11-K 1 a11-k.txt FORM11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K (Mark One): /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 or / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file Number: 0-22334 LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN AND TRUST (Title of the Plan) LODGENET ENTERTAINMENT CORPORATION (Name of Issuer of the Securities Held Pursuant to the Plan) DELAWARE 46-0371161 (State of Incorporation) (IRS Employer Identification Number) 3900 WEST INNOVATION STREET, SIOUX FALLS, SOUTH DAKOTA 57107 (Address of Principal Executive Offices) (605) 988-1000 (Registrant's Telephone Number, including Area Code) INDEX

PAGE ---- Form 11-K cover page for the LodgeNet Entertainment Corporation 401(k) Plan and Trust ........................................................................ Cover Index............................................................................................ 2 Signature........................................................................................ 3 FINANCIAL STATEMENTS AND EXHIBITS The following financial statements of The LodgeNet Entertainment Corporation 401(k) Plan and Trust for the time periods specified below are submitted herewith together with the independent auditor's report thereon: Independent Auditor's Report..................................................................... F-1 Statement of Net Assets Available for Benefits as of December 31, 1999 and 1998.............................................................. F-2 Statements of Changes in Net Assets Available for Benefits for the year ended December 31, 1999.................................................................. F-3 Notes to Financial Statements.................................................................... F-4 Supplementary Schedules: Schedule of assets held for investment purposes at end of year................................ F-7 Consent of Independent Auditors.................................................................. F-8

All other schedules are omitted since the required information is not present, or is not present in the amounts sufficient to require submission of a schedule; or because the information required is included in the financial statements and notes thereto. 2 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN AND TRUST -------------------------------------------------------- (Name of Plan) Date: June 28, 2000 /s/ Scott C. Petersen ---------------------------------------------- Scott C. Petersen President, Chief Executive Officer, and Plan Trustee LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN Financial statements as of December 31, 1999 and 1998 together with report of independent public accountants

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE PAGE Report of independent public accountants 1 Statements of net assets available for benefits 2 Statement of changes in net assets available for benefits 3 Notes to financial statements 4 Schedule of assets held for investment purposes at end of year 7

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of LodgeNet Entertainment Corporation 401(k) Plan: We have audited the accompanying statements of net assets available for benefits of LodgeNet Entertainment Corporation 401(k) Plan as of December 31, 1999 and 1998, and the related statement of changes in net assets available for benefits for the year ended December 31, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of LodgeNet Entertainment Corporation 401(k) Plan as of December 31, 1999 and 1998, and the changes in net assets available for benefits for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplementary schedule is the responsibility of the Plan's management. The supplement schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Minneapolis, Minnesota, June 2, 2000 F-1 LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN Statements of net assets available for benefits As of December 31

1999 1998 ----------- ---------- INVESTMENTS $10,539,580 $6,804,273 CONTRIBUTIONS RECEIVABLE: Participant 177 44,740 Employer 25,386 55,548 ----------- ---------- Total contributions receivable 25,563 100,288 ----------- ---------- Net assets available for benefits $10,565,143 $6,904,561 ----------- ---------- ----------- ----------

