Good day, ladies and gentlemen, and welcome to the third quarter 2013 Lakes Entertainment Incorporated earnings conference call. My name is Celia, and I'll be your operator for today. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. Tim Cope, President and Chief Financial Officer. Please proceed, sir.

Thank you, Celia. Good afternoon, and welcome to Lakes Entertainment's third quarter 2013 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, including statements concerning business strategies and their intended results and similar statements concerning anticipated future events. These statements are subject to risks and uncertainties, including those risks described in our filings with the SEC, and actual results may differ materially. Lyle will begin our discussion today with a general overview and update on our projects. I'll then discuss the third quarter financial results and recent business events. And then, we'll conduct a question-and-answer session. Now, I will turn the call over to Mr. Lyle Berman.

Thank you, Tim. And welcome everyone to Lakes' third quarter 2013 earnings call. As we previously announced, on August 29, 2013, we received a cash payment of $57.1 million from the Shingle Springs Tribe, pursuant to the terms of the debt termination agreement that we entered into with the Tribe, relating to moneys we had previously advanced the Tribe for the development of the Tribe's Red Hawk Casino located in Placerville, California. As a result of that payment, the management agreement under which we were managing Red Hawk terminated and we have no further obligations or responsibilities with respects to Red Hawk Casino. Due to the receipt of this recent cash payment, we currently have cash and short-term investments of approximately $90 million. We are evaluating various business opportunities to determine the best course of action to add value for our shareholders. The third quarter was the first full quarter that included gaming operations at our Rocky Gap Casino Resort, which we purchased in August of 2012. Since this acquisition, we have added a gaming facility, which opened on May 2, 2013. Rocky Gap is a AAA, four diamond resort that includes a casino, hotel, spa, four restaurants and the only Jack Nicklaus signature golf course in Maryland. The casino features 558 slot machines, 10-table games, 3 poker tables, a casino center bar and a new hotel lobby bar and food outlet, both casino revenue of $10.5 million and total revenue of $14.6 million that met or exceeded our revenue expectations for the quarter. We have implemented marketing initiatives, which have made the surrounding communities better aware of our offerings and we continue a busing program, which has been well received. Additionally, we expect the conference and event center to open this month, which we believe will drive additional gaming…

Thank you, Lyle. Third quarter results. Net earnings for the third quarter of 2013 were $19.6 million compared to a net loss of $1 million for the third quarter of 2012. Earnings from operations were $18.8 million for the third quarter of 2013 compared to a loss from operations of $2.5 million for the third quarter of 2012. Basic and diluted earnings per share were $0.74 and $0.73 respectively for the third quarter of 2013 compared to basic and dilutive losses of $0.04 per share for the third quarter of 2012. Lakes reported third quarter 2013 net revenues of $15.5 million compared to prior year third quarter net revenue of $3.6 million. Included in these amounts were net revenues of $14.1 million and $1.7 million for the third quarters of 2013 and 2012 respectively. Related to the operation of the Rocky Gap Casino Resort, also included in net revenues were $1.4 million in management fees earned during the third quarter of 2013 compared to $1.9 million earned during the third quarter of 2012, related to the Red Hawk Casino. The decrease in management fees earned during the third quarter of 2013 compared to the third quarter of 2012 was due to the August 2013, termination of the management agreement between Lakes and the Tribe for the management of the Red Hawk Casino, which resulted in only two months of management fees in the current year third quarter. As Lyle mentioned, during July 2013, Lakes' entered into a debt termination agreement with the Tribe relating to amounts Lakes' had previously advanced to the Tribe, and per that agreement, the Shingle Springs Tribe paid Lakes $57.1 million during the third quarter of 2013, which constituted full and final payment of all debt owed to Lakes as of that date. As a result…

We currently have a cash and short-term investments balance of approximately $90 million. Additionally, of the $21 million we currently have invested in Rock Ohio, $18.2 million is earning 15% payment in kind interest. Although, this interest is not being recorded on Lakes' books, we estimate that this $18.2 million will be worth approximately $25 million by the end of the year. As a result of our investment of Ohio properties, we indirectly own approximately 8% of the Cleveland and Cincinnati casino's and the Thistledown Racino's. Additionally, our note with Jamul Tribe, which is currently capped at $60 million will become due and payable, when and if our casino currently in the predevelopment stage by Penn National opens and any third-party casino development funds have been repaid. And we will begin receiving a cash interest payment of 4.25% once the casino opens. This note was written-off our books in prior years. We believe our overall assets have substantial value that are not fully reflected in our balance sheet, that when considered with our cash position, it gives us flexibility when considering new opportunities that will enhance shareholder value. I will now turn the call over to the operator for questions.

(Operator Instructions) The first question comes from the line of Paul Stringler, Espinol.

Couple quick ones. First, the $18.2 million at Rock Ohio, that tranche will be worth $25 million by the end of the year, or will the entire $21 million investment be worth $25 million?

Just the $18.2 million will have grown to have a face value of $25 million by the end of the year. As a carries it 15% PIK interest.

So if it's PIK interest, your stake in the Rock Ohio venture is not increasing now, you're just getting paid with more debt?

That is correct, as are our partners.

And then just on Rocky Gap, that there were some great numbers, so it looks like EBITDA came in at about $2.5 million for the quarter?

We don't really give out EBITDA numbers, but that would be a little bit high. I think we'll be filing our Q the next couple of days and we'll actually Rocky Gap segmented, you'll be able to see the pieces of the puzzle that that estimate is a little bit high.

And just, I guess, when we think about this quarter versus sort of subsequent quarters, is this, as to say, a fair run rate or with the event center and maybe few wrap-up costs, can we expect margins to increase at Rocky Gap?

