Lakes Entertainment Inc. swung to an operating loss in the second quarter after the company ended a management agreement at a Michigan casino.

The Minnetonka-based developer and manager of casinos said Wednesday that its operating loss was $1.1 million in the quarter ended July 1, compared with earnings from operations of $15.8 million a year earlier. Net earnings dropped to $425,000 from $9.5 million last year.

The Pokagon Band of Potawatomi Indians and Lakes Entertainment were in the fourth year of a five-year contract for the Four Winds Casino Resort in New Buffalo, Mich., which has proved to be successful. The tribe paid Lakes a buyout fee of about $24.5 million to end the contract last year.

Without the Four Winds contract, revenue for the quarter dipped to $2.5 million compared with $28.2 million last year.

Lakes shares fell 4 cents to $2.66 on Wednesday.

The company also took impairment charges of $1.4 million in the quarter, including an $800,000 loss for ending an Indian casino project near San Diego.

Lakes terminated the agreement with the Jamul tribe on March 13 after investing $57.5 million toward the development of a casino on the reservation that, after more than 12 years, never broke ground. In ending the deal, Lakes said it is likely that the tribe won't be able to repay outstanding debt.

"We decided there were other alternatives for our money," Lakes President and Chief Financial Officer Tim Cope said. "It doesn't meant they can't get something going in the future, and they may be very successful."

Lakes continues to have collateral in revenue from any future casino and other assets.

CEO Lyle Berman said in a statement that the company is maintaining a 10 percent interest in Rock Ohio Ventures, upping its contributions to $20.2 million for casino projects in Cincinnati and Cleveland.

Last week, Lakes closed on a $6.8 million deal to purchase Rocky Gap Lodge and Golf Resort, a four-diamond resort in Cumberland, Md., where it plans to add a casino that will open in mid-2013, Cope said.

Jackie Crosby • 612-673-7335