Golden Entertainment Inc (GDEN) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2009 Lakes Entertainment, Inc. earnings conference call. I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions). I would now like to turn the presentation over to our host for today's call, the President of Lakes Entertainment, Tim Cope. You may proceed, sir.

Thank you, Josh. Good afternoon, everyone. And welcome to Lakes Entertainment's first quarter 2009 earnings conference call. On the call with me is Lyle Berman, Lakes Chairman of the Board and Chief Executive Officer.

As we begin our prepared remarks, I would like to remind everyone that this call may contain forward-looking statements within the meaning of the Federal Securities Law, including statements concerning business strategies and their intended results and similar statements concerning 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 our discussion today with a general overview and update on our casino projects. I will then discuss the first quarter financial results and recent business events. And then we will conduct a question and answer session.

Lyle?

Thank you, Tim. Welcome, everyone, to Lakes first quarter 2009 earnings call.

The Red Hawk Casino in Shingle Springs, California which is the casino project with Shingle Springs band of Miwok Indians will be the first project I will discuss today. The casino features approximately 2,100 slot machines and gaming devices, 75 gaming tables, 10 different food and beverage outlets, retail space, a child care facility and arcade, and approximately 3,200 covered parking spaces. It also has a dedicated interchange from US Route 50 which is the road connecting San Francisco and Lake Tahoe allowing easy access for our customers to the casino only a few hundred yards away. First quarter financial results have been good in guest counts, table game revenue and food and beverage revenue. It is apparent however that while a large number of guests enjoy the Red Hawk Casino, the amount of money each customer is playing in the slot machines is less than anticipated. And results from slot operations continue to run below our expectations.

The first quarter has given us the opportunity to evaluate our customer preferences and we are currently making a number of adjustments both in terms of our slot machine product offering and our marketing programs. In addition to the revenue enhancement programs, an emphasis continues to be placed on operating efficiencies. The initial start-up period is now behind us and the property continuously works to maximize results.

Slot models, denomination choices and floor locations are being evaluated with well over one-third of the slot floor now changed. Marketing continues to focus on growing our Player Club membership and expanding our customer base to the Bay Area. There is no doubt current economic conditions continue to effect Red Hawk operating results. Throughout central California, including the Sacramento area, the housing market continues to be under severe pressure limiting our customer's amount of discretionary spending. However, with approximately four million people living within a 50 mile radius of the casino, we continue to believe the Red Hawk Casino is well positioned to benefit from our large number of customers as the economy improves along with all of our other previously discussed strategies.

The Four Winds Casino in New Buffalo, Michigan continues to produce strong operating results. Although additional competition has entered the market with the Horseshoe Casino Barge in the Blue Chip expansion since last year, first quarter results at Four Winds showed an improvement from prior year first quarter. In Perkins, Oklahoma, the Cimarron Casino continues to show strong results. The Casino which is owned by the Iowa Tribe of Oklahoma, contains approximately 370 Class III slot machines with a small food outlet and caters to a good local market. With regards to new and existing business opportunities, we recently submitted an application for a gaming license in the Southcentral gaming zone in Kansas which is located in Sumner County, just south of Wichita. The application is for a proposed casino in one of two sites, outside of the city of Wellington or outside the city of Mulvane, both right off Interstate 35 south of Wichita. The proposed casino would feature approximately 2,000 slot machines, 60 table games, 15 table poker room, multiple restaurants and bars, retail outlets and a childcare facility.

Phase II of the project could include a hotel, spa and other market-driven amenities. The project currently planned to be an approximately $265 million investment, will be financed through a combination of equity from Lakes, equity in the project from third party investors and third party project debt. We are actively working with a large financial institution in New York to complete the financing plan. We are currently negotiating with the State Gaming Commission in the county for endorsements and approval of the plans for the casino. Two other companies also submitted applications for the sole gaming licenses in that zone. The deadline for the Kansas City lottery commission to accept the proposed management agreement is June 30, 2009. The final selection is expected to take place near the first week in August. There has been some positive movement regarding the casino project near San Diego with the Jamul Indian Village.

