Tropicana helps Aztar to double first-quarter profit

By Liz Benston (contact)

Thursday, April 21, 2005 | 10:59 a.m.

First-quarter profit more than doubled for the owner of the Tropicana resort in Las Vegas but still missed analysts' expectations because of a less than impressive performance in Atlantic City.

Phoenix-based Aztar Corp. earned $9.9 million in the first quarter or 27 cents per share -- 5 cents short of analysts expectations. That compares with $3.7 million or 10 cents per share in the prior year's quarter.

The results include a recovery of $3.5 million from business interruption insurance and a loss of $2.9 million in the form of a lump-sum retirement payment to Aztar's former Chief Executive Paul Rubeli.

Following the Strip's upward trend, the Las Vegas property helped boost overall results.

Revenue at the Tropicana rose 4 percent to $42.2 million and earnings before interest, taxes, depreciation and amortization -- a key performance indicator -- rose 8 percent to a record $11 million.

Room revenue rose 17 percent during the first quarter, helping to offset a 5 percent decline in gambling revenue. Cost controls also played a role, executives said.

"Through excellent management of expenses, the Las Vegas Tropicana was able to bring all of its revenue increase to the bottom line," Chief Executive Robert Haddock said.

Haddock said the company hasn't made any decisions about when it would redevelop the Tropicana, which sits on 34 acres of land that has risen significantly in value during the latest real estate boom.

He said the company wouldn't consider selling the land to take advantage of rising land prices.

"We have just a huge opportunity on the 34 acres that we own," he said.

In Atlantic City, the opening of the company's newly-expanded Tropicana flagship attracted lots of customers but still didn't meet bullish expectations. Executives blamed results on a variety of factors including a delayed opening at a slow time of year, a union strike prior to opening and stepped-up promotions from competitors. The November opening of a themed retail and shopping district, coinciding with the addition of 500 hotel rooms, was several months behind schedule because of a construction accident in October 2003.

Revenue at the Atlantic City property rose 22 percent to $111.7 million but earnings before interest, taxes depreciation and amortization fell 11 percent to $21 million.

Haddock said it would be "premature to evaluate success based on four months of operations" and said investors should wait until results are in for March, the month it was originally anticipated to debut.