Golden Entertainment Inc (GDEN) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2008 Lakes Entertainment earnings conference call. I'd Like to turn the call over to your host for today's call, Tim Cope, President and Chief Financial Officer.

Good afternoon, and welcome to Lakes Entertainment third quarter 2008 earnings conference call. On the call with me is Lyle Berman, Lakes' Chairman of the Board and Chief Executive Officer. As we begin with our prepared remarks

I would like to remind everyone this call may contain forward-looking statements within the meaning of the Federal Securities law, including statements including business strategy and their intended results, similar statements including anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them.

Lyle will begin a discussion today with the general overview and update our Casino projects and I will then discuss our third quarter financial results and recent events and then we'll conduct a question and answer.

Thank you Tim, and welcome to Lakes' 2008 earnings call.

Let's start right away talking about the recent election in Ohio. As you can imagine, we are very disappointed that our [Mile High Onow] Casino Resort initiative was not approved by the voters in the state of Ohio in Tuesday's election. The total cost of our efforts in Ohio will be approximately $29 million, however, during the referendum process we never lost sight of our core operation and the development projects which continue to proceed as planned. We believe that our company is well positioned for growth, given the upcoming opening of the Red Hawk Casino as well as the projects we have in various stages of Daytona.

Before talking about our current operations and developments, I just wanted to briefly mention the current economic environment. Obviously, we here at Lakes are concerned about what has happened in the financial markets over the past few months and we're keeping very close tabs our operations and especially our cost structure as we prepare to enter to 2009. It's very difficult to forecast our business in the short-term due to the volatile economic conditions. But we want to stress that our fundmental business remains strong and we believe that we will whether any storm that Chinese our way, especially once the Red Hawk Casino opens. I would also like to emphasize that while we are always evaluating potential new opportunities, our current focus is on the successful opening of Red Hawk, the management of our other casino operations and the successful development of our remaining projects under contract.

Speaking of which, let's start off with our operations and the development discussion with the latest from the new Red Hawk Casino in Shingle Springs California which is the management project currently under construction with the Shingle Springs band of Miwok Indians. At end of September, Governor Schwarzenegger signed a bill ratifying the amended compact between the Shingle Springs Miwok Indians and the state of California, which will allow for class III gaming to be offered at the Red Hawk Casino. The new compact runs through 2029 and allows for a maximum of 5000 Class III electronic gaming devices at one gaming facility, in return for getting more Class III gaming devices. The Shingle Springs band will share revenues with the state based on a sliding percentage of net win ranging from 20% to 25% to the operations of the Class III slot machines. The tribe will also contribute $4.6 million per year to the revenue-sharing trust fund which pays up to $1.1 million each year to non-gaming tribes in California.

The same day of the ratification, the Shingle Springs tribal gaming authority, an affiliate of the Shingle Springs band of Miwok Indians, closed on the $77 million FF&E financing, the final portion of funding for the Red Hawk Casino. Securing the funding was a testament to the strength and progress of this project, considering the extremely volatile economic environment and the tight credit markets in which we currently reside. As of today, the casino project is approximately 92% complete, while it's dedicated interchange from U.S. Route 50, which will allow for easy access for our customers to the casino, is now substantially complete and will be open tomorrow for use by tribal members. The project remains within budget and on schedule for a planned grand opening at the end of the year.

In meantime, the amended compact has been submitted to the bureau of Indian affairs for its approval, and we anticipate receiving BIA approval prior to the end of this month. Subject to receiving all final approvals, upon its opening, the Red Hawk Casino plans to feature approximately 2,000 Class III slot machines, 75 table games, a high-stakes gaming room as well as ten food and beverage outlets, enclosed parking and other typical facilities. The tribe estimates that the casino will generate approximately 1800 new jobs at opening. We believe the Red Hawk Casino is well positioned to draw from a large customer base, with over 4 million people in a 65-mile radius of the casino, achieve a strong ROI and create shareholder value. You can see webcam shots of the current construction progress on our website at lakesentertainment.com, and we look forward to talking with you about the casino's initial operations on our next call.