The federal lawsuit commenced by the Jamul Indian Village against the California Transportation Authority has recently been settled. As a result of that settlement, the Jamul Indian Village will now conduct a traffic study and proceed with the permitting process required by Caltrans. This process is anticipated to take approximately 12 months to complete. Likewise, our project with the Iowa Tribe of Oklahoma, the Iowa Casino Resort located on US Route 66 near Chandler, Oklahoma, which is a suburb of Oklahoma City received positive news during the first quarter when the Bureau of Indian Affairs approved the tribal land lease for approximately 64 acres. The BIA is still reviewing the proposed lease agreement for the remaining 15 acres of the development site.

Along with the tribe we are currently working on plans to develop the casino project on the approved 64 acre site. We anticipate a 12 to 18 month development and construction timeline with a possible opening of the Iowa Casino in the Fall of 2010. The casino is currently planned to feature approximately 1,200 Class III slot machines, 25 table games, three restaurants and a 150 room hotel. The facility is master planned for future development that may include additional gaming space, hotel rooms, a golf course and other market-driven amenities. Successful completion of this project is dependent upon the ability to obtain construction and equipment financing on terms and conditions that makes this a viable casino project. In Vicksburg, Mississippi, we own or have the option to own 400 plus acres of land in Vicksburg. Due to the current financial environment, the proposed casino resort development remains on hold at this time. With that, I will turn the call back over to Tim to provide an overview of recent business issues and financial results.

Tim?

Thank you, Lyle.

Before we get to the first quarter results for Lakes Entertainment, I would like to remind everyone that after November 21, 2008, operations of WPTE have not been included in Lakes results of operations and historical results up to that date are included only as discontinued operations. Lakes Entertainment reported in the first quarter 2009 revenues of $7.3 million, a 58% increase in comparison to prior year period revenues of $4.6 million. This increase was primarily due to improved results from the Four Winds Casino resort during the current year period, as well as fees from Red Hawk Casino which opened in December of 2008. For the first quarter of 2009, Lakes selling, general and administrative expenses were $4 million, compared to $3.9 million in the first quarter of 2008.

Selling, general and administrative expenses consisted primary payroll and related expenses, travel expenses and professional fees. Development costs associated with the Ohio casino resort initiative which was terminated after November, 2008 election were $1.6 million during the first quarter of 2008. Net unrealized losses on notes receivable relate to the Company's notes receivable from Indian Tribes which are adjusted to estimated fair value based upon the current status of the related tribal casino projects and evolving market conditions. In the first quarter of 2009, net unrealized losses on notes receivable were $200,000 compared to net unrealized losses of $2 million in the prior year period. The net unrealized losses in the first quarter of 2009 were related to the project with the Jamul Indian Village and the project with the Iowa Tribe of Oklahoma due primarily to ongoing issues in the credit markets and general economic uncertainties.

Lakes also recognized an impairment on intangible assets related to the Jamul project in the amount of $600,000 in the first quarter of 2009. Unrealized losses in the prior year period related primarily to a decrease in projected interest rates for the notes receivable related to the Red Hawk Casino project and the notes receivable related to the Jamul Casino project. Amortization of intangible assets related to Indian casino projects for the first quarter of 2009 was $2.5 million, compared to $1.7 million for the first quarter of 2008. The increase of $800,000 related to the amortization of intangible assets associated with the Red Hawk Casino which began when it opened in December of 2008. Amortization in the first quarter of 2008, related primarily to the intangible assets associated with the Four Winds Casino Resort. Other income and expense net for the first quarter of 2009 was $1.5 million, compared to $200,000 for the first quarter of 2008. The increase was due primarily to interest earned on notes receivable from the Shingle Springs Gaming Authority.

The loss from operations was less than $100,000 for the first quarter of 2009, compared to a loss of $4.7 million for the first quarter of 2008. Net earnings applicable to common shareholders for the first quarter of 2009 was $1 million, compared to a loss of 6.9 million in the first quarter of 2008. As of March 29, 2009, Lakes had $9.9 million in cash and cash equivalents and $23.5 million of long term investments and securities recorded at estimated fair value. All investments and securities are auction rate securities and held by UBS Financial Services. As a result of liquidity issues surrounding the auction rate securities, the ARS's are classified as long term investments and securities. Lakes continues to earn and receive interest on the auction rate securities at contractually set rates.

