8-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) April 23, 2003

LODGENET ENTERTAINMENT CORPORATION (Exact Name of Registrant as Specified in Charter)

Delaware	0-22334	46-0371161
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3900 West Innovation Street, Sioux Falls, SD	57107
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (605) 988-1000

n/a
(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

Ex-99.1 Press Release

EX-99.2 PowerPoint Slides

Item 7. Financial Statements and Exhibits.

(c)  Exhibits.

99.1	Press Release issued April 23, 2003.
99.2	PowerPoint Slides

Item 9. Regulation FD Disclosure.

LodgeNet Entertainment Corporation issued a press release on April 23, 2003, disclosing its first quarter 2003 results from operations, fiscal 2003 outlook information and other matters. A copy of the press release is attached as Exhibit 99.1.

The press release was issued in advance of an analyst call, which was held at 4:00 PM Central Time on April 23, 2003. During the conference call, LodgeNet presented the PowerPoint slide presentation that is attached as Exhibit 99.2.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LODGENET ENTERTAINMENT CORPORATION
Date: April 23, 2003	By	/s/ Scott C. Petersen
		Scott C. Petersen
	Its	President and Chief Executive Officer

2

EXHIBIT INDEX

99.1	Press Release issued April 23, 2003.
99.2	PowerPoint Slides.

EX-99.1 3 c76456exv99w1.htm EX-99.1 PRESS RELEASE

FOR IMMEDIATE RELEASE

Ann Parker, Director	Mike Smargiassi
Investor Relations	Brainerd Communicators
(T) 605-988-1000	(T) 212-986-6667
ann.parker@lodgenet.com	smarg@braincomm.com

LODGENET REPORTS RECORD RESULTS FOR FIRST QUARTER 2003

- Revenue up 8.4% to a Record $59.6 Million -
- - Revenue Per Room up 2.1% During Quarter -
- - Digital Systems Deployed in Nearly 300,000 Rooms -
- - Over 962,000 Rooms Served Worldwide -

     SIOUX FALLS, SD, April 23, 2003 — LodgeNet Entertainment Corporation (Nasdaq:LNET) today reported its 38th consecutive increase in comparative quarterly revenue and Operating EBITDA¹. Revenue in the first quarter of 2003 increased 8.4 percent to $59.6 million in comparison to the first quarter of 2002, while Operating EBITDA¹ increased to $20.0 million from $19.8 million a year earlier. Operating income was slightly positive this year versus $1.4 million a year earlier. Net loss in the first quarter of 2003 was $8.4 million compared to $6.7 million for the first quarter of 2002.

     The following financial highlights are in thousands of dollars, except per-share data and average shares outstanding:

	Three Months Ended March 31,
	2003			2002
Total revenue	$	59,646		$	55,009
Operating EBITDA1		20,012			19,801
Depreciation and amortization		19,977			18,393
Operating income		35			1,408
Net loss		(8,419	)		(6,665	)
Net loss per common share	$	(0.68	)	$	(0.54	)
Average shares outstanding		12,431,149			12,300,969

     ¹ See Operating EBITDA reconciliation.

-more-

LodgeNet Q1 2003 Earnings 2-2-2-2

     “Driven by the strong performance of our digital rooms, we continue to grow revenue and cash flow,” said Scott C. Petersen, President and Chief Executive Officer. “During the quarter, per room revenue increased over 2 percent despite a 140 basis point reduction in occupancy levels over the first quarter of 2002. This increase was led by a strong guest response for the additional content choices on our digital system. With an 8.4% increase in total revenue in the quarter, we have once again proven our ability to perform during a challenging economic environment.”

     “With a solid top line performance and a clear focus on reducing operating expenditures, controlling capital spending and managing working capital, we were cash flow neutral in the quarter,” said Gary H. Ritondaro, Senior Vice President and Chief Financial Officer. “Selling, general and administrative expenses as a percentage of revenue decreased to 9.1 percent from 10.5 percent in the first quarter of 2002 while guest pay operating expenses per room increased a modest one percent, $2.88 per room compared to $2.85 per room in the first quarter of 2002, on an increase of more than 61,000 rooms served over the comparable quarter.”