Moving onto our current operations, considering the very difficult economic environment that we have been operating in, we were pleased with our third quarter performance. The Four Winds Casino Resort, which we manage on the behalf of Pokagon Band of Potawatomi Indians, met our expectations in the third quarter despite the volatile economy. We celebrated our first anniversary at the beginning of August, and we are very please with the progress made in the first 12 months of operation. We continue to refine our marketing efforts to starring the most profitable customers and we continue to fine tune our product offering to provide the best possible guest experience and maximize operating results at the Four Winds.

Four Winds customer loyalty program has continued to expand and our club membership still exceeds our expectations, a great sign for us. We have used this data to create direct marketing programs and promotions that have significantly improved the level of play from our guests, increasing the win per guest statistics and overall profitability per guest, and the hotel is still performing strongly. YTD we continue to run over 95% occupancy.

In addition to Four Winds our Cimarron Casino in Perkins, Oklahoma, which we manage for the Iowa tribe of Oklahoma, continues to see strong results despite the economy. The casino, which contains approximately 360 Class III slot machines, saw total revenue up once again in the third quarter of 2008 from the prior year period. We anticipate continued solid performance from Cimarron for the remainder of the year. In terms of our other development projects, the Jamul Indian village near San Diego recently filed a Federal complaint requesting the Federal court to provide injunctive relief to order the California Transportation Authority to cease its efforts to impede the Jamul village from using IT land for economic development purposes. A court date has not yet been set to resolve the matter.

With regard to the planned Iowa Casino Resort near Chandler, Oklahoma, we remain cautiously optimistic that the Bureau of Indian Affairs will approve the proposed tribal land lease this year, which will then allow the development of the project to start. Our proposed Casino Resort development in Vicksburg remains on hold at this time. We hope we will be able to provide you with the update on these three developments our next call.

With that, I'll turn the call back over to Tim to provide an overview of recent business issues and financial results.

Thank you, Lyle. Now I'll discuss the third quarter results for Lakes Entertainment.

Lakes Entertainment reported consolidated third quarter 2008 revenues of $11.2 million, a 60% increase from the prior year period. Lakes' revenue increased $5.8 million, primarily due to a full quarter of contribution of management fees from the Four Winds Casino Resort, which opened to the public on August 2, 2007. Also, contributing to the increase in Lakes' third quarter 2008 revenue was an adjustment resulting from an approved compact amendment between the Pokagon Band and the state of Michigan that reduced the Four Winds Casino Resort gaming tax. This amendment caused a one-time [accretion] of revenue of [about] $1.8 million to Lakes.

Revenue related to WPTE decreased to $2.8 million for the third quarter of 2008 from $4.4 million in the prior year period. The decrease was caused by decline in domestic television license fee income from the World Poker Tour television program, which was due to lower per episode license fees under the Gaming Show Network agreement in effect during the 2008 period, as compared to the Travel Channel agreement, which was in effect during the 2007 period. Consolidated, selling, general & administrative expenses were up $3.3 million from the prior year period to $13.3 million, due to development costs associated with the proposed Ohio Casino Resort project. For the third quarter of 2008, Lakes' selling, general & administrative expenses were $8.9 million, and consisted primarily of a development of cost associated with a lot with the Ohio Casino Resort initiative of $4.7 million.

Payroll and related expenses of $2.5 million including share based compensation, travel expenses of $.8 million and professional fees of $.5 million. Other costs and expenses incurred in the third quarter of 2008 included an increase in amortization of intangible assets of approximately $600,000, associated with a casino project with the Pokagon Band began which commenced upon the opening of the Four Winds Casino Resort in July of 2007. Also included in other costs and expenses was a $1.9 million impairment charge recognized by WPTE in the third quarter of 2008 related to its investment in secure gaming. Net unrealized gains on notes receivable relate to the company's notes receivable from Indian tribes, which are adjusted to fair value based upon the current status of the related tribal casino projects and evolving market conditions.

