Pinnacle posts first quarter profit

27 April 2010

By Howard Stutz

LAS VEGAS, Nevada -- Regional casino operator Pinnacle Entertainment posted a profit for the first quarter, surprising Wall Street, which had predicted a net loss after the company's upheaval following a management shake-up and direction changes.

The Las Vegas-based company, which operates casinos in Nevada, Louisiana, Indiana, Missouri and Argentina, said Tuesday its earnings jumped to $36.7 million, or 60 cents per share for the quarter that ended March 31, compared with $931,000, or 2 cents per share, a year ago.

The results surprised analysts surveyed by Thomson Reuters, who expected a loss of 11 cents per share.

Revenue for quarter gained 3 percent to $267.4 million from $259.2 million.

Pinnacle said the company's results were helped by a substantial gain related to some property sales as well as an insurance claim settlement.

The company also said its Lumiere Place resort in downtown St. Louis posted strong revenues and "record" adjusted cash flow.

Pinnacle said customers spent more money gambling and on hotel rooms. Consumers also spent a bit more on food and beverages, shopping and entertainment, a change since the recession which saw customers pull back on how much they spent on gambling.

During the quarter, Pinnacle scaled back on development plans in Lake Charles, La., following the company's decision earlier this year to scrap a planned $2 billion hotel-casino project in Atlantic City.

Pinnacle also benefited from the opening of a new casino in suburban St. Louis.

New Pinnacle Chief Executive Officer Anthony Sanfilippo, who was hired last month, said the company was focusing on operating its existing properties rather than expansion.

"Pinnacle generated solid first quarter operating results which reflect the initial benefits of our heightened focus on achieving operating efficiencies and exercising financial discipline throughout the company," Sanfilippo said. "Our success with these strategies in the first quarter should provide an excellent foundation for further progress throughout the balance of the year."

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said Pinnacle lowered promotional spending which positively impacted margins.

He thought the results bode well for other regional casino operators that consumer spending is showing some signs of life.

"Cost cutting, exiting non-core markets, and sound capital deployment make us believe (Pinnacle's) management seems committed to improving shareholder value," Wieczynski said.