During 2008, Lakes accepted an offer from UBS giving the Company nontransferable rights to sell the auction rate securities at par value to UBS at any time during the period from June 30, 2010 through July 2, 2012. The par value of the auction rate securities is approximately $26.8 million. Lakes had notes receivable from Indian tribes recorded at $63.1 million as of March 29, 2009. In 2009, we planned for selling, general, and administrative expenses, excluding the cost incurred in fiscal 2008 for the Ohio casino resort initiative to remain relatively flat or below the 2008 SG&A costs. In addition, we currently expect amortization of intangible assets related to Indian casinos to increase in 2009 as a result of the amortization expense associated with the Red Hawk Casino in 2009.

In summary, improvements at Four Winds coupled with the addition of fees from the new Red Hawk Casino have contributed to substantial improvements in Lakes revenue and net earnings compared to the prior first quarter. We remain focused on improving our operating efficiencies at Lakes as we continue to seek out new business opportunities such as in Kansas in an effort to improve our shareholder value.

Now I will turn the call over to the operator for questions.

Thank you, very much, sir. (Operator Instructions). Our first question comes from the line of Justin Sebastiano from Morgan Joseph. Justin, you may proceed.

Thanks. Hi, guys.

Justin.

The Red Hawk performance, you're saying that you are out of the start-up phase now. Have you trimmed back on your payroll? Have you kind of brought that down now that you see where you are going to be going forward with the staffing levels?

Yes, this is Lyle Berman. We brought that down substantially. Also, what helps us do that is we compare every department to Four Winds Casino which of course is already matured and it is year and a half old. And we are saying, okay, we're not waiting a year and a half in Red Hawk to get to Four Winds results. So, yes, we've trimmed it down substantially. And we are continually looking at ways to trim it down more.

Okay. So do you think there is a lot more to go or you pretty much - - you're at the point you think, you are close to where Four Winds is now?

We think that there is some ways yet to go. We are looking not just at the labor component but we've challenged every single department to say, okay, tell us how you can do what we are doing and spend a little less. And just as a little example, we looked at some certain outside services where for example, we were getting certain kinds of data on a monthly basis on consumer surveys, for example. We said, if we got them every other month or every quarter, would we really make any other decisions. The answer was, no. So we are looking at every line item, every expense line and saying, how do we do it a little better, a little cheaper, a little different.

Okay. And then SG&A, Tim, you were saying it is flat to slightly down compared to 2008, but the first quarter was up comparatively year-over-year. And I assume that is because of what you guys are doing in Kansas. I assume some of that will come through in the second quarter as well. Will that go away in third and fourth quarters? And is that kind of where that increase comes from?

No, actually, I don't think there is any other costs in the first quarter due to the Kansas efforts. Frankly, what happened in the first quarter, we had some one-time unusual costs to maintain the airplane.

Okay.

Some unusual repair modes that cost us more than we thought.

Okay. So - -

I would expect the second, third, fourth quarter to now go down compared to the first quarter.

Okay. Tim, the Shingle Springs notes, can you give us the face value and the fair value.

Face value of the Shingle Springs notes are just about $73 million. I think it is 72.9 face value. Fair value is 52.4.

Okay. And lastly, on the Kansas financing, you say you are going to look for equity from you guys and equity from a third party and dept from a third party. What equity are we talking about? Are you going to issue shares to generate that or are you going to sell your Shingle Springs notes? I just don't know where that equity is going to be coming from.

I think we're considering both, selling a part or all of the Shingle Springs notes and/or selling some shares.

Okay. So, you are going to take an equity partner in there. And what percentage of the casino will you own?

That is yet - - what we will up end owning will be some equity in the casino yet to be negotiated, and of course, a management contract.

Okay. And is it safe to say you'll own more than 50% so you'll be consolidating the results.

No. I think it is more likely we will own less than 50%.

Okay. Thanks, guys.

Our next question comes from the line of Chris Krueger from Northland Securities. Chris, you may proceed.

Hi. Good afternoon, guys.

Afternoon.

I had a numbers question as well. As far as the interest income, it is about 1.9 million. Is that a decent number just in general. Does that hold steady as we go forward through the rest of the year?

That interest income of course primarily that - - you have to remember that is made up of accreted income from the difference in the face value/fair value in the Shingles Springs notes. So that will hold steady at about $600,000 to $700,000 a quarter. And the rest of it is the auction rate security, interest income, and then just the income on the notes themselves from the Shingle Springs. It will be fairly consistent going forward.