In the third quarter of 2008, net unrealized gains notes reasonable were $1.8 million compared to net unrealized loss of $0.6 million in the prior year period. The net unrealized gains in the third quarter of 2008 were primarily due to the recognition of a gain associated with a continued progress towards a fourth quarter opening of the Red Hawk Casino, partially offset by unrealized losses associated with a decrease in probability of opening the casino project for the Jamul Indian village due to issues associated with site access. The loss from operations from the third quarter of 2008 was $5.1 million, compared to $6.3 million in the third quarter of 2007 and resulted primarily from the items discussed above. The net loss applicable to common shareholder for the third quarter of 2008 was $5.7 million compared to $5.2 million in the third quarter of 2007, and loss applicable to common shareholders per fully diluted share was $0.23 in the third quarter of 2008 compared to $0.21 per share for the third quarter of 2007.

With regards to our capital and liquidity position, as of September 28, 2008, the company on a consolidated basis had $12.1 million in cash and cash equivalents, $3.9 million in short-term investments and marketable securities, and $35.6 million in long-term investments and securities. Of these amounts $6.9 million in cash and cash equivalents related to Lakes and $24.4 million in long-term investments related to Lakes. All other amounts related to WPTE. All of Lakes' long-term investments and securities and $10.2 million of WPTE's long-term investments in securities are comprised of auction rates securities. As a result of the liquidity issues surrounding the auction rates securities, the ARSs are classified as long-term investments and marketable securities as of September 28, 2008. The types of ARSs at both Lakes and WPTE owned are backed by student loans, the majority of which are guaranteed under the Federal Family Education Loan Program.

Lakes and WPTE continue to earn and receive interest on auction rate securities at contractually set rates. However, it will not be possible to liquidate the ARSs until the issuer calls a security, a successful auction occurs, the ARSs are sold back to the firms managing the ARSs, buyers are found outside of the auction process or the security matures. During October, 2008, Lakes and WPTE received account statements for September of 2008 from the firm's managing the auction rate securities, which estimated a fair value of the ARSs. Lakes and WPTE analyzed these statements and concluded that a temporary decline in estimated fair value of $3.7 million related to the ARSs has occurred as a result of the current lack of liquidity. This consolidated decline in estimated fair value includes $2.5 million related to Lakes and $1.2 million related to [WPTE] .

Since the company considers a decline in the estimates fair value of auction rate securities to be temporary, the related unrealized loss is included in the accumulated other comprehensive loss and the shareholder's equity section of the company's balance sheet as of September 28, 2008. On October 3, 2008, Lakes entered into a new credit line with UBS, which supersedes a prior margin account agreement for the purposes of borrowing between Lakes and UBS. The credit line enabled Lakes to draw 75% of the market value of Lakes' auction rate securities and is secured by the auction rate securities held at UBS. Amounts previously drawn under the margin account agreement were transferred to the credit line, and the entire remaining amount available under the credit line was then drawn by Lakes upon its execution. As of September 28, 2008, approximately $11.7 million was outstanding in the margin account agreement and approximately $8.2 million is currently outstanding under the Lakes credit line.

Effective May 16th, 2008, WPTE entered into a client agreement with one of the brokers that holds WPTE's auction rate securities, for the purpose of borrowing and/or obtaining credit in the principal amount of approximately $4 million. This WPTE credit line allows WPTE to draw up to 50% of the market value of WPTE's auction rate securities held by that broker, which is secured by the related auction rate securities. WPTE has not drawn on its credit line. On November 3, 2008 Lakes accepted an offer from UBS giving Lakes nontransferable rights to sell its security held by UBS at par value to UBS during the period of June 30, 2010 through July 2, 2012. The par value of Lakes auction rate securities, all of which are held by UBS, is approximately $26.8 million.

On October 28, 2008 Lakes closed on a two-year, interest-only $8 million non-revolving line of credit loan agreement with First State Bank. The interest rate of the loan is 8.95%. Lakes has drawn $2 million on this loan agreement to date. Lakes had notes receivable from Indian tribes, which are recorded at their estimated fair value of $82.2 million as of September 28, 2008. Prepaid advertising costs related to the Ohio Casino Resort initiative were $7.6 million as of September 28, 2008, and long-term contract acquisition costs payable related to Pokagon Band compact were $5.6 million as of September 28, 2008.

