Lakes Entertainment Announces Results for First Quarter 2011

Lakes Entertainment, Inc. (NASDAQ: LACO) today announced results for the three months ended April 3, 2011.

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.

Lakes Entertainment reported first quarter 2011 revenues of $5.9 million, compared to prior-year first quarter revenues of $7.0 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 2010, as well as a decline in management fees associated with the Red Hawk Casino project in Shingle Springs, California. The decline was partially offset by an increase in management fees earned from the Four Winds Casino Resort, in New Buffalo Michigan, during the first quarter of 2011 compared to the prior-year period.

For the first quarter of 2011, Lakes’ selling, general and administrative expenses decreased in comparison to the first quarter of 2010 by approximately $0.6 million 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.

Lakes recognized impairment losses of $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 Indian Village ("Jamul Tribe”) near San Diego, California. Also included in impairment losses for the first quarter of 2010 were $2.1 million related to the previously announced termination agreement entered into with the Iowa Tribe of Oklahoma in May 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 the 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 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 discussed above. The first quarter 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 previously announced partial impairment of intangible assets associated with the Shingle Springs project during the fourth quarter of 2010.

Other income (expense), 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 $1.0 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 provision. Lakes’ income tax provision in the prior year period was primarily due to the effect of valuation allowances associated with 2010 timing differences.

Tim Cope, President and Chief Financial Officer of Lakes stated, "Although revenue declined in the first quarter of 2011 compared to the first quarter of 2010, management fees from each of our managed properties met our expectations for the first quarter of 2011. We continue to focus on achieving operating efficiencies at our managed properties as well as at the corporate level.”

Further commenting, Lyle Berman, Chief Executive Officer of Lakes stated, "During the first quarter, we made additional investments of approximately $6.0 million related to our investment in Rock Ohio Ventures, LLC and its proposed casino developments in Cincinnati and Cleveland. We look forward to the continued progress of these projects which we believe will add value to our company. We also continue to evaluate other potential projects in order to increase shareholder value.”

About Lakes Entertainment

Lakes Entertainment, Inc. currently has development and management or financing agreements with three separate Tribes for casino operations in Michigan, and California, for a total of three separate casino sites. Lakes is currently managing the Four Winds Casino Resort for the Pokagon Band of Potawatomi Indians and the Red Hawk Casino for the Shingle Springs Band of Miwok Indians. Lakes is also involved in other business activities, including the development of new table games for licensing to Tribal and non-Tribal casinos.