Okay. Very good. The Kansas opportunity, you stated these dates but I was writing fast and didn't quite get them all. I know you said that the deadline for them to accept an agreement is June 30th. And they would actually make a selection of one of you guys by early August. Was that correct?

Probably mid-August, yes.

Mid? And when you said deadline to accept the agreement, does that mean - - What does it mean exactly.

It means each of the three proponents. On a technical basis, it is the Kansas lottery that owns the license. They actually hire us under a long term management contract. So we have to negotiate a management contract with the Kansas lottery which is not much - - pretty much the same for everybody. It's basically, the taxes we are going to pay. And we are allowed to pay more taxes if we choose to.

Okay. So basically you and the others potentially are all accepting an agreement by June 30th.

Yes. We will all have accepted it. I think, you can be pretty sure that we will all have agreements, could be a little bit different, but probably very little. Then the state commissioner will select one of us.

Okay. So really mid-August is what to look for.

Yes. Not much happens between now and then.

Now for the Iowa Tribe in Oklahoma. You say the bureau approved 64 acres of land for lease. Is there anything that's holding up being able to build a casino there besides financing.

At this point it's just planning and financing.

Okay, so it's all approved. There's no environmental, no other issues like that then?

There are none. The next step is now to start the design planning. Obviously, we've got to go through all the site work yet, but pretty well underway in that project.

And our next question comes from the line of John Mueller. John, you may proceed.

Hi, guys. How are you doing? I actually have Martin Melvstein on the line with me. And we were wondering as far as Red Hawk in the first quarter, did that come in profitable? Or did you not split that out?

We don't share our casino operations independently. You remember, these are all tribally owned casinos. We don't own them. And we are very careful to protect the confidentiality of those Tribe's operations.

Okay. Did you have anything else?

Did you have anything else?

Yes, I mean, on the Four Winds, your management fee, is it on the gross or the net. How did you come up with the management fee.

In both cases, both Red Hawk and Four Winds, our management fee is a percentage of the net income, the bottom line. So we share in revenue and we share in expenses. So the net effect of the operations is what our percentage is based on.

Well about what area is that percentage out of curiosity.

I can tell you. At Four Winds, we get 24% of net income, and at Red Hawk, it's 30%.

Well, it seems to me that this Four Winds is doing close to 60 million to 70 million for the quarter. That should leave some nice profit area.

We like the results of Four Winds. And obviously, we continue to work on improving them as well as the other projects.

Are you done with the expenses from the Ohio thing, or is that going to be some more expense.

Of the Ohio initiative in November and all those expenses related to, are behind us. Those were all expenses in 2008.

So you had a $1.6 million expense this last quarter from Ohio.

No, that was 2008.

Yes, but you took it off the income in this quarter.

No, I believe that was 2008, we were comparing to the prior year. It is blank on 2009.

Tell me this. Is this Kansas going to cost a lot of money. Or is it a nominal amount to get in the game.

I don't think we're going to spend a lot of money. We've made some efforts obviously already to the application process. And there will be more to come as we present at the various planning commissions and zoning hearings. But I think the large dollars will come after the selection process is made.

How big is the market around this Kansas area?

Well, the market is we think is not only very good but it is exclusive. The Wichita SMSA I think is in the .5 million people range. In addition, we are about an hour drive from the Oklahoma border. But the primary market is the two counties, Sedgwick and Sumner County, primarily Sedgwick. But the nice thing about the Wichita market is, it is a market that can never be, have competition to it. Kansas is only allowed four casinos, one in Kansas City, which is in the northeast. There's one in the southeast. And one in the northwest and then ourselves in the central part. And there is no other state that could legalize gaming that would effect the Wichita market. So it is a very exclusive, protected - - I guess you could call it a monopolistic market.

How far are you from Kansas City.

A three hour drive.

A three hour drive.

I think a little over that.

Well, I am a fan of Four Winds. I go out there every weekend and - - the premise is doing very good but you had a bad write-up last Sunday from a local Chicago paper. I don't know if you are aware of that.

I was aware of that and we actually contacted the writer back. It is funny, his story on the telephone is, he was a very big supporter of the project, loved the facility, he just happened to have a grumpy day the day he showed up there. But he was certainly a supportive of the project.

