Aztar profit drops 73%

By Liz Benston (contact)

Thursday, April 22, 2004 | 10:41 a.m.

Officials at the parent company of the Tropicana hotel-casino in Las Vegas said Wednesday they still won't decide whether to redevelop the property until the first quarter of next year -- and reported stronger quarterly numbers for the Las Vegas property.

That's when Aztar Corp. executives say they will have a better sense of whether the Las Vegas market has improved enough to warrant spending millions of dollars on a new megaresort.

The Phoenix-based company reported a 73 percent drop in first-quarter profit Wednesday. Earnings were depressed by a tax charge and the effects of a construction accident at the company's Tropicana casino in Atlantic City.

But cost controls at the company's Las Vegas and Laughlin casinos helped boost Aztar's cash flow by 48 percent.

Profit fell to $3.7 million in the first quarter ended April 1 from $13.5 million in the same quarter a year ago. On a per share basis, earnings fell to 10 cents per share compared to 35 cents per share a year earlier.

Without the effects of the tax charge and including insurance recoveries on the construction accident, profit would have been 45 cents in the quarter, beating analysts' estimates of 32 cents, executives said.

In October, the collapse of a parking garage under construction in Atlantic City killed four construction workers and injured others. It is part of a $245 million expansion of more than 500 hotel rooms as well as a retail and entertainment district that was scheduled to open in March but is now set to open in September. The company filed for $6.9 million in business interruption claims for the first quarter of this year with its insurance carriers but doesn't know yet what it will recover. Recovered damages in the first quarter would have added about 11 cents per share to the company's profit, officials said.

Indiana's tax court recently ruled against Aztar in the company's challenge to an assessment for additional Indiana state income tax. The company had disputed the state's position that gaming taxes paid to the state based on casino revenue are not deductible. Aztar expects to pay $17.3 million to cover tax assessments plus interest from 1996 through the end of the first quarter of 2004.

The company has asked the state courts to review the decision, which will likely affect other companies with Indiana casinos that have not taken into account past tax payments, executives said.

"I don't know of any state in the union that doesn't deduct gaming taxes," Chief Executive Officer Paul Rubeli said.

Revenue rose 1 percent to $205.3 million and cash flow, a key indicator of casino performance, rose 6 percent to $46.7 million. The revenue figure excludes promotional expenses such as costs for casino complementaries.

Revenue at the Tropicana in Las Vegas rose 7 percent to $41 million. Cash flow rose 48 percent to $9.2 million. The occupancy rate rose 3 percentage points to 98.1 percent and the average daily rate rose $15.13 to $86.24.

Revenue at the Ramada Express Laughlin was relatively flat at $24.8 million but cash flow rose 9 percent to $7.2 million. Rubeli said competition from tribal casinos near Laughlin appears to have stabilize and the city has also benefited from Las Vegas' growth.

Morgan Stanley gaming analyst W. Todd Scott today raised his growth estimates for the Tropicana in Las Vegas on strong overall trends on the Strip.

"We expect the strong first quarter 2004 Las Vegas Strip results to continue throughout 2004," Scott wrote in a research note to investors.