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Arnold M. Knightly

Hooters Hotel sees fourth-quarter decline

3 April 2008

LAS VEGAs, Nevada -- Hooters Hotel's management said the economic downturn late last year drove fourth-quarter revenue down as the property saw departmentwide declines.

Fourth-quarter net revenues declined 11.5 percent to $14.8 million from $16.8 million in 2006.

Casino revenues dropped 10.1 percent, food and beverage fell 12.1 percent, and hotel revenue fell 8.4 percent for the three months ended Dec. 31.

"The challenges presented by the current economy have eroded consumer confidence," said Mike Hessling, president of 155 East Tropicana, LLC, Hooters' parent company, during a conference call Tuesday. "It has caused certain customers to reduce their spending on leisure and entertainment."

The property's net loss for the quarter increased 46.9 percent to $3.5 million from a net loss of $2.4 million in 2006.

While quarterly numbers showed large decreases and a greater loss, yearly numbers were somewhat better.

In 2007, net revenues fell 2.5 percent to $65 million from $66.7 million in 2006. The property cut its net loss for the year by 23.4 percent to a loss of $14.1 million from a net loss of $18.4 million.

Fourth-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, dropped 25 percent to $1.8 million for the quarter from $2.4 million in 2006. In 2007, cash flow was $14.8 million, an 11.9 percent drop from $16.8 million in 2006.

KDP Investment Advisors gaming analyst Barbara Cappaert in a note to investors described the operating earnings as "unimpressive."

However, the pending sale of the property is still proceeding according to the investment group working to purchase the 9-acre property on Tropicana Avenue.

Santa Monica, Calif.-based Hedwigs Las Vegas Top Tier made another $500,000 nonrefundable, nonapplicable fee payment Monday to retain exclusive purchase rights through the end of April.

Hedwigs principal Richard Bosworth said in early March the property will be rebranded into a yet-to-be-named boutique hotel following a $130 million redevelopment of the property to begin later this year.

The investment group has made $5 million in nonrefundable payments, of which only $3 million goes toward the $225 million transaction.