Golden Entertainment Inc (GDEN) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the first quarter 2010 Lakes Entertainment earnings conference call. My name is Keisha and I'll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Cope.

I'd like to remind everyone that this call may include forward-looking statements, and that such statements may include risks, including those risks described in our filings with the Securities and Exchange Commission. 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, recent business events and then we'll conduct a question-and-answer session. Lyle?

Thank you, Tim. The economy and increased competition continue to pressure the operating results at our casino locations. That said, even though revenue declined slightly in the first quarter of 2010, compared to the first quarter of 2009, our management fees from each of our managed properties did meet our expectations for the first quarter of 2010. And cost control measures both at Lakes and our managed properties continue to positively impact our operating results.

I'd like to start the discussion with the Red Hawk Casino in Shingle Springs, California. Which is the casino project with the Shingle Springs Band of Miwok Indians. The casino features just under 2100 slot machines and gaming devices, 75 gaming tables including seven poker tables, five restaurants, four bars, retail space, a child care facility and arcade and approximately 3200 covered parking spaceless. It also has a dedicated interchange from US route 50, which is the road connecting San Francisco and Lake Tahoe, allowing direct access for our customers to the casino and the enclosed parking structure.

A lagging housing industry, high unemployment rates and an uncertain statewide budget continue to impact Red Hawk's ability to achieve consistently strong results. We introduced poker at the end of 2009 and we are seeing results that have exceeded our expectations. In addition, we have increased the number of slot machines to accommodate greater play during peak hours. The value pricing we have implemented in our restaurants along with the greater emphasis on guest services continues to generate a local market following.

I will next discuss our project in Tunica, Mississippi. As previously announced, we entered into a development services and management agreement with the Abston-McKay Ventures, wherein Lakes will perform certain developmental and management services for a potential casino located at the former Isle of Capri site in Tunica, Mississippi. We continue to work with the owners to help design and develop what we expect to be a first-class casino facility, with exciting new games, restaurants, entertainment, a hotel and other amenities.

Next, I'd like to discuss Ohio. As we previously announced, we entered into agreements with both Rock Ohio Ventures and with Penn Ventures, a subsidiary of Penn National Gaming, whereby we funded 10% of certain costs related to the successful referendum in November, 2009, to amend the Ohio Constitution to authorize casino gaming in Columbus, Cincinnati, Cleveland and Toledo. Pursuant to those agreements, we now have the right to purchase up to 10% of the equity in the entities owning those casinos at a purchase price equal to 10% of the cost of equity to fund the development of those casinos.

If we choose to invest additional funds in these casinos, we will need to obtain additional financing. We can discontinue funding at any time for any reason, and still keep our equity interest that we purchase up to the time we discontinue funding. We are passive investor in these ventures, and will have no management or operational responsibility. Both companies have made progress with respect to site acquisition, and the details of the proposed casinos including size and scope, and the construction time line are still under consideration.

Near New Buffalo, Michigan, the Four Winds Casino produced operating results which were below the same period a year ago, due to increased competition in the market this year. We are pleased, however, that the EBITDA at the casino was in line with our expectations, and the hotel continues to operate at 99% occupancy. The results of the Four Winds customer loyalty program and its ability to attract high value customers continues to be a strong component of the Four Winds marketing program, as we continue to increase our customer base in the greater Chicago market. It is currently expected that Four Winds will experience additional competition sometime in the next 12 months with the planned opening of the Gun Lake Casino, approximately 100 miles north of Four Winds' location.

As previously announced, last week, we entered into a termination agreement with the Iowa tribe of Oklahoma and its governmental components and instrumentalities, terminating all agreements with the tribe, including our management contract with the Cimarron Casino, a 375 slot machine operation and a note under which we advanced approximately $5 million to the tribe effective May 1, 2010. The termination agreement provides for the Iowa Tribe to pay Lakes a total of $4.5 million. $1 million of which we have received and the remaining $3.5 million to be paid in 15 equal monthly installments commencing on June 15th, 2010. The Iowa Tribe is permitted to make prepayments on the outstanding amount at a 6% discount during the first 12 months after the execution of the termination agreement. We will also receive management fees from managing the Cimarron Casino through May 1, 2010.

With respect to the Jamul Indian Village casino project near San Diego, the traffic, environmental, engineering and other required studies are now under way, and planning is still ongoing to design the proposed Jamul casino. Current plans are to provide for approximately 1,000 class II gaming devices, along with 25 class II table games. However, the Jamul Indian Village does have a compact with the state allowing for class III gaming, should all regulatory and legal requirements be met. Work with Caltrans is slowly progressing to ultimately determine the best possible site access design. Finally, as we previously announced in April, with withdrew from the Kansas project and received a full refund of $8 million on our portion of the privilege fee.

