Taxes hurt Mikohn earnings

David Strow

Tuesday, Oct. 31, 2000 | 11:10 a.m.

Mikohn Gaming Corp. of Las Vegas today reported a 7 percent decline in net income for the quarter ending Sept. 30, the result of a sharp increase in the company's federal tax rate.

Mikohn posted net income of $1.17 million for the quarter, down from $1.26 million in the year-ago quarter. The company earned 11 cents per share, down from 12 cents per share.

Company revenues rose 3 percent, to $28.25 million, while cash flow shot up 22 percent to $7.2 million. But those gains were countered by an increase in Mikohn's tax rate from 20 percent to 39 percent. In the year-ago quarter, Mikohn's taxes were reduced by a research and development tax credit.

The loss of that credit resulted in a tax bill of $759,000, up from $311,000 in the year-ago quarter.

The decline in earnings was expected, and didn't deter investors today -- in midday trading, Mikohn was up 13 cents to $6.25.

Mikohn said revenue growth was driven primarily by growth in recurring revenue sources, particularly in the company's slot machine business. Revenue from recurring sources, primarily from leased and revenue participation slot machines and table games, accounted for 32 percent of Mikohn's revenues in the quarter, up from 26 percent one year ago. Slot operation revenues increased 138 percent.

The company, which also sells casino systems and casino signage products, is focusing much of its energies on its slot machine offerings. It now has 1,600 "Yahtzee"-themed slots installed, with contracts to install another 900. In addition, the company said it has contracts to install more than 500 of its new "Battleship"-themed slots.

Meanwhile, the owner of the Hard Rock Hotel & Casino near the Las Vegas Strip posted strong gains in revenues and cash flow for the quarter ending Sept. 30, though the company still posted a net loss.

Hard Rock Hotel Inc. posted a net loss of $1 million, a substantial improvement over the loss of $3.8 million recorded in the year-ago quarter. Revenues rose 24 percent to $29.6 million, while cash flow increased 94 percent to $6.2 million.

The hotel-casino reported increased business across the board, with a 67 percent increase in table game revenues, a 10 percent increase in slot revenues and a 30 percent increase in food and beverage revenues.

Casino revenues rose 40 percent to $12.1 million, while hotel revenue increased 14 percent to $6.7 million. The hotel reported a "substantial" increase in average daily room rates, but didn't specify its current ADR.

Hard Rock Chairman and Chief Executive Peter Morton said renovations of the Hard Rock's original tower will begin in November.

Also reporting earnings Monday was American Vantage Cos. of Las Vegas, which posted a loss of $3.85 million for the fiscal year ending July 31, compared to net income of $2.03 million in the previous fiscal year. The company lost 79 cents per share, compared to net income of 38 cents per diluted share in the year-ago period.

Revenues plunged to $589,000 for fiscal 2000, down from $6.7 million in the year-ago period. The company's loss from continuing operations was $1.8 million, compared to $2.5 million one year ago.

The company did not break out results for the quarter ending July 31.

American Vantage's earnings were hurt by the decision of the Table Mountain Tribe to terminate American Vantage's consulting contract at its California casino, which was the source of all of the company's fiscal 1999 revenues. The company's lawsuit against the tribe was thrown out by a California federal court in September for lack of jurisdiction, though the company said it plans to refile its lawsuit in California Superior Court.

The company's current focus is Placement 2000, an Internet-based recruitment database primarily for information technology workers. This subsidiary recorded revenues of $589,000 in the fiscal year, but also posted expenses of $1.17 million. American Vantage said the subsidiary "is in need of additional working capital," and said it is reviewing "strategic alternatives" for the subsidiary.

The fiscal year's revenues included the operations of Border Grill, located in Mandalay Bay, and WCW Nitro Grill, located at the Excalibur. American Vantage closed the WCW Nitro Grill in September as part of a company-wide restructuring, taking a $1.2 million loss in the process.

Additional assets will be sold, the company said, though it didn't identify what those assets might be. The goal of the restructuring is to raise cash to "acquire, merge into or make an investment in an existing business or businesses," American Vantage said.