     “The foundation of our opportunity continues to be our business model, based on predictable cash flows from long-term contracts,” continued Petersen. “As we expand our industry-leading footprint, we are seeing strong demand from guests and hotels for our digital system, which is now installed in 300,000 rooms or 33.0% of our guest pay room base. With operating costs in check and the flexibility to moderate growth capital we remain committed to achieving our financial goal of reaching net free cash flow after all growth expenditures beginning in the second half of this year. Once we reach net free cash flow, it is our intent to continue to grow our company without reliance on additional debt financing and be in a position to pay down debt in 2004.”

RESULTS FROM OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 VERSUS
THREE MONTHS ENDED MARCH 31, 2002

     Total revenue for the first quarter of 2003 was $59.6 million, an increase of $4.6 million, or 8.4%, compared to first quarter 2002. Revenue from Guest Pay interactive services increased $5.2 million, or 9.9%, resulting from a 7.7% increase in average rooms in operation, with an additional 154,000 digital rooms deployed compared to first quarter 2002. Revenue per room increased from $21.45 per month in the first quarter of 2002 to $21.89 per month in the first quarter of 2003. Per room revenue from movies increased from $17.04 per month in the first quarter of 2002 to $17.12 in the current year quarter despite a 140 basis point decrease in occupancy levels. Guest Pay revenue per room from other sources increased 8.2%, from $4.41 per month in the first quarter of 2002 to $4.77 in the current year quarter, due to expanding revenue from TV Internet, TV On-Demand, digital music, cable television programming services, and other interactive TV services available with the digital system.

     Gross profit increased to $33.1 million in the first quarter of 2003 compared to $32.6 million in the first quarter of 2002. The overall gross profit margin decreased to 55.4% in the current quarter compared to 59.2% in the prior year quarter. The decrease was attributable to increased Internet connectivity costs, programming costs and hotel commissions.

     Guest Pay operations expenses increased 9.0%, or $630,000, in the first quarter of 2003, compared to the year earlier quarter. The increase is primarily due to the 7.7% increase in average rooms in operation. As a percentage of revenue, Guest Pay operations expenses were 12.8% in the first quarter of 2003 compared to 12.7% in the year earlier period. Per average installed room, Guest Pay operations expenses were $2.88 per month in the first quarter of 2003 compared to $2.85 per month in the prior year quarter.

     Selling, general and administrative expenses decreased $345,000, or 6.0%, in the first quarter of 2003 compared to the prior year quarter. This decrease was due to reductions in the levels of bad debt and professional fees incurred in the prior year quarter related to InnMedia, partially offset by increases in payroll-related expenses.

     Depreciation and amortization expenses increased 8.6% to $20.0 million in the current year quarter versus $18.4 million in the first quarter of 2002. The increase was driven by the 7.7% increase in average rooms in operation and the amortization of the new media business acquired in August 2002. At the end of first quarter 2003, the interactive digital system had been installed in more than 297,000 rooms, an increase of 154,000 rooms over the prior year quarter.

     As a result of factors previously described, the Company generated Operating income of $35,000 in the first quarter of 2003 compared to Operating income of $1.4 million in the year earlier quarter. The Company’s net loss increased to $8.4 million from $6.7 million in the year earlier quarter.

LodgeNet Q1 2003 Earnings 3-3-3-3

Operating EBITDA Reconciliation

     Operating EBITDA (defined by the Company as Operating Income plus Depreciation and Amortization) increased to $20.0 million in the first quarter of 2003, from $19.8 million in the first quarter of 2002. As a percentage of total revenue, Operating EBITDA was 33.6% in the current quarter as compared to 36.0% in the same quarter of 2002.

