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Best of Benjamin Spillman

Gaming Guru

Benjamin Spillman
 

Binion's hemorrhages cash

3 April 2007

LAS VEGAS, Nevada -- Losses at Binion's increased substantially in 2006, fueling talk that the owners should sell the historic Las Vegas property to a company better-suited to succeed in the stagnant downtown casino market.

MTR Gaming Group of Chester, W.Va., reported Monday that earnings before interest, taxes and depreciation at Binion's were $3.1 million in the red during 2006, compared to a positive cash flow of $580,000 in 2005.

EBITDA, or cash flow, in the fourth quarter was a loss of $1.5 million, double the negative cash flow of $660,000 Binion's reported in the last quarter of 2005, MTR reported.

The Binion's information was included in MTR's 2006 fourth-quarter and year-end financial reports to the U.S. Securities and Exchange Commission.

Overall the company, which is heavily invested in race tracks and slot machines in West Virginia, Ohio and Pennsylvania, reported an annual profit of $4.4 million, or 16 cents per share, down from a 2005 profit of $7.7 million, or 27 cents per share.

For the quarter ended Dec. 31, MTR had net income of $518,000, or 2 cents per share, compared with $41,000, or nil per share, a year earlier.

Quarterly revenue rose 5.2 percent to $86.7 million from $82.4 million.

Company officials are scheduled to discuss the earnings today during a conference call. A statement accompanying the earnings report, however, said a decrease in MTR's cash flow was "due in large part to Binion's operating results," expenses related to a slot machine referendum in Ohio and pre-opening costs at its Presque Isle Downs casino in Erie, Pa.

Frank Fantini, publisher of the Gaming Morning Report, said the financial results bolster the notion that MTR should sell Binion's to a company in a better position to make money in the competitive -- and declining -- downtown Las Vegas market.

"I don't think MTR Gaming is very long in Las Vegas," Fantini said. "If I were (MTR President and CEO Edson Arneault), I would be interested in consolidating down to properties that made a profit."

MTR has already moved to unload another Las Vegas-area property, the Speedway Casino.

In February MTR struck a deal to sell the Speedway in North Las Vegas to a locally owned private company for $18.2 million.

Binion's, which MTR bought in 2004 for $20 million, would then be the company's only Nevada property.

Even before MTR bought it, the 56-year-old casino fell on hard times. In 2004 gaming regulators swooped in on Binion's Horseshoe, founded by Nevada gaming pioneer Benny Binion, and forced a shutdown to ensure former owner Becky Binion Behnen could pay mounting debts.

Harrah's later bought the property primarily for the Horseshoe name and the lucrative World Series of Poker.

It sold the casino a month later to MTR, which rechristened the property Binion's Gambling Hall and Hotel last year.

Binion's isn't the only casino having trouble downtown. Gaming win has declined or remained flat every year for more than a decade. In 2006 it declined 3.6 percent to $630.4 million and was in decline during the last seven months of the year.

Last month William Robinson Jr., vice president and chief operating officer of Speakeasy Gaming, a subsidiary of MTR which runs Binion's, told the Nevada Gaming Control Board the casino would recover, but probably not to the level it enjoyed during its heyday.

"I don't know if we'll get back to where it was when Jack Binion (Benny's son) ran it, but we're going to try," said Robinson, who was before the board for approval for a key employee license.

He told the board the company planned to remodel the casino.

"We want to get Binion's back to where it used to be," said Robinson, who did not return calls Monday for comment.

Fantini, however, said Binion's and MTR would be better served if an operator with more experience in downtown Las Vegas took over. He mentioned Boyd Gaming, owners of Main Street Station, California and Fremont casinos downtown, and the Golden Nugget as examples of successful operations.

Improving the performance of Binion's could help neighboring casinos, too, Fantini said.

"We all know the casino industry operates with critical mass," he said.

MTR shares fell 6 cents, or 0.46 percent, Monday to close at $13.02 on the Nasdaq National Market.