Golden Entertainment Inc (GDEN) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Lakes Entertainment Incorporated first-quarter 2011 earnings conference call. My name is Amica, and I'll be your operator for today. At this time, all participants are in a listen-only mode. We'll have a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes. At this time, I would now like to turn the call over to Mr. Tim Cope. Please proceed.

Thank you, operator. Good afternoon, and welcome to the Lakes Entertainment's first-quarter 2011 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 just like to remind everybody that this call may contain forward-looking statements within the meaning of the federal securities law, including statements concerning business strategies and intended results and similar statements concerning anticipated future events, and expectations that are not historical facts. These statements do not guarantee future performance, and are subject to risks and uncertainties, including those risks described in our filings with the Securities and Exchange Commission. Lyle will begin our discussion today with a general over view and update on our casino projects, I'll then discuss the first-quarter financial results and recent business events, and then we'll conduct a question-and-answer session. Now I'll turn the call over to Mr. Lyle Berman.

Thank you, Tim, and welcome everyone to Lakes' first-quarter 2011 earnings call. The Four Winds Casino, owned by the Pokagon Band of Potawatomi Indians in New Buffalo, Michigan, again posted strong results and beat our expectations in several areas, including gaming wins, overall net revenue and operating margin. The competitive impact from the Gun Lake, Michigan property that opened earlier this year, has not been as significant as originally anticipated. We are pleased that this property continues to perform well in its market, even with the increased competition.

The Red Hawk Casino continues to aggressively compete in a northern California economy that is challenged with high unemployment rates and troubled regional housing market. We are listening to our guests, and a result, we have relocated the poker room to the smoke-free lower level of the casino. At the same time, the former poker room area was converted into a classic slot zone, offering historically-favored games, themes, and models that our guests continue to enjoy.

These new casino initiatives have been well received, and coupled with the continued emphasis on high quality food offerings at an exceptional value, have generated increased guest traffic volumes from the same period a year earlier. Red Hawk continues to analyze customer comments and suggestions to ensure that the casino is offering the best guest service, a great gaming opportunity, and superior food experience. We continue to work closely with the Shingle Springs Tribal Gaming Authority, to ensure that this property is operated as efficiently as possible for the benefit of the Shingle Springs Tribe and Lakes.

In Ohio, we invested an additional $6 million in the Rock Ohio Ventures LLC, bringing our total investment to approximately $8.4 million. Lakes continues to have the right to own up to 10% of Rock's ownership in the two casinos, provided that Lakes funds a proportionate amount of the equity capital required from Rock to develop such casinos.

The first phase of the casino project in Cleveland is underway, with an expected opening in 2012. This phase of the casino is expected to cost approximately $350 million, featuring approximately 2,000 slot machines, 65 table games, a large poker room, and multiple food and beverage outlets. The Cincinnati casino is currently in the planning phase, and is expected to cost approximately $400 million. When it opens, the Cincinnati casino will feature approximately 2,300 slot machines, 70 table games, poker, food and beverage outlets, and a parking structure with approximately 2,500 spaces.

With respect to the Jamul Indian Village casino project near San Diego, the Jamul Tribe is currently performing various environmental and traffic studies so it can continue to move forward with its efforts to develop a casino on its reservation. The Tribe has the two basic requirements to do this, federal recognition as an Indian tribe, and Indian land eligible for gaming. In addition, the Tribe has a [compact] with the State of California. With that, I'll turn the call back over to Tim to an overview of recent business issues and financial results. Tim?

Thank you, Lyle. Net earnings for the first quarter of 2011 were $1.4 million, compared to a net loss of $4.7 million in the first quarter of 2010. Earnings from operations were $1.2 million for the first quarter of 2011, compared to a loss from operations of less than $0.1 million for the first quarter of 2010. Basic and diluted earnings were $0.05 per share for the first quarter of 2011, compared to basic and diluted losses of $0.18 per share for the first quarter of 2010.

First-quarter 2011 revenues were $5.9 million, compared to prior-year first-quarter revenues of $7 million. This decline was due to the elimination of management fees from the Cimarron Casino project, as a result of the termination of that agreement in May of 2010, as well as a decline in management fees associated with the Red Hawk Casino. The decline was partially offset by an increase in management fees earned from the Four Winds Casino Resort during the first quarter of 2011, compared to the prior-year period.

For the first quarter of 2011, selling, general and administrative expenses decreased in comparison to the first quarter of 2010 by approximately $600,000, to $2.7 million. Selling, general and administrative expenses consisted primarily of payroll and related expenses, travel expenses and professional fees. The decline in selling, general and administrative costs in the first quarter of 2011, compared to the first quarter of 2010, resulted primarily from decreases in payroll and related expenses and travel expenses.

Impairment losses were $0.9 million during the first quarter of 2011, compared to $2.7 million in the prior-year period. Impairment losses in the first quarters of 2011 and 2010 included approximately $0.9 million and $0.6 million respectively, due to continued uncertainty surrounding the completion of the project with the Jamul Tribe. Also included in impairment losses for the first quarter of 2010 were $2.1 million related to the termination agreement entered into with the Iowa Tribe of Oklahoma in May of 2010, related to the Ioway Casino project.

Net unrealized gains on notes receivable relate to the Company's notes receivable from Indian Tribes for casino projects that are not yet open, which are adjusted to estimated fair value, based upon the current status of their related tribal casino projects and evolving market conditions. In the first quarter of 2011, net unrealized gains on notes receivable were $0.9 million compared to $1.8 million in the prior-year period. The net unrealized gains in the first quarter of 2011 were primarily related to the project with the Jamul Tribe, due again primarily to improvements in the credit markets. The net unrealized gains in the first quarter of 2010 included $0.9 million related to the project for the Ioway Casino, related to the termination agreement with the Iowa Tribe of Oklahoma, I mentioned earlier. The first quarter of 2010 net unrealized gains also included $0.9 million in gains related to the Jamul Tribe, due primarily to improvements in the credit markets.

