Riviera helps parent improve its profits

LAS VEGAS, Nevada -- The Riviera's status as one of the Strip's last midlevel properties is paying off for its parent company.

Riviera Holdings Corp. on Friday reported sharply higher second-quarter earnings and announced plans to remodel the Riviera's 2,075 hotel rooms and casino during the next 30 months.

The company said it will spend $25 million to renovate the Riviera and its casino in Black Hawk, Colo., to meet the requirements of a smoking ban in that state.

"Given our current competitive situation in Las Vegas, we believe the return on this investment will be exceptional," company Chairman and Chief Executive Officer William Westerman said during a conference call to discuss earnings.

Riviera Holdings posted net income for the quarter ended June 30 of $3.6 million, or 28 cents per share, up from $418,000, or 3 cents a share, a year earlier.

Analysts polled by Reuters estimated earnings of 15 cents per share.

Revenues rose 2.3 percent, to $53.6 million from $52.4 million.

Cash flow, defined as earnings before interest, taxes, depreciation and amortization, increased 20.5 percent to $13.3 million for the quarter.

Riviera Holdings' cash flow for the first six months of 2007 increased 14.9 percent to $25.7 million.

The Strip property's revenues increased 1.3 percent, to $40.2 million from $39.7 million in the quarter.

Second-quarter property cash flow was $9.4 million, a 12.6 percent increase compared with a year ago. Cash flow for 2007 increased 7.1 percent to $18 million.

The increases follow recent closings of other midlevel properties on the Strip including the Stardust in November and the New Frontier in July.

Riviera obtained the New Frontier's customer list and began a marketing campaign to lure players to the property. The strategy has worked before; the company obtained and used the Westward Ho's customer list when that property closed in 2005.

Boyd Gaming Corp. kept the Stardust's customer list when it closed in October.

The Riviera posted a 7.6 percent increase in revenue per available room rate to $80. However, the property's entertainment and food-and-beverage revenue continued to decline. There was a decrease of $400,000 tied to the closing of "Splash" in October and fewer entertainment acts visiting the property, Riviera Las Vegas Chief Operating Officer Robert Vannucci said. The new show, "Ice: Direct from Russia," did not debut until the end of April, a month into the second quarter.

Riviera Holdings has been trying to conduct business as usual, although it is operating under speculation about a possible buyout.

On May 16, investment group Riv Acquisition Holdings made a $423.6 million offer, $34 per share. It was the third offer by the group composed of major shareholders.

Riviera Holdings shares fell $2.74, or 9.02 percent, Friday to close at $27.63 on the American Stock Exchange.