     Operating EBITDA is not intended to represent an alternative to Operating income or cash flows from operating, financing or investing activities (as determined in accordance with generally accepted accounting principles (GAAP)) as a measure of performance, and is not representative of funds available for discretionary use due to the Company’s financing obligations. Operating EBITDA, as defined by the Company, may not be calculated consistently among other companies applying similar reporting measures. Operating EBITDA is included herein because it is a widely accepted financial indicator used by certain investors and financial analysts to assess and compare companies on the basis of operating performance and is an integral part of the Company’s debt covenant calculations. In addition to the GAAP data presented, management believes that Operating EBITDA provides a stable and consistent comparison of operating performance exclusive of historical costs of capital such as depreciation and amortization. Additionally, management also believes that Operating EBITDA provides an important perspective on the Company’s ability to service its long-term obligations, the Company’s ability to fund continuing growth, and the Company’s ability to continue as a going concern.

     Reconciliation of Operating EBITDA to GAAP financial measure (Dollar amounts in thousands):

		Three Months Ended March 31,
		2003		2002
Operating income		$	35	$	1,408
Add back:
	Depreciation and amortization		19,977		18,393
Operating EBITDA		$	20,012	$	19,801

2003 Outlook

     With regard to financial results for the second quarter of 2003, LodgeNet expects to report revenue of between $62.0 million and $65.0 million, resulting in $21.0 to $22.5 million in Operating EBITDA and $1.1 to $2.6 million in Operating income. This outlook is based on the assumption of occupancy rates ranging from a 150 basis point reduction to flat as compared to the second quarter of 2002. Loss per share estimates are $(0.60) to $(0.48) for the second quarter of 2003. With respect to the calendar year 2003, LodgeNet expects to report revenue in a range from $254.0 million to $260.0 million, $86.0 million to $89.0 million in Operating EBITDA, and Operating income from $6.7 million to $9.7 million. Loss per share estimates are $(2.20) to $(1.96) for the full year 2003. This outlook is based on the assumption of occupancy rates ranging from plus or minus 100 basis points as compared to the full calendar year of 2002.

     Reconciliation of operating EBITDA to GAAP financial measure (Dollar amounts in thousands):

		Second Quarter 2003 Outlook				Full Year 2003 Outlook
Operating income		$	1,100	$	2,600	$	6,700	$	9,700
Add back:
	Depreciation and amortization		19,900		19,900		79,300		79,300
Operating EBITDA		$	21,000	$	22,500	$	86,000	$	89,000

     The Company will hold a conference call on Wednesday, April 23, 2003 at 4:00 pm CST. The call is being webcast live over the Internet via ECI at http://www.calleci.com/ecidev/new_ECIsite/conference/pub_cs.jsp. The webcast will be archived at that site for one month and can be accessed via LodgeNet’s company website at www.lodgenet.com. Additionally, the Company has posted slides at its website under the investor relations, company presentation section, which will be referenced during the conference call.

LodgeNet Q1 2003 Earnings 4-4-4-4

About LodgeNet

     LodgeNet Entertainment Corporation (www.lodgenet.com) is the leading provider in the delivery of broadband, interactive services to the lodging industry, serving more hotels and guest rooms than any other provider in the world. These services include on-demand digital movies, digital music and music videos, Nintendo® video games, high-speed Internet access and other interactive television services designed to serve the needs of the lodging industry and the traveling public. As the largest company in the industry, LodgeNet provides service to 960,000 rooms (including more than 900,000 interactive guest pay rooms) in more than 5,700 hotel properties worldwide. More than 260 million travelers have access to LodgeNet systems on an annual basis. LodgeNet is listed on NASDAQ and trades under the symbol LNET.

     This press release contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and are subject to risks, uncertainties, and other factors that could cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition to the risks and uncertainties discussed in the foregoing sections, such factors include, among others, the following: the effects of economic conditions, including in particular the economic condition of the lodging industry, competition, programming availability and quality, technological developments, developmental difficulties and delays, relationships with clients and property owners, the availability of capital to finance growth, the impact of government regulations, and other factors detailed, from time to time, in the Company’s filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

(See attached financial and operational tables)

LodgeNet Q1 2003 Earnings 5-5-5-5

LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollar amounts in thousands, except share data)