Amortization of intangible assets related to the operating casinos was $1.9 million for the first quarter of 2011, compared to $2.8 million for the first quarter of 2010. The decrease in amortization costs related to the partial impairment of intangible assets associated with the Shingle Springs project during the fourth quarter of 2010. Other income, net for the first quarter of 2011 was $1.1 million compared to $1.5 million for the first quarter of 2010. The income tax provision for the first quarter of 2011 was $1 million, compared to $6.1 million for the first quarter of 2010. Lakes' income tax provision in the current year quarter consists primarily of current income tax provisions. Lakes' income tax provision in the prior-year period was primarily due to the effect of valuation allowances associated with 2010 timing differences.

In summary, management fees from each of our managed properties met our expectations, and in the first quarter of 2011, we continued to invest in the two new casino opportunities in Ohio, with Rock Ohio Ventures. We have a strong balance sheet with no debt, and our cash position provides us flexibility when considering potential new business opportunities. Our business focus continues to remain on operating our managed properties as efficiently as possible. Achieving operating efficiencies at our corporate level, and on maintaining our investment in Rock Ohio Ventures, and its proposed casino developments in Cincinnati and Cleveland. Jamul remains in our project pipeline, and we continuously evaluate other projects, which we believe will add value to our Company.

Now, I'll turn the call over to the operator for questions. Operator?

Thank you. (Operator Instructions). Your first question comes from the line of [Roy Barry]. Please proceed.

This is for Lyle Berman. And in, you're contemplating two casinos along the lower Mississippi, is the current flooding affecting those plans and to how much extent is it affecting those plans?

Well, I think -- what I think you're referring to is Lakes Entertainment does own land in Vicksburg, Mississippi, which is deemed a casino site. And we have put that -- we've owned it for quite a while now, and that project at the current time is just on hold. We aren't in the mode of developing it at this point. So you mentioned two casinos in Mississippi, but I don't know of any other one. And of course, because we have no operations in Mississippi, the floods do not affect our Company.

I'm talking about the Tunica Casino.

Oh, I'm sorry. You're talking about the proposed new casino in Tunica.

Yes.

I don't believe the flooding effects that. They are still in the financing stage. But I mean, everybody knows from time to time there will be flooding. If it had been under construction or open, I believe it would have been closed, because all of the casinos in Tunica, Mississippi, are closed today. But I don't believe that affects the future development.

That answers my question.

Okay, thank you.

By the way, can I ask one more question?

Sure.

Is Vicksburg above the river or is it down on the river side?

Vicksburg -- Tim, I think it's above the river.

I would consider it above the river. It's south of the City of Vicksburg itself, which as you may know, sits on the bluff. And then the casinos there are down the bluff on the actual river. Our site is about a mile and a half south of there, and it's in, off of the river above the 100-year floodplain.

Okay. Well maybe you should talk about merging with some of these floating river casinos.

(Operator Instructions). Your next question comes from the line of David Hargreaves with Sterne, Agee. Please proceed.

Hi, I was wondering if you could give us an update on changes you're making at Shingle Springs and what type of impact you're seeing this at the property. We've seen in the monthly numbers that have come out for April so far, there has been a bit of an uptick. I'm wondering if you're seeing any signs of that in the Sacramento area?

This is Lyle Berman. Well, we're constantly looking for ways to improve Red Hawk Casino, as you know. The basic overall concept is to reposition it into a more value-oriented locals casino, which it has always been, but I think we've just been focused a little bit more on bringing more economic value to our patrons. And we've seen it stabilize and actually grow a little bit in the last month or so. Tim, do you have any additional comments?

I think that's fair. David, as you heard us say just a few weeks ago on the annual call, a lot of the new marketing programs have been initiated, and are now starting to take hold, including some of the things Lyle mentioned earlier about repositioning the poker room and the classic slot area, both of which have seemed to work. The property is implemented as a value pricing option, with the quality of the food out there, and that's been well received in all of the restaurants, not just the buffet, which the price has been changed. All of the restaurants have improved and I think our guest counts are showing that customers in the market like what we're doing.

That's good. Do you have a target date for when the quarterlies are going to be out for Pokagon and Shingle?

Yes, we're working on that as we speak. It'll-- plan to be next week, and we'll certainly get that announcement out in the next day or two.

And how is the response to the new poker room?

It's gone well. Have you had a chance to visit the property, since it's been implemented? If not, you'll see it's a little bit larger area. It's downstairs in the non-smoking area, and as we know, poker rooms are non-smoking gaming environments. So, it fits well in a non-smoking environment that we have on the lower level of the Casino.

How should we be thinking about the comparison you guys are up against this year. I think you had $23 million of EBITDA last year. That seems like a big hurdle.

I think it's too early to tell comparative wise. As you remember last year, I don't think the Thunder Valley expansion had been open at this point in time last year.

Sure.

So, the good news I see right now is we're having some fairly, reasonably good comparisons in this quarter with the new competition, compared to last year when there wasn't a competition. So, I think that bodes well for holding our own throughout the rest of the year.

Excellent. Okay. Thank you very much.

You're welcome.

(Operator Instructions). At this time, there are no further questions. I would now like to turn the call back over to Mr. Lyle Berman for closing remarks.

Thank you very much, operator and for all of your questions. We will focus on continuing to execute on our long-term strategy of generating shareholder value. Thank you once again for your interest in Lakes, and we will speak with you again on our next earnings call.

Ladies and gentlemen, this concludes the presentation. You may now disconnect. Thank you, and have a great day.