And our next question comes from the line of Clint Morrison from Feltl and Company. Clint, you may proceed.

Thanks. Hey, Lyle, is it fair to just kind of ask with regards to your - - the new Kansas opportunity. Kind of your expectations or the odds in your opinion changed at all now that we've got our proposal in and a couple months further into the project.

No, I don't think so. There's three proponents, they're all very viable proponents. We think we certainly have a leg up from the experience. I mean, they are all, they all have nice pedigrees but none of them other than us represent a operating management company. One group has two very senior executives from the Mandalay Bay Company. Very, very, experienced in casinos and in big casino development, but don't have a staff of 50 people like we do. And the other group is Foxwoods which obviously runs one of the largest casinos in the world. But, again, doesn't have a dedicated management staff. So we think we are as good as any and probably better than most.

Okay. So the needle hasn't moved in the last month or two.

Not at all.

And when the final decision is made, do you have to essentially have your partner, have the equity split and show the equity dollars and your financing and all that kind of stuff set up. Or how far - -

Put it this way, the more you can show them, the more likely they will pick you. So the answer is on a bare minimum, you don't need anything other than $25 million that you are willing to put up at risk that once you pass the muster of their investigating your Company and license you, it goes hard. But and that is just to get in the game.

Right.

The more you can convince them or show them that you have the funds, the higher likelihood you have them, the more likely you will get the deal. Obviously, on the debt side, there can be - - nobody can arrange debt prior to going to market because it would just be too expensive to have the money in reserve. The equity portion of it, they expect to, again, the more hard, the more you can show them, the better off you will be.

Okay. Fair enough. Tim, I think it was sort of the other expense of 400 or something grand, what was that in the quarter?

Other expenses? That is interest expense. That's the interest expense we are paying on the first date loan of $2 million and the ARS's that we borrowed against.

And sort of roughly can you tell us where those Shingle Springs bonds are now trading? Has that really changed much here over the last couple of months?

Yes - - the bonds have gone a couple ago they're probably 40, they are up in the 60's now.

Okay. And is that fairly typical. I don't know, has the Four Winds bonds gone up and is this kind of typical in the gaming industry, overall?

I think right now, it is happening the whole bond market has improved in the last week to 10 days. Four Winds has always traded quite high. They've always been in the high 80's or 90's. That's always been a very highly tradable bond.

You also have to remember, when the bond prices were really down, what we don't know is the volume. The bottom line is they became very liquid. And very few people wanted them so anybody who wanted to trade them really had to sell at a cheap, a distressed price. But although they showed incredibly low prices like in the high 30's to low 40's. I quite frankly don't know if there if there was much volume, if any, at those numbers.

I appreciate that. Okay. That takes care of me, thank you.

(Operator Instructions). And our next question comes from Roy Berry from Lakes Entertainment.

I am not from Lakes Entertainment, Tim, but I talked to you before by correspondence.

Yes, sir.

You seem to have an endless income tax payable to the Louisiana taxing authority. It is up to 17 million, I noticed. I think that dates back to 1992. Isn't there some kind of statute of limitations or why does that seem so endless?

I agree, it seems endless. It is from 1999 and 2001, is when it started. And again, the whole case is the fact that we paid our - - what we think is certainly all the taxes in Louisiana according to the Louisiana statutes, and Louisiana has taken the position, they just want more money. So they have actually, it is in litigation. They have sued us and based on that there is no statute of limitations. We are - - we would like to work with them to negotiate a settlement. That is probably not going to happen in the near term so we will just prepare to take it to court.

Good luck.

Okay. Thanks.

Our next question comes from the line of Michael Temple from Pioneer Investments. Michael, you may proceed.

Hi, guys. I know you are not going to give me a lot of detail on the individual gaming facilities. But I am wondering if you can provide a little more color on what is going on with Shingles. - - listened to your call last quarter and listened the Shingles call, it suggested that you weren't quite, all that happy. That it was essentially operating under expectations. But it was operating actually much better than I think most market participants were assuming and so we did see the bonds rise per your comments. Based on conversations I had with the general manager, it sounded like every month was doing a little bit better than the month prior. Marketing campaigns were starting to kick in and that you all were feeling a little bit better about things on a monthly basis. I am curious if you can let me know if you continue to feel that way or are there hiccups or problems or issues that you are having to address.