					March 31,			December 31,
					2003			2002
				Assets
Current assets:
	Cash and cash equivalents				$	1,188		$	1,107
	Accounts receivable, net					29,440			28,373
	Prepaid expenses and other					4,868			3,772
		Total current assets				35,496			33,252
Property and equipment, net						242,076			243,656
Debt issuance costs, net						6,930			7,443
Intangible assets, net						11,250			12,042
Other assets						1,588			1,691
					$	297,340		$	298,084
			Liabilities and Stockholders’ Equity (Deficiency)
Current liabilities:
	Accounts payable				$	17,700		$	12,812
	Current maturities of long-term debt					8,527			9,320
	Accrued expenses					15,165			12,977
	Deferred revenue					3,358			3,371
		Total current liabilities				44,750			38,480
Long-term debt						344,936			344,470
Other long-term liability						4,995			4,995
Derivative instruments						11,300			11,443
	Total liabilities					405,981			399,388
Commitments and contingencies
Stockholders’ equity (deficiency):
	Common stock, $.01 par value, 50,000,000 shares authorized;
		12,431,149 shares outstanding at March 31, 2003 and December 31, 2002				124			124
	Additional paid-in capital					153,437			153,363
	Accumulated deficit					(249,934	)		(241,515	)
	Accumulated other comprehensive loss					(12,268	)		(13,276	)
		Total stockholders’ equity (deficiency)				(108,641	)		(101,304	)
					$	297,340		$	298,084

LodgeNet Q1 2003 Earnings 6-6-6-6

LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollar amounts in thousands, except share data)

			Three Months Ended March 31,
			2003			2002
Revenues:
	Guest Pay		$	57,867		$	52,637
	Other			1,779			2,372
		Total revenues		59,646			55,009
Direct costs:
	Guest Pay			25,744			21,174
	Other			852			1,281
		Total direct costs (exclusive of other operating expenses shown separately below)		26,596			22,455
Gross profit (exclusive of other operating expenses shown separately below)				33,050			32,554
Operating expenses:
	Guest Pay operations			7,623			6,993
	Selling, general and administrative			5,415			5,760
	Depreciation and amortization			19,977			18,393
		Total operating expenses		33,015			31,146
Operating income				35			1,408
Investment gains				—			280
Interest expense				(8,389	)		(8,126	)
Other income (expense), net				64			(103	)
Loss before income taxes				(8,290	)		(6,541	)
Provision for income taxes				(129	)		(124	)
Net loss			$	(8,419	)	$	(6,665	)
Net loss per common share (basic and diluted)			$	(0.68	)	$	(0.54	)
Weighted average shares outstanding (basic and diluted)				12,431,149			12,300,969

LodgeNet Q1 2003 Earnings 7-7-7-7

LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)

				Three Months Ended March 31,
				2003			2002
Operating activities:
	Net loss			$	(8,419	)	$	(6,665	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization			19,977			18,393
		Investment gains			—			(280	)
		Change in operating assets and liabilities:
			Accounts receivable		(975	)		(5,069	)
			Prepaid expenses		(83	)		(237	)
			Accounts payable		4,863			1,455
			Accrued expenses and deferred revenue		2,115			3,538
			Other		91			84
Net cash provided by operating activities					17,569			11,219
Investing activities:
	Property and equipment additions				(16,180	)		(18,817	)
	Note receivable advances				(1,000	)		—
	Proceeds from affiliates, net				—			763
Net cash used for investing activities					(17,180	)		(18,054	)
Financing activities:
	Borrowings under revolving credit facility				1,000			7,000
	Repayments of revolving credit facility				—			(550	)
	Repayment of long-term debt				(1,176	)		(385	)
	Repayment of capital lease obligations				(234	)		(122	)
	Exercise of stock options				—			423
Net cash (used for) provided by financing activities					(410	)		6,366
Effect of exchange rates on cash					102			—
Increase (decrease) in cash and cash equivalents					81			(469	)
Cash and cash equivalents at beginning of period					1,107			1,528
Cash and cash equivalents at end of period				$	1,188		$	1,059
Supplemental cash flow information:
	Cash paid for interest			$	4,903		$	4,793