As Lyle mentioned, core 2008 SG&A costs continue to be scrutinized and will remain relatively flat with the previous year. Our SG&A guidance does not include the development cost associated with a proposed Ohio casino project. In addition, I want to remind everyone of the upcoming dividend of all of the of company's shares and WPTE enterprises Inc. coupon stock, which is 12.48 million shares or approximately 61% of the World Poker Tour. The record date was October 24th and the date of distribution is November 21st. This distribution will provide shareholders with the opportunity to monetize the value of WPTE shares if they so choose, and will allow Lakes to provide better transparency of Lakes' operation and financial results to our shareholders and the general public, as we will no longer be required to consolidated WPTE results. An information statement will be made to Lakes shareholders of record before November 21st which provides a final distribution ratio as well as other important information.

On a personal note, I would like to comment on my recent and continuing exercise and sale of Lakes' stock options. As mentioned in a recent company Press Release on this issue, I entered into an approved 10B51 plan earlier this year, which enables me to exercise a number of stock options that I've held for ten years and which will expire at the end of this year. I did purchase and continue to hold 40,000 shares related this option grant, bringing my total current ownership in Lakes to approximately 100,000 shares. The fact I entered into this 10B51 plan is strictly a matter of my only personal financial circumstances, and is in no way intended to reflect on my support of Lakes Entertainment.

Now I'll turn the call back over to

For the remainder of 2008, Lakes remains focused on successfully managing our current operations and opening the Red Hawk casino at the end of the fourth quarter of this year. With that, I will turn the call over to the operator for questions.

(OPERATOR INSTRUCTIONS)

Your first question comes from the line of Justin Sebastiano with Morgan Joseph. Please proceed.

Thanks, guys. Do you expect a quarter-over-quarter gain of your Four Winds management revenue against the fourth quarter?

The answer is yes. We do expect that.

Okay, and what type of impact do you think the blue chip expansion that's supposed to open I guess in the first quarter, what type of impact do you think that will have on the Four Winds EBITDA?

We think it is very good. We wish they would open sooner because it would increase our EBITDA. The fact is they're not increasing their gaming capacity. What they are is adding a hotel, and remember this is all drive in business. So people who drive in typically like to go see the big dog in the neighborhood, and that's us. So we think it incrementally will bring business to us, and shouldn't take anything away from us because they really haven't changed the casino at all.

I'm sorry if I missed this, but how much did you spend on the Ohio lobbying effort in the fourth quarter, I guess October and the first couple of days in November?

I can talk you through that a little bit. We've funded -- as of the end of the quarter, we funded approximately $18 million and, of which about $10.5 million of that was expensed in that quarter, in the third quarter. We have about an additional $10 million to fund, which gets us up to approximately the $29 million I mentioned, or Lyle mentioned.

Okay, so about $10 million in 4Q we should be looking at?

Yes.

Okay. And I apologize, if you could kind of walk me through this a little bit. The ARS, you've got the $26.8 million is the par and then the fair value has declined $2.5 million from that number, is that correct?

That's right.

You have about 24.3 of market value, and how much do you have pulled down from the UBS credit line?

A little over $18 million, and that's the entire Credit line.

That's 75% of the market value. What happens if the market value continues to decline and what you have borrowed is actually more than that 75%? Do you have to pay back or how did that get remedied?

At this point in time they indicated to us that we don't have to pay that back until such a time it's sold at par in '010.

So if the market value falls below the 75% threshold, you don't need to pay back to bring your borrowing back down below that 75%?

That's what they told us.

That's correct.

Lastly, thanks for taking these many questions. Tim, I think I missed what you said about your SG&A management expectations for '09.

For '09. Obviously we think they're going to be flat, if not slightly lower.

Okay, thanks a lot, guys.

Your next question comes from the line of Todd Eilers with Roth Capital. Please proceed.

Hi, guys thanks for taking my call. Just a couple of follow-ups in Michigan at the Pokagon tribe. Can you guys -- I guess the tribe has recently -- part of the new compact negotiated with the state you mentioned includes a reduction in the tax rate. I think I've also seen that it also included some satellite casino opportunities. Can you talk about that opportunity a little bit? I'm assuming you guys would be able to manage those satellite casinos and could you may be talk about the opportunity there?

