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Lakes Entertainment Announces Results For Third Quarter 2011

Stocks in this article: LACO

Amortization of intangible assets related to the operating casinos was $11.4 million for the first nine months of 2011 compared to $8.4 million for the first nine months of 2010. The increase in amortization costs related primarily to the buy-out of the management agreement for the Four Winds Casino Resort which resulted in the full amortization of the remaining intangible assets associated with that project during the second quarter of 2011.

Other income (expense), net for the first nine months of 2011 was $3.9 million, a significant portion of which relates to non-cash interest income. Other income (expense), net for the first nine months of 2010 was $27.1 million which included a gain on divestiture of a cost method investment of $23.1 million. During the third quarter of 2010, Lakes entered into a Termination Agreement with Penn Ventures, LLC in which the Company divested its interest in the entity to be formed in collaboration with Penn Ventures, LLC in exchange for a $25 million payment from Penn Ventures, LLC, resulting in this gain.

The income tax benefit for the nine months ended October 2, 2011 was $0.5 million compared to an income tax provision of $11.5 million for the nine months ended October 3, 2010. Lakes’ income tax benefit for the current year period is primarily due to 2011 timing differences and related valuation allowances. Lakes’ income tax provision for the prior year period consists primarily of current income tax provision.

Lyle Berman, Chief Executive Officer of Lakes stated, “During the third quarter of 2011, we continued our involvement with existing projects and became involved with two new potential operations. During the third quarter, we formed a joint venture to submit a response to a request for proposal for a video lottery operation license in Allegany County, Maryland. The license will allow the operation of a video lottery operation at the Rocky Gap Lodge and Golf Resort in Cumberland, Maryland. We look forward to the decision by the State of Maryland Video Lottery Facility Location Commission related to this project and to the possibility of entering this east coast market and adding a long-term revenue stream for the Company. We also entered into a joint venture for the purpose of managing and redeveloping the existing Dania Jai Alai fronton in Dania Beach, Florida. Although various factors have caused us to write down our convertible note receivable related to this opportunity, we continue to closely monitor the status of this project.”

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