LodgeNet Q1 2003 Earnings 8-8-8-8

LodgeNet Entertainment Corporation and Subsidiaries
Five Quarter Summary

				1st Qtr '03			4th Qtr '02			3rd Qtr '02			2nd Qtr '02			1st Qtr '02
Room Base Statistics
Total Rooms Served1					962,852			952,673			939,062			929,696			908,487
	Total Guest Pay Interactive Rooms 2				889,776			876,348			863,777			847,380			828,650
	Total Digital Rooms 3				297,592			265,097			226,475			184,554			143,177
	Percent of Total GP Interactive Rooms				33.4	%		30.3	%		26.2	%		21.8	%		17.3	%
Guest Pay Per Room Statistics (per month)
		Movie Revenue		$	17.12		$	16.84		$	18.98		$	18.20		$	17.04
		Other Interactive Service Revenue			4.77			4.65			4.99			4.22			4.41
		Total Guest Pay Revenue Per Room		$	21.89		$	21.49		$	23.97		$	22.42		$	21.45
		Guest Pay Operations Expense		$	2.88		$	3.08		$	3.01		$	2.98		$	2.85
Summary Operating Results
(Dollar amounts in thousands)
		Total Revenue		$	59,646		$	57,621		$	63,660		$	58,701		$	55,009
		Gross Profit (exclusive of other operating expenses)		$	33,050		$	32,030		$	35,879		$	33,745		$	32,554
		Operating EBITDA4		$	20,012		$	18,325		$	22,450		$	21,317		$	19,801
		Depreciation and Amortization		$	19,977		$	19,385		$	19,241		$	18,899		$	18,393
		Operating Income (Loss)		$	35		$	(1,060	)	$	3,209		$	2,418		$	1,408
		Net Loss		$	(8,419	)	$	(11,248	)	$	(5,512	)	$	(5,701	)	$	(6,665	)
		Cash Provided by Operating Activities		$	17,569		$	4,400		$	20,797		$	7,353		$	11,219
		Property and Equipment Additions		$	16,180		$	15,141		$	19,709		$	18,448		$	18,817
		Gross Profit Margin			55.4	%		55.6	%		56.4	%		57.5	%		59.2	%
		SG&A as Percent of Total Revenue			9.1	%		9.8	%		9.0	%		8.4	%		10.5	%
		Operating EBITDA as Percent of Total Revenue			33.6	%		31.8	%		35.3	%		36.3	%		36.0	%
		Operating Income (Loss) Margin			0.1	%		(1.8	)%		5.0	%		4.1	%		2.6	%
Reconciliation of Operating EBITDA to GAAP Financial Measure
(Dollar amounts in thousands)				$	35		$	(1,060	)	$	3,209		$	2,418		$	1,408
		Operating Income (Loss)		$	35		$	(1,060	)	$	3,209		$	2,418		$	1,408
		Add Back:
			Depreciation and Amortization		19,977			19,385			19,241			18,899			18,393
		Operating EBITDA		$	20,012		$	18,325		$	22,450		$	21,317		$	19,801

LodgeNet Q1 2003 Earnings 9-9-9-9

¹ Total rooms served represents rooms receiving one or more of the Company’s services including rooms served by international licensees.

² Guest Pay interactive rooms receive one or more Guest Pay Services such as movies, video games, music or other interactive services. This number represents domestic Guest Pay Interactive Rooms.

³ Digital interactive rooms provide content stored on a digital file server as a component of LodgeNet’s interactive digital system.

⁴ Operating EBITDA is defined by the Company as Operating Income plus Depreciation and amortization.

