Wednesday, April 22, 1998 | 9:53 a.m.
Five big Las Vegas hotel-casinos reported lower quarterly profits this morning as the overcapacity in the Strip gambling market worked its way to their bottom lines.
Lower operating earnings were reported by Hilton Hotels Corp.'s three Strip-area casinos, as well as the Riviera and Tropicana. In addition, Standard & Poors on Tuesday downgraded the rating of Circus Circus Enterprises Inc. debt, citing a shortage of gamblers in Circus casinos.
The Flamingo Hilton reported EBITDA -- earnings before interest, taxes, depreciation and amortization -- of $25 million, down 7 percent from the year-ago quarter as occupancy fell 2.2 percentage points to 90 percent.
Bally's, another Hilton property, also showed an EBITDA decrease of 7 percent to $25 million as occupancy declined 1.8 points to 88.5 percent and its gaming win percentage declined.
The Las Vegas Hilton reported EBITDA of $17 million, an 11 percent decline from $19 million in the 1997 quarter. Occupancy declined 2.1 points to 87.9 percent. Despite these results, Hilton said the hotel's new Star Trek attraction is meeting expectations of bringing more people to the hotel.
Despite the Las Vegas results, Hilton said its first-quarter profit rose 13 percent as the strong demand for hotel rooms allowed it to boost rates and results improved at its Reno, Atlantic City and overseas casinos.
Hilton net income rose to $77 million, or 29 cents a diluted share, up from $68 million, or 12 cents, in the year-ago quarter. The per-share earnings matched the average estimate of analysts polled by IBES International Inc.
Hilton revenue rose 4.8 percent to $699 million from $667 million and room rates rose 7.3 percent to an average of $157 a night.
Separately, Riviera Holdings Corp. reported a first-quarter loss of $319,000, or 6 cents share, compared to a net profit of $979,000 or 19 cents in the year-ago quarter.
Riviera owns and operates the Riviera hotel-casino, operates the Four Queen hotel-casino in downtown Las Vegas and is developing a casino in Black Hawk, Colo.
Riviera blamed the loss on higher depreciation and interest expenses, saying operating earnings before interest, taxes, depreciation and amortization rose 4.2 percent to $7.8 million. Revenues of $39.2 million were off $300,000.
"In early 1997, we determined that the dynamics of the Las Vegas market were shifting due to numerous causes. After detailed research and analysis, we revitalized our marketing programs and implemented aggressive cost reduction initiatives that resulted in the Riviera's ability to counter the adverse earnings trend being experienced by the competition by keeping (operating earnings) constant in the fourth quarter of 1997 and growing it in the first quarter of 1998," said CEO William Westerman.
And Aztar Corp. of Phoenix, owner of the Tropicana, said it earned $618,000, or 1 cent per share, compared to break-even operating earnings a year earlier. Operating cash flow increased nearly 40 percent to more than $21 million at the Atlantic City Tropicana.
"Unfortunately, the large increase in the operating cash flow from the Atlantic City Tropicana and our riverboat division was offset to a significant degree by lower results at our properties in Nevada, particularly by lower levels of table games revenues at the Las Vegas Tropicana," said President Paul Rubeli.
Also, Standard & Poor's lowered its ratings of Circus Circus Enterprises Inc. and removed it from CreditWatch.
"The downgrade reflects the current difficult market conditions on the Las Vegas Strip, the prospects for continued softness over the near term, as well as the company's deteriorating credit measures. The increase in Circus' leverage is due to the debt incurred to finance recent and current construction projects, as well as weaker-than-expected cash flow growth.
"Circus' operating performance has suffered over the last few quarters, particularly in Las Vegas, due primarily to new capacity additions in the market. Room rates and occupancy levels have been affected, and the company is not generating adequate gaming volumes, particularly at Luxor. As a result, the over $500 million recently spent at Luxor and Circus Las Vegas have not yielded adequate returns to date," S&P said.
Standard & Poors said Circus, with $1.8 billion in debt, could be lowered further if its $950 million Mandalay Bay hotel-casino does not meet expectations after opening next year.
The Circus senior unsecured debt and long-term corporate credit rating were lowered from BBB to BBB-.
Finally, gaming industry supplier Acres Gaming of Corvallis, Ore., reported a quarterly loss of $1.9 million, or 22 cents per share; a decline from $1.3 million or 15 cents lost in the year-ago quarter. Revenue of $2.8 million was up from $2.7 million.
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