Aztar Reports Loss in 2Q Earnings

 Though second quarter revenue was up to $221.9 million, compared with $221.4 million in the comparable 2005 quarter, Aztar still lost $66.1 million.

The entire loss and about $12 million in profit was sucked away because it had to pay Pinnacle Entertainment a $78 million fee for canceling a pre-existing merger agreement with that company. Aztar had originally planned to merge with Pinnacle, but Columbia Entertainment offered a last minute and more lucrative offer.

During a conference call held yesterday for analysts and Wall Street followers, the merger was omnipresent throughout the question and answer period. With the Las Vegas property under sharp speculation as to its future, Hubert Wong, a Vice President with Aztar said the company will start converting its slot machines to ticket-in ticket-out capability. A sign that the Las Vegas Tropicana won’t be shuttered anytime soon.

“I do believe it is [Columbia Sussex‘s] intention to continue to operate the property in the long term and not their intention to discontinue operations. They will build and expand the property,” said Robert Haddock, Aztar chairman, president and CEO, during the conference call.

In Atlantic City, Aztar’s Senior Vice President of Finance and Development Gary Simspn said the Tropicana will undergo a renovation of the main table pits, which will  be an important tool for capturing market share in 2007. Simpson said the addition of The Quarter has given the property a higher share of the average customer’s total spend.

During the second quarter, the Atlantic City Tropicana saw 95.6 percent of its rooms occupied, up from 91.6 percent at this time in 2005. The hotel is also earning 10 percent more on its rooms for its average daily rate.The property also enjoyed EBITA growth of 17 percent, 5.4 million.

However, the property did not fare so well at the tables (including poker), which was down 6.4 percent in revenue. Simpson said the decline was, “mostly due to bad luck at the tables.” During the last quarter, the table games held 14 percent, while the previous four quarters took 16 percent of gambler's money.

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The closure of all Atlantic City casinos in early July due to a political standoff also negatively impacted the Tropicana. According to Simpson the property lost $5 million in revenue including the impact immediately before and after the closure. Hotel rooms the following weekend were also only about 80 percent full rather than 100 percent full.

The Aztar/Columbia merger is still subject to approval by Aztar shareholders and is expected to close in the fourth quarter of 2006. As part of the agreement with Columbia, Aztar must sell its Missouri property, Casino Aztar Caruthersville. The company has retained an investment banking firm and is currently in discussions with  several potential buyers. Approval by Missouri gaming authorities will be required for any transaction involving the sale of our Missouri property.

Consolidated revenue was $443.2 million in the first half of 2006, compared with $437.3 million in the first half of 2005. Property EBITDA from continuing operations was $120.8 million in the 2006 period, compared with $109.8 million a year earlier. First-half 2006 net loss was $62.9 million, equivalent to $1.77 per diluted share, compared with net income of $25.4 million, equivalent to 68 cents per diluted share, in the first half of 2005. Adjusted diluted net income per share was 72 cents in the 2006 first half, which is after stock option compensation expense equivalent to four cents per share, compared with 67 cents in the 2005 first half.

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