The accompanying notes are an integral part of these statements. F-2 LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN Statement of changes in net assets available for benefits For the year ended December 31, 1999 ADDITIONS: Contributions- Participant $ 1,433,571 Employer 560,267 Rollover 18,369 ------------ Total contributions 2,012,207 ------------ Investment income- Interest income 44,428 Net increase in fair value of investments 2,432,458 ------------ Total investment income 2,476,886 ------------ Total additions 4,489,093 ------------ DEDUCTIONS: Expenses (164) Distributions to participants (827,236) Forfeitures, net (1,111) ------------ Total deductions (828,511) ------------ Net increase 3,660,582 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 6,904,561 ------------ End of year $ 10,565,143 ============ The accompanying notes are an integral part of this statement. F-3 LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN Notes to financial statements December 31, 1999 and 1998 1 DESCRIPTION OF THE PLAN The following is not a comprehensive description of LodgeNet Entertainment Corporation 401(k) Plan (the Plan) and, therefore, does not include all situations and limitations covered by the plan. Participants should refer to the plan agreement for a more complete description of the Plan's provisions. GENERAL The Plan is a defined contribution plan covering all full-time employees of LodgeNet Entertainment Corporation (the Company) who have completed 90 days of service and are age 18 or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. PLAN OPERATIONS The Company functions as the plan administrator. The plan administrator utilizes Fringe Benefits Design, Inc. and Nationwide Life Insurance Company to provide record-keeping and reporting services. Nationwide Life Insurance Company and Charles Schwab Retirement Plan Services are the asset custodians of the Plan. Administrative expenses of the Plan are paid by the Company and were $29,355 in 1999. CONTRIBUTIONS The Plan includes 401(k) basic and supplemental cash deferred arrangements. Participants in the Plan may make a basic voluntary contribution by salary deferral in amounts ranging from 1 percent to 15 percent of their compensation, as defined. The Company matches participant contributions in an amount equal to 50 percent of the first 6 percent of each participant's eligible contribution for the plan year, not to exceed 3 percent of their compensation, as defined. The Company may make discretionary contributions to the Plan. In a year in which the Company chooses to make discretionary contributions, the contributions will be allocated based upon a participant's proportionate share of total compensation for all participants. There were no discretionary contributions in 1999. VESTING Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company's matching contribution portion of participant accounts plus actual earnings thereon is based on years of continuous service. A participant is 100 percent vested after five years of credited service based on the following percentages: Less than one year of service 0% vested One year but less than two 20% vested Two years but less than three 40% vested Three years but less than four 60% vested Four years but less than five 80% vested Five years or more 100% vested If a participant dies or becomes disabled while still employed by the Company, his or her entire plan interest becomes 100 percent vested. Forfeitures of the nonvested employer contributions, resulting from participants who withdraw from the Plan, are used to reduce future employer contributions. PARTICIPANT LOANS Participants may borrow funds from the Plan up to 50 percent of their vested balance. Loans will not be granted in amounts less than $1,000 or greater than $50,000. Loans are evidenced by a promissory note and have a repayment period of up to five years, unless the loan qualifies as a home loan. The plan administrator will determine the appropriate interest rate by obtaining at least one quote from a financial institution, as chosen by the plan administrator, that is in the business of lending money. F-4 DISTRIBUTION OF BENEFITS Upon retirement, death, disability or attainment of age 62, a participant or a participant's beneficiary, in the case of death, may receive the vested portion of the amount credited to the participant's account by a lump-sum payment or, if the invested portion exceeds $3,500, the participant may elect to receive periodic installment payments. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared on the accrual basis of accounting. USE OF ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Ultimate results could differ from those estimates. INVESTMENTS Participants have the opportunity to direct all money allocated to their accounts. Participants have 14 investments from which to choose. A description of each investment is as follows: DREYFUS STANDARD & POOR'S 500 INDEX--Seeks investment results that correspond to the price and yield performance of publicly traded common stocks in the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. FIDELITY ASSET MANAGER--Seeks capital appreciation. NEUBERGER/BERMAN LIMITED BOND--Seeks income, consistent with low risk to principal and liquidity. OPPENHEIMER GLOBAL--Seeks capital appreciation; current income is not an objective. AMERICAN CENTURY 20TH CENTURY ULTRA--Seeks capital growth. NATIONWIDE VIRTUOSO II--Seeks the guarantee of principal and interest through an unallocated insurance contract. A new interest rate is declared annually. DREYFUS A BOND--Seeks current income consistent with preservation of capital and maintenance of liquidity. NATIONWIDE MONEY MARKET--Seeks to provide a high level of current income while preserving capital and maintaining liquidity. WARBURG PINCUS EMERGING GROWTH--Seeks maximum capital appreciation. JANUS WORLDWIDE--Seeks long-term growth of capital. This fund is considered to be moderately volatile. JANUS TWENTY--Seeks stocks with strong current financial positions and the potential for future growth. It may invest without limit in foreign securities. This fund is nondiversified. FIDELITY ADVISOR GROWTH OPPORTUNITY--Seeks to provide capital growth. Considered to be a moderately volatile investment option. AMERICAN CENTURY INCOME & GROWTH--Seeks long-term growth of capital as well as current income. Considered to be a relatively volatile investment option. LODGENET ENTERTAINMENT CORPORATION COMMON STOCK--Invests in LodgeNet Entertainment Corporation common stock. Limited to 10 percent of contributions made. All of the investments described above, except for Nationwide Virtuoso II and the Company's common stock, are part of an unallocated insurance contract pooled separate account with Nationwide Life Insurance Company. F-5 VALUATION OF ASSETS Investments, except for Nationwide Virtuoso II which is valued at contract value, are valued at market value as reported by the asset custodian as of December 31, 1999 and 1998, based on quoted market prices of investments held by the funds. Net unrealized gains represent the increase in the market value of an investment from the end of the prior year or from the date of purchase, if purchased during the year, to the end of the current year. 3 INVESTMENTS The following presents investments that represent 5 percent or more of the Plan's net assets at December 31:

1999 1998 ---------- ---------- Dreyfus S&P 500 Index Fund, 540,069 and 516,301 shares, respectively $2,161,068 $1,762,114 Fidelity Asset Manager Fund, 351,903 and 406,582 shares, respectively 713,845 746,666 Oppenheimer Global Fund, 177,867 and 209,591 shares, respectively 630,519 481,143 American Century 20th Century Ultra Fund, 529,902 and 551,926 shares, respectively 2,423,032 1,829,588 Janus Worldwide Fund, 332,722 and 205,344 shares, respectively 827,952 322,431 Janus Twenty Fund, 327,887 and 80,895 shares, respectively 1,131,644 175,081 LodgeNet Entertainment Corporation common stock, 23,768 and 19,066, respectively 593,898 135,316

During 1999, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows: Mutual funds $1,917,519 Common stock 418,217 ---------- $2,335,736 ========== 4 TAX STATUS The Internal Revenue Service has determined and informed the Company by a letter dated February 14, 1995, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (the IRC). The Plan has been amended since receiving the determination letter; however, the plan administrator and the Plan's tax counsel believe that the Plan continues to operate in compliance with the applicable requirements of the IRC and remains tax-exempt. 5 PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of the Plan's termination, participants will become 100 percent vested in their accounts. F-6 LODGENET ENTERTAINMENT CORPORATION 401(K) PLAN (EMPLOYER IDENTIFICATION NUMBER: 46-0371161) (PLAN NUMBER: 001) Schedule of assets held for investment purposes at end of year As of December 31, 1999

Number of units or shares Description Cost Market value ----------- ---------------------------------------------------------------------------- ---- ------------ 161,595 Nationwide Virtuoso II unallocated insurance contract** * $ 207,681 Nationwide Arranger pooled separate accounts**: 540,069 Dreyfus Standard & Poor's 500 Index * 2,156,868 351,903 Fidelity Asset Manager * 712,039 111,465 Neuberger/Berman Limited Bond * 134,434 177,867 Oppenheimer Global * 628,782 529,902 American Century 20th Century Ultra * 2,418,566 115,851 Dreyfus A Bond * 139,341 240,534 Nationwide Money Market * 456,071 81,530 Fidelity Advisor Growth Opportunity * 160,468 47,020 Warburg Pincus Emerging Growth * 96,515 332,722 Janus Worldwide * 825,400 327,887 Janus Twenty * 1,129,448 199,425 American Century Income & Growth * 422,147 23,768 LodgeNet Entertainment Corporation common stock** * 592,194 Loans to participants, with interest ranging from 8.25 percent to 9.75 percent** 459,626 ----------- Total investments $10,539,580 ===========

*Historical cost is omitted for participant-directed investments. **Denotes party in interest. F-7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated June 2, 2000 included in this Form 11K, into the Company's previously filed Registration Statement, (Form S-8 No. 33-75906). ARTHUR ANDERSEN LLP Minneapolis, Minnesota, June 28, 2000 F-8