It's clearly an opportunity. The tribe has the right to open up two independent satellite operations, and they're not insignificant because each one can be built up to 1,000 machines. This is obviously a new settlement with the tribe. At this point the tribe has not focused on it. I don't think they have any immediate plans to do it. We do have an exclusive management contract for the whole area. So anything that they did, we would be involved in to the extent of our contract, which is five years and perhaps could be extended if we started something earlier.

Okay, great. And then with respect to the tax reduction for the tribe, the $1.8 million gain I'm assuming that was kind of the cumulative effect of the reduction since the opening of the casino. Is that correct?

That's correct but it was about a year and maybe two months.

A year.

A little -- about a year so that's a permanent increase, so to speak, for us.

Okay, but then going forward it should be just the 2% reduction and the tax rate would effect --

That's correct because that would give us the same incremental as we picked up the one time, which was $1.8 million, so it should be incremental for the entire management contract.

Okay. With respect to the taxes in the quarter, it looked like there was a large amount of taxes or larger than we were modeling in. Could you talk about what that was?

This is a result of the WPTE dividend that we declared, and it relates to the reduction in our deferred tax asset on the balance sheet. There's a corresponding reduction there, and historically what we have done is we have capital losses that we would expect to have covered with the capital gains from the sale of the WPTE or the value related to WPTE stock. Now that we declared that dividend and know what the market value of that is, we made the adjustment of capital gains versus our capital losses. So we reduced our tax asset by that amount, and then reciprocal goes to that provision. It's a one-time provision of a tax expense of about $1.9 million.

It did not use up any cash.

It's a non-cash issue, yes.

And then how about expectations going forward for taxes? Obviously I think with the opening of the Red Hawk Casino and Pokagon continuing to do well, I would think you guys would be GAAP profitable, free cash flow positive in early '09. At what point do you guys start paying corporate taxes, and what kind of tax rate should we be modeling in?

I think you should be modeling in about the 40% tax rate, and we should be in a taxable position, tax income position for '09, but we do have NOLs carry forward that will offset some of that.

Okay. And one final question if I may with respect to Shingle Springs and the Red Hawk opening there, should we expect similar preopening expenses to be shared between you and the tribe for the first year?

That related only to the Pokagon contract.

Okay, perfect. All right, thanks, guys.

Your next question comes from the line of Chris Kreuger with Northland Securities, please proceed.

Good afternoon. A little bit more on SG&A. I just want to make sure I'm reading the numbers correctly. Excluding World Poker and Ohio, SG&A would have been about $4.2 million, is that correct?

That's right.

And looking out to '09, would a run rate around that level of $4 to $5 million per quarter be appropriate or what do you think we should be modeling there?

I can - that's appropriate and that a good estimate.

4 to 5 per quarter. Okay. And interest expense as well, now its a different debt, It's saying it's happening just in recent weeks or months. Can you just give us a simple what an interest expense number to look for like in the first quarter, for instance?

I don't have a calculator here but I think it's as easy as taking the $8 million. We've drawn two of it, so we have two many outstanding debt at the 8.95%. Chances are we'll borrow another $5 million against that. Even in worst case you took $8 million at 8.95% and used that run rate for '09, I think that would be good.

However, remember, we have interest income coming from the ARSs.

Okay. Some of the stuff you're borrowing against that?

We get interest on the $26.2 million of ARSs. We pay interest on the $18.3 million loan, so we have a net gain of interest on the $8 million and that pretty much would offset our borrowing. Our net interest should be close to zero.

Very good. And then as far as the overall gaming environment. I know a lot of companies -- like the economy have had concerns there. I guess Four Winds, would it be fair to say since you're only 15 months into it that you're still getting more efficient and kind of growing through a tough gaming environment?

