relatively little financial risk to Lakes."
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 15 Corporate Profile
---------------------------------------------------------------------------
BALANCE SHEETS
LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES
BALANCE SHEETS (IN THOUSANDS)
AS OF AS OF AS OF
JUNE 29, 2003 DEC 29, 2002 DEC 30, 2001
(UNAUDITED) (AUDITED) (AUDITED)
------------------- ------------------ ------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 23,354 14,106 42,638
Short-term investments - - 2,027
Current installments of notes receivable - - 67
Related party receivables - - 4,000
Accounts receivable, net 948 116 3,601
Deferred tax asset 4,481 6,771 4,549
Other current assets 741 547 1,079
------------------- ------------------ ------------------
TOTAL CURRENT ASSETS 29,524 21,540 57,961
------------------- ------------------ ------------------
PROPERTY AND EQUIPMENT-NET 6,697 6,962 6,300
OTHER ASSETS:
Land held under contract for sale 4,772 28,832 30,826
Land held for development 29,382 27,791 24,965
Notes receivable-less current installments 75,595 70,955 53,201
Cash and cash equivalents-restricted - 8,300 9,175
Investments in and notes from unconsolidated 8,423 1,013 839
affiliates
Deferred tax asset 4,707 3,835 3,870
Other long-term assets 8,823 6,657 6,042
------------------- ------------------ ------------------
TOTAL OTHER ASSETS 131,702 147,383 128,918
------------------- ------------------ ------------------
TOTAL ASSETS $167,923 $175,885 $193,179
=================== ================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 96 226 105
Current maturities of long-term debt - - 1,325
Current installments of capital lease obligations - - 123
Income taxes payable 4,312 5,564 3,906
Litigation and claims accrual 180 5,847 6,572
Accrued payroll and related 418 252 671
Other accrued expenses 2,944 3,486 2,670
------------------- ------------------ ------------------
TOTAL CURRENT LIABILITIES 7,950 15,375 15,372
LONG-TERM LIABILITIES:
Capital lease obligations-less current installments - - 5,591
Other long-term liabilities - - 225
------------------- ------------------ ------------------
TOTAL LONG-TERM LIABILITIES 5,816
------------------- ------------------ ------------------
TOTAL LIABILITIES 7,950 15,375 21,188
COMMITMENTS AND CONTINGENCIES, SHAREHOLDERS' EQUITY:
Capital stock, .01 par value; authorized 100,000
shares;
10,638 common shares issued and outstanding at
June 29, 2003, December 29, 2002, and December 106 106 106
30, 2001
Additional paid-in-capital 131,526 131,525 131,525
Retained Earnings 28,341 28,879 40,420
Accumulated other comprehensive loss - - (60)
------------------- ------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 159,973 160,510 171,991
------------------- ------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $167,923 $175,885 $193,179
=================== ================== ==================
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 16 Corporate Profile
----------------------------------------------------------------------------
CONSOLIDATED
STATEMENT OF
EARNINGS
LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES
INCOME STATEMENT (IN THOUSANDS, EXCEPT PER SHARE DATA)
6 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED
JUNE 29, 2003 DEC 29, 2002 DEC 30, 2001 DEC 31, 2000
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED)
----------------- ------------------ ------------------ ------------------
Revenues:
Management fee income - 1,502 34,854 59,044
License fee income 3,504 - - -
----------------- ------------------ ------------------ ------------------
TOTAL REVENUES 3,504 1,502 34,854 59,044
Costs and Expenses:
Selling, general and administrative 7,929 9,892 9,239 9,025
Reversal of litigation and claims accrual (3,212) - - -
Impairment losses - 8,000 25,410 -
Depreciation and amortization 259 481 1,329 2,910
----------------- ------------------ ------------------ ------------------
TOTAL COSTS AND EXPENSES 4,976 18,373 35,978 11,935
Earnings (loss) From Operations (1,472) (16,871) (1,124) 47,109
Other Income (Expense):
Interest income 551 1,424 1,983 5,878
Interest expense - (90) (170) (97)
Equity in loss of unconsolidated affiliates (147) (459) (465) (2,904)
Loss on land held for development - - (3,731) -
Gain on sale of securities - - - 61
Provision for litigation loss - - - (18,000)
Write-down of investment in unconsolidated - - (666) (5,522)
affiliates
Other 158 - (684) 2
----------------- ------------------ ------------------ ------------------
TOTAL OTHER INCOME (EXPENSE), NET 562 875 (3,733) (20,582)
Earnings (loss) before income taxes (910) (15,996) (4,857) 26,527
Provision (benefit) for income taxes (372) (4,455) (1,991) 12,068
----------------- ------------------ ------------------ ------------------
Net Earnings (Loss) (538) (11,541) (2,866) 14,459
================= ================== ================== ==================
Basic Earnings (Loss) per Share (0.05) (1.08) (0.27) 1.36
================= ================== ================== ==================
Diluted Earnings (Loss) per Share (0.05) (1.08) (0.27) 1.36
================= ================== ================== ==================
Weighted Average Common Shares Outstanding 10,638 10,638 10,638 10,635
Dilutive Effect of Stock Compensation Programs - - - 7
----------------- ------------------ ------------------ ------------------
Weighted Average Common and Diluted Shares
Outstanding 10,638 10,638 10,638 10,642
================= ================== ================== ==================
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 17 Corporate Profile
- --------------------------------------------------------------------------------
IMPORTANT DISCLOSURES
(C)2003 Lakes Entertainment, Inc. All rights reserved.
No part of this material may be redistributed without the prior written consent
of Lakes Entertainment, Inc. ("Lakes"). This Corporate Overview ("Overview") is
solely to provide a general introduction to the Company and its business
activities. This Overview does not constitute a complete statement of all
material facts related to any company, industry or security mentioned herein.
This Overview is neither an offer to sell nor the solicitation of an offer to
buy any security in any jurisdiction where such an offer, solicitation or sale
would be illegal prior to registration or qualification under the securities
laws of such jurisdiction.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Overview
(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, 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 contracts; highly
competitive industry; possible changes in regulations; reliance on continued
positive relationships with Indian tribes and repayment of amounts owned 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.
While Lakes has endeavored to contain information in this Overview that is
accurate and relevant, and has obtained the information from sources believed to
be reliable, Lakes does not guarantee the information as to its accuracy or
completeness. The information in this Overview is subject to change without
notice and may be updated from time to time.
- --------------------------------------------------------------------------------
Lakes Entertainment, Inc. 18 Corporate Profile