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Aztar Blames Calendar for Q4 Declines

6 February 2003

by Jeff Simpson

NEW YORK --The Tropicana's parent company on Wednesday blamed a tough calendar for fourth-quarter declines in earnings, revenue and cash flow.

Phoenix-based Aztar Corp. reported fourth-quarter earnings declined 5.5 percent to $12.1 million from $12.8 million in the 2001 quarter.

On a per share basis, income fell to 31 cents from 33 cents.

Revenue dropped by 6.2 percent, to $199.1 million from $212.2 million. Cash flow, defined as operating income before interest, taxes, depreciation, amortization and rent, was down 9.6 percent, to $43.3 million from $47.9 million.

Aztar's unusual fiscal calendar ended its quarter and year on Jan. 2. Company executives noted that the 2002 quarter had one less week than the 2001 quarter, which they said was a $3.3 million cash flow disadvantage, or more than 70 percent of the quarterly cash flow decline.

"It was a good quarter, particularly considering the tough comparison," said Paul Rubeli, Aztar chairman and CEO, on a Wednesday afternoon conference call for analysts and investors.

Year-end income was up 1.6 percent to $58.9 million from $58 million. Revenue fell 1.8 percent to $834.3 million from $849.5 million, while 12-month cash flow dropped by 1 percent to $199.7 million from $201.8 million.

Rubeli said company executives expect to make a decision about whether to redevelop the company's prized Las Vegas property by the end of the year.

Aztar bosses are still evaluating the timing, scope and economic feasibility of redeveloping its Tropicana site, he said.

Rubeli took analysts to task for failing to comprehend the impact of Aztar's $225 million expansion of Tropicana Atlantic City, which he said was on budget and on time for a March 2004 opening.

"It's time to do some homework here," Rubeli chided, "Focus on (Aztar's) 2004 story. It's only 12 months away."

Rubeli saved his toughest talk for New Jersey Gov. James McGreevey, who this week submitted a state budget that calls for substantial casino tax increases, including a 25 percent increase in the tax on the money casinos win from gamblers, to 10 percent from 8 percent.

"It was a broadside attack on the very partnership that's worked for 25 years," Rubeli said, warming up to a 35-minute uninterrupted stream-of-consciousness diatribe against the proposed tax increase. "It's bad for New Jersey, and will bring expansion to an abrupt halt."

Rubeli said the casino business is New Jersey's top taxpaying industry, and noted that McGreevey's proposal was made at a time when Atlantic City casinos are spending $2 billion on new development.

"Let me ask the gentleman in Trenton: Who else is doing this much?" he asked.

Larry Klatzkin, Jeffries & Co. casino industry debt analyst, said he sympathized with Rubeli's passionate remarks.

"Atlantic City provides the biggest part of (Aztar's) cash flow," Klatzkin said. "The governor's proposal is ridiculous. He comes out with a big tax increase when these (casino operators) are pregnant with the $2 billion in new projects. I don't see the legislature doing this big a whack job on the industry."

Aztar's announcement came after Wednesday's market close. Its shares closed at $12.25 in Wednesday trading on the New York Stock Exchange, up 33 cents.

In addition to the Tropicana on the Strip and the Tropicana Atlantic City, Aztar owns and operates the Ramada Express in Laughlin and Casino Aztar riverboats in Indiana and Missouri.

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