I think it's fair to say we're going through a tough gaming environment. I think in the last 15 months we have ironed out virtually all of our -- we'll call it lack of efficiency. So I think we're running as we like to say a lean, mean, fighting machine. That being said and our results are very good but certainly they would be better if we were in a better economic climate. So we think we're weathering the storm very well both from an expense side as well as revenue per customer side.

That's all I got, thanks, guys.

Your next question comes from the line of Clint Morrison with Feltl & Company. Please proceed.

Tim, I just want to clarify because I'm pretty sure you said that there was a $4.7 million of Ohio expense in this quarter, and if the total is 29 we're going to recognize about $25 million of expense in Q4. Is that correct?

It will be about 15, I think? Right?

So some of this was recognized in Q2? Obviously.

Let me just talk you through this again. I wasn't sure Justin got a fair answer there. We funded approximately $18 million as of September 28th.

So "funded" meaning?

Funded means cash outlay.

Okay.

And of that, about $10.5 million has been expensed for the nine months, and then have funded an additional $10 million so that gets us up to about $28 million has been funded, have to spend another million dollars roughly during the third quarter.

Clint, the reason that we pay in advance is typically when you do any kind of campaign like this, the people who you book ads with require the money up front. When we said we used cash we funded more in the third quarter but we hadn't expensed it because the ads didn't run.

I just wanted to clarify, so we basically - so we've got another $10 million of expense or we've got $18 million of expense that's going to be recognized.

That's right.

And relative to sort of the balance sheet we're look at now, we've got another $10 million cash draw in for that?

That's correct.

Okay, because that was my question and outside of that, the rest of the company ought to be generating cash for the most part because it sure sounds like Four Winds is covering your operating expense.

That's correct.

Okay. So and then back to Four Winds, I think this is the tail end of where you've had to share in the sort of the pre-opening expense. How much of that was recognized -- that extra expense was recognized in this quarter? Roughly like $300,000 or $400,000 or something?

It would be just one month of approximately $1 million. So probably $300,000.

We'll get - by definition, all things being equal, we'll get a pick up going into the next quarter.

Right.

Okay. And okay, that takes care of me for the moment. I'll go back into queue. Thanks.

Your next question comes from the line of [Calvin Orey] of [Orey Capital].

Good afternoon, regarding that WPTE dividend you're issuing to shareholders, couldn't you just sell stock and at least get cash for it instead of dividending it out?

We thought that dividending it out was the best value for our shareholders.

You get nothing for it now. You could have gotten a couple of million bucks at least.

Again, I will repeat that we think it was the best value for the shareholders to get that stock.

What was the thinking behind it?

Well, we looked at selling it. We did look at it. We talked to a number of people there was very little market for it. We're talking today where it was very little value. It was very little value when we did it, too. It was like $0.49 or $0.50 but we thought it was a better -- we still think that World Poker Tour is viable; and if it goes up, we would like to see our shareholders share in that.

Okay. All right, thanks, that's all I have for now.

And your next question comes from the line of Brett Hendrickson with (inaudible) .

Hey, you answered my question, thanks.

Your next question comes from the line of Alex (inaudible) with Key Colony. Please proceed.

Hey, Lyle. If you had to look out in the future, how long is it going to take you to get your balance sheet where you have the ability when the market throws a [seven], whatever, so that you could participate?

Well, we believe that Red Hawk Casino is going to open and do very, very well. Once that opens and does very well, both the Red Hawk bonds should come back to be trading close to par and our debt, which is the Shingle Springs Band owes us approximately of $70 million should become a fairly liquid asset, and assuming we have a need for capital, we clearly would plan to monetize that. So I would say probably six months -- six months after Red Hawk opens, assuming what I just said happens, I think our balance sheet and we sell the Red Hawk security. I think we'll have a very good-looking balance sheet. We'll be cash flowing and -- got just positive cash flow, but we will be earning GAAP accounting earnings as well.

Okay. Thank you.

Your next question is a follow-up from the line of Clint Morrison.

Along the lines of that $70 million, Lyle. Once the casino opens, they will have to start in effect paying back on that so besides the management fee, what kind of cash flow would come out of that note?

About $15 million the first year. The $70 million is amortized over seven years, so it's approximately $10 million a year for seven years and then of course the interest goes down each year so the first year it should be about $5 million of interest and of course every year it would go down by one seventh.