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. Net loss for the first quarter of 2010 was $4.7 million, compared to earnings of $1 million in the first quarter of 2009. And the loss from operations was less than $0.1 million for each of those quarters. Basic and diluted losses were $0.18 per share for the first quarter of 2010, compared to basic and diluted earnings of $0.04 per share for the first quarter of 2009.

First quarter 2010 revenues were $7 million, compared to prior year first quarter revenue of $7.3 million. This decrease was primarily due to the new competition that entered the Four Winds Casino Resort market during the third quarter of 2009. For the first quarter of 2010, Lakes selling, general and administrative expenses were $3.2 million, compared to $4 million in the first quarter of 2009. Selling, general and administrative expenses consisted primarily of payroll and related expenses, travel expenses and professional fees, All of which decreased compared to the prior year's first quarter. Net unrealized gains and losses on notes receivable relate to the Company's notes receivable from Indian tribes for casino projects that are not yet opened 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 2010, net unrealized gains on notes receivable were $1.8 million, compared to net unrealized losses of $0.2 million in the prior year period.

The net unrealized gains in the first quarter of 2010 consisted of $0.9 million related to the project for the Iowa casino with the Iowa Tribe of Oklahoma. These gains resulted from the previously mentioned termination agreement entered into with the Iowa Tribe in May 2010. Also included in net unrealized gains were gains of $0.9 million related to the Jamul tribe, due primarily to improvements in the credit markets. The net unrealized losses in the first quarter of 2009 were related to the project with the Jamul Tribe and the Iowa Tribe, due primarily to ongoing issues in the credit markets and general economic uncertainties. Lakes recognized impairment losses of $2.7 million during the first quarter of 2010, compared to $0.6 million in the prior year period.

Included in impairment losses for the first quarter of 2010 were $2.1 million related to the termination of the agreements with the Iowa Tribe discussed above. In each of the current and prior year first quarters, impairment losses included approximately $0.6 million due to continued uncertainty surrounding the completion of the Jamul project. Amortization of intangible assets related to the operating casinos was $2.8 million for the first quarter of 2010, compared to $2.5 million for the first quarter of 2009. Other income net for the first quarters of 2010 and 2009 was $1.5 million. The income tax provision for the first quarter of 2010 was $6.1 million, compared to $0.4 million for the first quarter of 2009. Lakes' income tax provision in the current year period is primarily due to the effect of valuation allowances associated with 2010 timing differences.

In summary, we continued to focus on operating our managed properties as efficiently as possible. Progress continues on each of the four casino projects in Ohio that were approved in the November 2009 election. The Ohio investment, along with our involvement in the Tunica project and the eventual development of the Jamul project, are new business opportunities that we believe will add value to our company and benefit our shareholders. Now, I'll turn the call over to the operator for questions.

(Operator Instructions). Your first question comes from the line of Mark Smith with Feltl and Company. Please proceed.

Hi, guys. Just two quick questions. First, can you just give us any insight into SG&A going forward with the cancellation of the Iowa agreements?

The SG&A going forward will be fairly flat to what you saw the first quarter, down slightly. There will certainly be less travel expenses, slight payroll deductions, but not materially different from the first quarter.

Okay. And then second, any insight into the 6% discount on receivables payback from the tribe there and why that discount's there?

Yes, the discount relates to our contract. We had -- always had an arrangement where if they early prepay us there was a discount associated with that, was about I'd say that 6% range.

Okay. Great. Thank you.

(Operator Instructions). And there are no further questions. Okay. We just had one pop in. From the line of [Gerald Hannahs] with Lakes Entertainment. Please proceed.

I'm not with Lakes Entertainment. I think I told the lady that I was trying to get on the Lakes Entertainment conference call. I'm a shareholder of Lakes Entertainment.

No problem. I do apologize, Gerald. Go ahead with your question.

Yes, I think you said the quarter, the payroll related expense and travel was $3.2 million.

That's a total G&A for the Company; correct.

For the quarter or the year?

For the quarter.

Right. How much of that was travel?

You know, I don't have that particular breakdown in front of me, but if you want to call or leave me a number and I can call you back at and find that for you.

Well, my question is do you travel commercially or private?

We travel -- this is Lyle. We travel both. Our Company does have a private jet, and because we are in our casinos both in the Michigan casino as well as the West Coast probably all of our people there are generally there two times each month, we find it very efficient to go on private jet, even though it is somewhat more expensive, because we save a day of work each way we go.

And you don't think that -- how many people travel to a meeting like that on a corporate basis?

Typically, it's seven or eight. Sometimes more. Sometimes it's actually a few more and some go commercial.

There are no further questions in queue at this time. I would now like to turn the call back over to Lyle Berman for any closing remarks.

Thank you very much, operator and for the few of your questions. We thank you for your interest in Lakes and we will speak with you again on our next earnings call. Thank you.

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