No, we continue to feel that way. Again, the good news is we are getting as many people as we expected. Our marketing department is bringing in, we're bringing lots of bodies. We are still just not getting the gaming revenue. For example in Shingle Springs, we get equal or more, almost the same number of people in Shingle Springs that we get in Four Winds. But their win per customer is substantially less. We are working on all the things I just said about to - - correct that. Better machine mix is always the case. But when you open a casino, you have more opportunity to modify that mix in the first six to eight months of a casino than you do two years later. We're marketing out further is an old axiom, the further people come, the more they bring to gamble. The less frequently they come, we are doing more marketing in the Bay Area. And again we're watching expenses very closely.

Are you seeing any early successes to that marketing effort in the Bay Area?

Yes.

Can you give us any parameters around that?

I don't think so. We are marketing in three ways. We do a busing program out of the Bay Area. That is kind of quantifiable that we're doing much better with that. We are actually doing player development to try to get the higher roller out of that area which can give you the most immediate results. And then of course we're doing more general marketing which is what we call casting not the big fish net out there to bring people in for the first time, get them to sign up on your player card. And then of course you can market directly to those people that have the higher propensity to gain.

How big is the database at this point there?

We have approximately 150,000 in the database there.

That has grown quite nicely since the last call.

It is definitely growing.

Yes, and it grows every single week.

So any thoughts on whether you see the potential for increased competitive pressure now that Thunder Valley is slowly but surely kind of maybe getting its act together. Or would that even be a correct characterization based on what you're seeing out there.

I think we are definitely seeing the competitors react to what we have done just by visual looking at the casino floor. They are changing their slot product to match ours actually a little bit closer. The signage packages have become much more aggressive in terms, inside the casinos. And they seem to be spending dollars in their marketing campaigns and some direct mail things that they hadn't previously done.

What should I take from the comments that you are willing to sell down your Shingle Springs note at a discount based upon kind of the original assessment? Are you coming to the conclusion that your returns there are'nt going to be what you expect and therefore you think the returns elsewhere will be higher.

First off, we didn't say we would, we just said it is one option. But certainly, I don't believe at the current price we would be much of a seller of that.

Fair enough.

Certainly an option.

And how do you assess that price. What valuation and methodology do you use to assess it.

Well basically, what you look at is your opportunity cost. In other words, what can you monetize that for and what do you expect to get on the other side of that?

No, I am sorry. I probably confused you there. What I am asking is, you have it on the books at a certain price and yet you are valuing, the original valuation was higher. How do you arrive at that kind of current market price and where you think that is. Is it based upon where the Shingle Springs bond is trading.

Are you talking about the actual fair value?

Correct.

We actually hire an outside valuation company and it is based on and in this case now, because it is open. But prior to open, it is the intangibles would be, expectations, probability of opening, probability of getting paid back. And now a lot of it is just a function of long term treasury curve - - interest rate curve on treasures

But at the end of the day, it is more art than science.

Fair enough.

Gentlemen, thank you.

Our next question comes from the line of Justin Sebastiano from Morgan Joseph. Justin, you may proceed.

Couple of follow ups. Tim on the call, you said you had over 150,000 people in the database. That was the end of March. Now you are saying the same number. Yet you guys are saying it goes up every week. Could you kind of give us a little more detail so that I can understand exactly where the database is going.

It is going up. It is still over 150,000.

Is it over 200,000.

I don't think we've hit the 200,000 yet. But it is continuing to grow. Remember our last call was only a few weeks ago.

Five weeks ago. Okay. And then the Blue Chip impact, it is open for a couple of months now. Is it still helping you guys, bringing people into the market, or do you see Blue Chip promoting a little bit more and taking maybe a little bit of share near term from you guys.

No. It is hard to quantify it. But we think the net/net is it's a positive to us. They fill up these hotel rooms. They don't - - Our hotel is running at over 95% occupancy, or maybe even 98 or 99, and certainly every weekend is 100. So we are not seeing any where they are taking any of our customers to their hotel. So we think that the net result is their hotel will bring people into - - some of those people will come to us. Remember, they had an expansion that did, took like three years. The big part of the expansion was the casino which was done before we opened. The only real thing they've done since we opened which is just recently was open the hotel.

