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Arnold M. Knightly

Riviera cuts spending and puts off renovations

7 November 2008

LAS VEGAS, Nevada -- Riviera Holdings Corp. has cut nearly all capital expenditures for next year and suspended room renovations at its Strip property to help the company weather the general economic crisis, executives said Thursday during the company's third-quarter earnings call.

Chairman and Chief Executive Officer William Westerman told management that unless the expenditure is needed to keep from having to "shut the doors ... don't waste your time asking for it."

Westerman said that despite the tough economic times, the company is well positioned with its banks.

Riviera Holdings now has a $225 million bank loan at just under 7.5 percent interest, which doesn't mature until June 2014, and a $20 million revolving credit line.

"We're going to do everything to make sure we do not have to go hat-in-hands to the banks to refinance our credits," Westerman said. "We're used to surviving. We've survived 53 years and we have a healthy cash position and we have a very excellent financial package of loans."

The suspension of room renovations at the 2,075-room Riviera will save the company $4.3 million, according to the company.

The decision comes after four of the five hotel towers at the property were renovated at a two-year cost of $18.7 million. The company also opened a $11 million sports book in February.

The economy has forced the company to do what other gaming companies have done -- cut jobs and expenses as third-quarter revenues and cash flow plunged.

Westerman said no bonuses or employee stock ownership plan payments will be made this year. Management salaries have not been cut, but management positions at the Strip property and the casino in Black Hawk, Colo., have been reduced.

"While it has been unfortunate to let go so many of our team members, I believe we are employing the correct strategy to maximize income and cash from operations during these challenging times," Westerman said. He did not say how many people were cut.

Company revenues dropped 23.2 percent to $40.2 million for the third quarter ended Sept. 30, down from $52.4 million for the same period last year.

Quarterly company cash flow, defined as earnings before interest, taxes, depreciation and amortization, dropped 57.8 percent, to $4.3 million from $10.3 million.

The company was able to trim its loss in the third quarter, however, despite sharp declines, due to the absence of a $12.9 million loss incurred last year tied to a debt retirement.

Riviera Holdings posted a net loss of $3.5 million, or 28 cents per share, for the quarter, compared with a net loss of $18.3 million, or $1.48 per share, a year earlier.

Riviera Holdings posted net income of $826,000 for the first nine months of the year, reversing a $12.1 million loss posted during the same time in 2007.

Cash flow for the first nine months decreased 34.7 percent to $23.5 million from $36.1 million. Revenues for the first nine month's fell 15.4 percent to $133.8 million from $158.1 million in 2007.

Revenues at the Strip property declined 20.3 percent for the quarter and 13.2 percent for the first nine months of the year.

Property cash flow fell 52.2 percent for the quarter and are down 31.4 percent for the year.

Riviera Holdings shares fell 30 cents, or 7.89 percent, Thursday to close at $3.50, on the American Stock Exchange.