Okay, so 3 to $4 million a quarter and assuming you guys do open in December, the timing, when would you first get your check from Red Hawk?

I think we get our first check from Red Hawk probably in the second week of February or the third week of February.

And paid on a monthly basis?

Monthly checks, right.

Monthly checks, lagging at three weeks after closing the books each month.

Yep,

I got you. And the -- based on what you have said you've indicated you need to fund another $10 million of cash, but it looks like you've only got that $8 million credit line, another $2 million. Are we kind of tight on cash? Is there any chance that we need to go out and borrow more?

I think you misunderstood. We have at this point borrowed $2 million and we certainly have the additional $6 million as a contingency. We don't think we need any more money between now and the end the year, and clearly as we cash flow from Red Hawk we don't believe we need any additional borrowing other than the $8 million.

That factors in the $10 million funding for Ohio?

That money is already out the door.

Okay.

We have no more --

Reflected in the numbers we see as of the end of the quarter?

We have no more -- essentially no more funding obligation for Ohio. Everything was prepaid.

So as of this point and time we have no more funding for Ohio when you still have $6 million available on the credit line?

And some money in the bank.

And some money in the bank. Very good, thank you.

Your next question is a followup from the line of Todd Eilers with Roth Capital.

Hi guys. Tim, just a question on the dividend from the World Poker Tour stock. Would you guys report a partial quarter in 4Q and if so would you report it as discontinued OPs through the fourth quarter?

Yes, it will be like a footnote as discontinued operations. It will not be consolidated balance sheet anymore.

Okay. Perfect. Thanks.

Your next question is a follow-up from the line of Justin Sebastiano with Morgan Joseph.

Thanks, just on the Shingle Springs [notes], when that does open and we assume it does get close to par, will you think about selling it pretty much immediately or do you need to have something in the pipeline in order to use that cash to reinvest it or are you happy with just getting your prime plus 200 or whatever it is?

The answer is no, we would not be happy with prime plus 200. hat's what the note is at, prime plus 200. If we sold it without a use for the funds, we would have it in the bank at 2% or 3%, so we want to have a use of the money before we would sell it but one of the highest and best use for our funds if our stock stays as depressed as it is right now, we would use that money probably to start a shared buyback.

So we can assume that you will probably want to sell those notes as quick as possible?

Assuming we can get close to par, yes.

Right, okay. Thanks.

Your next question comes from the line of [Steven Silk] (inaudible).

Good afternoon, thanks for taking my call. Lyle, you had touched upon the -- there was a question asked about the distribution the WPT to your shareholders so they can maximize the value. I'm also interested, what avenues could you look at to maximize it for Lakes? Were you looking at an outright sale of the company?

Yes, we did. We looked at it rather extensively, and at the end the day we had a number of tire kickers but we had no taker.

How about was there a consideration given to buying the remaining shares?

Yes, we looked at that, too. That was certainly the other possibility. Quite frankly, it's not really a good product for Lakes to own because of gaming licenses there's just too many restrictions our side.

Just thinking out loud that perhaps if you had purchased the remaining shares outstanding, that you could have just sold the assets and been able to use the cash that WPTE had and monetize it to the value of Lakes going forward?

We did look at that option, I can just say we thought it what we did was the better way to go.

This maybe out of line. You are the chairman of WPTE, and you'll be disposing of 60% of the shares and probably about 8 million shares not including what you're going to get, since you thought the best use of Lakes' capital when the bonds start paying off is to buy shares back, would you look at repurchasing shares at WPTE? It has a market capital of about $4 million and they have $20 million in cash?

There's no question World Poker Tour will be looking at that opportunity.

I appreciate your taking the time to answer my questions.

No further questions at this time, sir.

Well, I want to thank everybody for taking the time to listen to our third quarter report. We hope that our fourth quarter's a little bit better, although from our operations standpoint things are very good, and I guess I'll reiterate we were incredibly disappointed with Ohio, and we will be very focused as we were in the past but even more so I guess on our operations to date. Thank you, very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.