Right. Okay. You guys are sending buses over there to pick-up potential gaming customers?

We are not. But we do have buses that Four Winds own and they do pick-up groups on requests.

Okay. Tim, you mentioned that there was a plane - - like a one-time maintenance cost for the plane in the first quarter. How much was that exactly.

Well, I think over and above of what we expected is probably $200,000 to $300,000 more than we had thought.

So there is none, were there any plane maintenance costs in the first quarter of 2008.

I am sure there were.

So the Delta then is $200,000 or $300,000.

Okay. Thanks, guys.

Our next question comes from the line of Brett Henderson from Nacomas Capital. Brett, you may proceed.

Hi, guys. How are you doing. Lyle, I just want to go back to something you said a few questions ago about financing for Kansas. And I want to start with them. I have watched everything you have done at Grand, and I think you guys have done a great job opening casinos over many years now. I get the potential economic value to you and me and other shareholders if we can win in Kansas and get that built. And especially, if we get a management stream that kind of - - and we can promote if you will. Did you say that issue in stock was one of the options.

Yes.

Okay. I just want to make sure that we are both on the same page as last time I talked to you about this. I take just the face value of Shingle Springs and the results haven't met initial expectations. But the credit is good. Eventually that's going to get paid. Even if we just have to wait for it to amortization over the years. That $73 million phase, I take the cash and ARS which I will treat as cash for now, less the debt.

That's another 16.5 million, divide that by the $26 million and change shares, you get 338 a share just came out of my calculator, 339. And the stock is trading at 350. That's just the value of your, you can't call them liquid assets because they're ARS, and the bonds obviously are still trying to discount. But that's your, using the term loosely. That's the value of the cash equivalents and not any value to the stream of Four Winds and from Red Hawk. And so I want to make sure. I know at one point we're hoping to get some cash from Shingle Springs and maybe buy back stock. So has there been a change in your thinking or is the opportunity cost just that big.

Well, again we are measuring the opportunity cost. I didn't tell you how much stock we would sell. Possibly some of it could be on a convert that would be at a higher than current market. In other words, where some of the money could come in and they have the right to convert but it would be an interest - - bond with a convertible feature. We just haven't really got to the fine points to see what we can raise and how we can raise it. So I'm just saying quite frankly everything is open for discussion.

Okay. Just so I can get a sense of the potential return in Kansas, Lyle. What is the - - or maybe it hasn't been determined by the state yet. What is the tax rate going to be there and is there an up front cost for the license.

The tax rate is 27% unless you opt to offer more. The one-time fee is $25 million to get the license.

And other than that, it is just the cost to build the casino which you and your partners would bear.

That's correct.

27.5%, Lyle?

27.

Okay. Thank you, guys.

Okay.

Our next question comes from the line of David Hargreaves from Sterne Agee. David, you may proceed.

Hi. I apologize if some of these were covered. There were three gaming calls going at the same time. The comments that you guys put in the press release can cause people to have a little bit of concern about the Shingle Springs bonds. I'm wondering if - - I know you don't like to comment on specific results, but anything you could offer about the health of the credit I think we would really all appreciate it.

At this point we certainly are making the payments and we anticipate continuing to make the payments. I don't see a concern on the bond credit issue.

When you say making the payments, there is a lot of junior payments that are made in addition to all the senior payments. You've got the amortization on the loans and you have got obviously the management fees. And so, in order to be making all of those junior payments, it implies a certain level of coverage at the senior level. Are you able to say what that level is. It would be something like, I would think north of 2.5 times interest coverage for you to be making everything current. Would that sound like something that is a reasonable level to you guys.

No, David, I don't think I could even comment on that specifically. I don't have that. I haven't figured that number out.

Are you performing at a level where you are current on all of your subordinated payments.

That's correct.

Okay. That's something. Have you closed out the construction budget yet? I apologize if you have covered this already.

Haven't.

Not yet. Okay. That's all I have, thank you.

And at this time we are showing no further questions available. Mr. Berman, you may proceed.

Thank you very much for your interest in Lakes Entertainment. We will focus on continuing to execute our long term strategy in 2009 in order to generate shareholder value. Thank you once again for your interest in Lakes and we will speak with you again on our next earnings call. Bye now.

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