Herbst Gaming sees profit on lower interest expense

By Steve Green (contact)

Monday, Nov. 16, 2009 | 3:48 p.m.

Herbst Gaming Inc. of Las Vegas, which is preparing to emerge from bankruptcy protection, reported Monday a small profit for the third quarter thanks to reduced interest expenses.

Net revenue of $168.7 million was down from $196.5 million in 2008's third quarter.

Herbst said fewer gaming machines were in service in slot routes at gas stations, taverns and stores because of the recession; while the economic decline reduced activity at the company's casinos in Nevada.

Revenue held steady at the Herbst casinos in Iowa and Missouri. Overall, the company has 16 casinos.

Despite the decline in revenue, the company earned $385,000 in the quarter vs. a loss in 2008's third quarter of $22.4 million.

A big factor in the turnaround was a $28.5 million reduction in quarterly interest costs. Because of its bankruptcy, the company didn't make interest payments and instead made periodic special payments to lenders.

On Oct. 30, U.S. Bankruptcy Judge Gregg Zive in Reno orally confirmed a reorganization plan in which secured lenders owed $860 million will take over the company; while bondholders owed another $329 million will receive nothing.

Herbst said slot route revenue of $47.5 million was down from $58.3 million. Some 6,300 slot machines were in service, down by about 500 machines as stores and bars that once hosted the machines closed and under-performing routes were dropped during the recession.

Casino revenue of $114.6 million was down from $122.8 million. Nevada casino operating costs of $61.8 million were down from $68.4 million due to lower staffing levels and other cost-saving measures.