I think obviously we think margins will increase, however, when we opened as in May, so we had June, July, August, September, October, all those have been very good months. So far November has come in very strong, however typically in the casino business, between Thanksgiving and Christmas it's pretty much a downtime. So we haven't run through that one year, so we would expect the fourth quarter probably to be a little bit less than the third quarter, but then I we'll ramping up and it should be equal or greater.

The next question comes from the line of Carl Hanson, Feltl.

Tim, the $57 million loss carry forward, in past years I've seen some companies set up a tax asset on their books, and then subtract the valuation to still arrive at zero, but at least it's visible. I'm wondering if you've ever thought about doing that.

Carl, we actually have done that same accounting. We do have deferred tax assets with the full 100% valuation against it, it's just not under current GAAP you don't show that gross on the balance sheet.

In past years, I've seen it, I haven't seen it recently. As far as visibility, would it be feasible to put the $60 million note on the balance sheet along with the valuation of $60 million and still lined up at net zero, but the visibility would be there.

It's a same concept. At this point in time there is no value to it. It's been written-off until the project is actually opened we have no ability to collect on anything. So again, as the gross we don't put receivables on the balance sheet that aren't being of any value.

I was just thinking of visibility even though the carrying value is still zero.

We do talk about it all the time and tell people about it.

Rock Ohio, are there future developments? If they are, I understand the expected cash flow will pay for it.

There are a number of future developments going on in Ohio. A couple of the significant ones, of course other than just maturing of the business is that the government did attempt to and I think affectively a shutdown all of the sweepstakes, slot machines in the marketplace, which I am not sure, but I think is in excess of 10,000 machines or so and they are in the process of shutting those down. In addition, in Cleveland the parking ramp today does not connect directly to the casinos. So people have to park, walk outside to get to the casino, they are under construction with the park with a skyway that goes from the parking ramp directly into the casino, that should come on stream in the first quarter of next year and we think that will have a significant affect as well.

Lastly, you talked about the increase in value of the $18 million, but at one point, taking the overall investment there, I recall something being alluded to the fact that that investment could bring something north of $100 million. Is that a realistic thought?

No, don't believe it is. Right now, we put $18.2 million investment and that ha carries that PIK. We have an obligation, if called upon to put in $4 more million, although we don't think it's going to be called upon. And then of course, we have another $2 million or $2.5 million invested that doesn't have the PIK. We have never put out a number, a value on it other than stating that that face value of our note would now $25 million. The results of Ohio are across the board with all four casinos, the two that we're part of as well as the Toledo and Columbus are doing, I would say reasonably less than projected, although still profitable. I know the Cleveland and Cincinnati are doing in the neighborhood of $20 million a month. I think they projected somewhere in the $25 million to $30 million. But the ramp up is taking a little bit slower. They've been getting a significant number of guests, but the win per guest is below expectations.

Next question comes from the line of Tim O'Brien from DG Capital.

I guess just, first, you guys have mentioned in the past and you mentioned again that you don't see your value reflected in today's stock price. What are your thoughts on one year options in buying back stock or issuing a dividend here? How high is that on your list of things that are contemplating?

I would say that's two out of our top three. The third one is of course investing in a new business. And we are looking at all three of those options, and we look at them all together. As you are well aware, we only got the money in September or late August. So it's only been a couple of months that we've been focusing on it. But those clearly are on our agenda, every time we have a board meeting to talk about the priorities.

And how long you've been looking at sort of all these alternative business?

We really just started that in the last 30 days to 40 days, because up until September, we didn't know when we would get the money or how much. And now that we have it and it's real, and it's in the bank, we are aggressively starting to look.

And any thoughts on whether this will be a gaming business or outside of gaming?

Our primary focus is on gaming, but we are able and willing to look outside the gaming industry as well.

On Jamul, Penn has made some interesting or favorable comments on that project. Do you have any thoughts on the likelihood of that going forward and timing? And I believe you have some land there that might be sold to them?

Yes, in addition to our $60 million note from the Tribe, we have a 100 acre that is contiguous to the reservation that we negotiated with Penn and gave them an option to buy at approximately $7 million. We believe that they'll execute that option, once they start construction and they know they're under construction. It's our understanding through reading in the weekly gaming sheets that they are actively working with the Tribe and they expect to start construction some time in the 2014 timeframe. I can't substantiate that other than that what we've read. We don't have any direct knowledge. Although, we do know that Penn is actively working with the Tribe. And of course, what we know is we know it's one of the best sites there is in the San Diego market and would be once constructed, and they get through the legal hurdles will be a very successful casino. And if they do open, we're very confident that we'll would probably get our entire payment back with interest or return.

On Rocky Gap, SG&A, I think Tim you mentioned, it came in up at $4.1 million for the quarter. I think that compares, if my numbers are right, at $2.6 million last quarter. Any one-time fees in there, you mentioned professional fees, any one-time professional or marketing fees? Or is that sort of the run rate SG&A you would expect for Rocky Gap?

That's above what we would expect to Rocky Gap. The big number in there is marketing of course. So the subject there somewhat flexible with revenue, how the marketing spend goes. But that'd be the difference between quarter-over-quarter, because this was the first full quarter of casino operations.

I didn't catch you, when you mentioned it. Can you say again what the table and slot win per day were?

Slots were $180 and tables were $1,460.

There's no further questions at this time. I'd like to turn the call back over to Mr. Berman and Mr. Cope for closing remarks. Please proceed.

Thank you very much for all of your interest and for all of your questions. We will focus on continuing to execute on our 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. Thank you. Good bye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.