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November 23, 2014

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Aztar Corp. remains bullish on LV Tropicana redevelopment plan

The parent company of the Tropicana hotel-casinos reported a 3 percent decline in fourth-quarter profit when business plummeted after a parking garage at the company's flagship property in Atlantic City collapsed and killed four workers. Results were helped by the Las Vegas resort, which benefited from a stronger economy, executives said.

Phoenix-based Aztar Corp. on Wednesday reported a drop in net income to $11.7 million from $12.1 million a year ago. On a per-share basis, earnings rose by a penny to 32 cents as the number of shares outstanding in the most recent quarter, at 36.6 million, was about 6 percent less than a year ago. Per-share results beat analysts' expectations of earnings of 27 cents.

Prior to the accident and during the company's last earnings report in October, Aztar Chief Executive Paul Rubeli said the company would put off for at least a year its decision on whether to build a new 2,500-room resort on the north side of the Tropicana site in Las Vegas. The company had previously said it would make that decision sometime this quarter.

During a conference call Wednesday, Rubeli said the company -- which expects to complete design work on the Tropicana in April -- is bullish on the potential project but still wants to finish and open the Atlantic City expansion first.

Hotel revenue in Las Vegas began rebounding last summer and casino revenue has picked up more recently, which "augurs extremely well for the redevelopment," he said. "Both (indicators) are heading in the right direction, he said. "This is a better environment than we saw a year ago today."

The effect of California's growing tribal casinos on the Tropicana Las Vegas and its Ramada Express in Laughlin isn't expected to be dramatic, even with the potential of more slot machines in that state, Rubeli added.

California casinos aren't necessarily taking business from Laughlin or Las Vegas because they are likely taking the place of local Friday night activities such as going out to eat or going to the movies, he said.

A multi-story parking garage under construction at the Tropicana Atlantic City collapsed in October, resulting in the temporary evacuation of 600 hotel rooms, the closure of several blocks of traffic and obstructed access to the resort's main entrance, self-park garage and bus terminal. A main road reopened on Jan. 30 but traffic remains hindered and the bus terminal remains closed. Customers must access the property's porte cochere and self-park garage via secondary routes, the company said.

The parking garage was part of a $225 million expansion at the resort that was scheduled to open by the end of March but is now expected to open by the end of September. The expansion includes a 500-room hotel tower and a 200,000-square-foot dining, entertainment and retail complex called "The Quarter," which will have an Old Havana theme. Preparation to remove the garage debris is under way and further inspection of the adjacent structure is needed, officials said.

According to plans filed with Clark County, Aztar is contemplating dividing the 34-acre Tropicana Las Vegas site into two sections and tearing down the north side of the resort. The south side would retain 820 or so hotel rooms that would be reserved for subsequent development by the company or with a joint venture partner.

Before making a decision on the site, Rubeli said the company wanted to get a better feel for the economic rebound nationwide and in Las Vegas as well as focus on the Atlantic City expansion, which will produce cash flow that would help pay for the Las Vegas project.

The Tropicana Atlantic City this month began marketing aggressively to customers to offset the loss of revenue caused by the disruption of business as well as "the perception of disruption caused by the accident," Rubeli said.

Fourth-quarter earnings included a $6.7 million settlement from the Internal Revenue Service, or 19 cents per share, regarding deductions of casino complementaries on past tax returns. Similarly, the year-ago quarter included a $1 million tax benefit, or 3 cents per share.

Revenue at the company fell 6.9 percent to $185.3 million. Cash flow fell 25.1 percent to $30.2 million. Cash flow would have been around $21.9 million had the garage accident not happened, a 15 percent decline from a year earlier and in line with expectations, officials said.

Cash flow at the Tropicana Las Vegas rose 26.5 percent to $6.2 million. Revenue at the resort increased 7.8 percent to $37.3 million. Occupancy of 95.1 percent was up from 88.1 percent while the average daily room rate rose to $72.79 from $66.07.

Revenue at the Tropicana Atlantic City fell 16.4 percent to $88.9 million and cash flow plummeted 45.4 percent to $14.2 million. Revenue at the Ramada Express Laughlin fell 3.5 percent to $21.8 million and cash flow fell 11.3 percent to $4.7 million.

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