EX-99.2 4 c76456exv99w2.htm EX-99.2 POWERPOINT SLIDES

This presentation contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and are subject to risks, uncertainties, and other factors that could cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the effects of economic conditions, including in particular the economic condition of the lodging industry, competition, programming availability and quality, technological developments, developmental difficulties and delays, relationships with clients and property owners, the availability of capital to finance growth, the impact of government regulations, and other factors detailed, from time to time, in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this presentation. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Slide 1

(in millions) Steady Revenue Growth Despite Occupancy Declines FINANCIAL HIGHLIGHTS Q1 '01 Q2 '01 Q3 '01 Q4 '01 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 LTM Revenue 200 207 212 217 221 224 230 235 240 LTM Occupancy 0.675 0.669 0.655 0.645 0.635 0.632 0.631 0.631 0.628 Slide 2

Q1 2003 Q1 2002 % Change Movie Revenue $ 17.12 $ 17.04 .5% Other Interactive Services $ 4.77 $ 4.41 8.2% Total Per Guest Pay Room $ 21.89 $ 21.45 2.1% Q1 Revenue Per Room Analysis Slide 3 Despite occupancy levels down 140 bps Digital platform in 33% of rooms, generating 38% more revenue than tape. FINANCIAL HIGHLIGHTS

Slide 4 Q1 2003 Q1 2002 bp Change Gross Profit Margin 55.4% 59.2% -3.8 Reconciliation: TV Internet Integration (InnMedia) -2.0 Programming Costs (Mix Shift) -0.9 Hotel Incentive Commissions -0.9 -3.8 Gross Margin Analysis FINANCIAL HIGHLIGHTS

Improving Efficiencies Slide 5 Q1 2003 Q1 2002 % Change GP Operations Expense $ 2.88 $ 2.85 1.1% SG&A Expense 2.05 2.35 (12.8%) Total Digital Revenue $ 4.93 $5.20 ( 5.2%) FINANCIAL HIGHLIGHTS SG&A down to 9.1% of revenue, from 10.5% Q1'02

(in millions) EBITDA Growth Despite Occupancy Declines Slide 6 1995 Q1 '01 Q2 '01 Q3 '01 Q4 '01 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 EBITDA 15.9 69.6 72.4 73.4 75.1 77.6 79.6 81.7 81.9 82.1 Occupancy 0.251 0.675 0.669 0.655 0.645 0.635 0.632 0.631 0.631 0.628 FINANCIAL HIGHLIGHTS

Decreasing Capital Spending - Q1 vs. Q1 Q1 2002 Q1 2003 2001 18.8 16.18 Total Capital Spending Q1 2002 Q1 2003 2001 475 420 Capital Per New Digital Room Slide 7 (in millions) FINANCIAL HIGHLIGHTS

Cash from Operations Analysis - Q1 vs Q1 Q1 2003 Q1 2002 Cash from Operations $ 17.6 $ 11.2 Corporate Capital (3.6) (4.5) Minor Extension Investment (0.9) (1.0) Discretionary Free Cash Flow $ 13.1 $ 5.6 Digital Renewal Investment * (4.9) (3.3) New Room Investment ** (7.7) (9.1) Post-Growth Cash Flow $ 0.4 $ (6.8) *Digital Upgrade Rooms 14,300 9,000 **New Digital Rooms 18,400 19,300 Slide 8 (in millions) FINANCIAL HIGHLIGHTS

FINANCIAL OUTLOOK Q2 & Full Year 2003 Guidance Q2 '03 Range FY' 03 Range Revenue $ 62.0 - $ 65.0 $ 254.0 - $ 260.0 Operating EBITDA $ 21.0 - $ 22.5 $ 86.0 - $ 89.0 Operating Income $ 1.1 - $ 2.6 $ 6.7 - $ 9.7 Net Loss $ (7.4) - $ (5.9) $(27.4) - $ (24.4) EPS (Loss) $(0.60)- $(0.48) $(2.20) - $ (1.96) Capital Investment $15.0 - $ 16.0 $ 60.0 - $ 63.0 Slide 9 (in millions except per share)

FINANCIAL OUTLOOK Second Quarter Operating Strategy Basic assumption - Occupancy rates will be soft Action Plan: Reduce discretionary operating expenses Moderate capital investment - new rooms emphasis Incremental financing - approximately $8 million Net, free cash flow positive beginning in 2nd Half '03: Manage capital investment program Debt to peak at approximately $363 million Intent to reduce debt levels in 2004 and beyond Slide 10

Copyright 2003 LodgeNet Entertainment Corporation All rights reserved.

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