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Chris Jones

Riviera Holdings Reports Loss

9 March 2006

LAS VEGAS -- Juggling gauchos, an assortment of drag queens and one tired topless revue apparently can't pack in fans like they used to.

And that's bad news for the parent company of the Riviera.

Las Vegas-based Riviera Holdings Corp., which owns the 50-year-old Strip hotel-casino and Riviera Black Hawk Casino near Denver, on Wednesday revealed a nearly $3.9 million fourth-quarter loss due in part to weakened entertainment sales.

That 32 cents per share decline was significantly greater than the nearly $1.5 million loss, or 13 cents per share, reported for the fourth quarter ended Dec. 31, 2004.

Riviera Holdings' quarterly revenue was nearly $46.2 million, down 2.8 percent from last year's $47.5 million.

Cash flow -- a key performance indicator generally defined as earnings before interest, income taxes, depreciation and amortization -- was nearly $8.2 million, down 8.1 percent from the prior year's $8.9 million.

The Riviera's Las Vegas productions -- which include the long-running variety show "Splash," the drag revue "La Cage" and the topless "Crazy Girls" -- sold 71,000 fewer cash tickets than in 2004, and issued 92,000 fewer complimentary tickets. Those showgoers' absence clearly hurt casino revenue.

"Several of our shows, as you well know, are dated," said Bob Vannucci, the property's president. "The other issue we have to overcome is the level of competition. There are over 100 shows on the Strip right now."

Vannucci ruled out the possibility of adding an expensive headliner. The Riviera will instead pursue shows new to the market, and tweak its existing productions to make them more attractive.

The Riviera's 2,070-room hotel continued to perform well. Average daily rates grew by $7.92 in the fourth quarter to $72.38, while its revenue per available room tally climbed by $5.24 to $62.84.

The Riviera is marketing to customers in the database of the recently shuttered Westward Ho, a move Vannucci believes will bolster his hotel-casino's 2006 performance.

Riviera Holdings is frequently connected to buyout rumors thanks to its 26-acre parcel on the north Strip.

Bill Westerman, the company's chief executive officer and chairman, again said the company will consider redeveloping its Las Vegas site, taking on a joint venture partner or selling its interests outright.

Westerman in January sold 1 million shares to a group of investors that includes former Starwood Hotels' Chairman Barry Sternlicht and Las Vegas real estate developer Brett Torino.

The group hoped to buy the entire company, but negotiations broke down earlier this month when a special committee of Riviera board members could not agree on a price.

Riviera Holdings has studied expanding into the Gulf Coast, though executives worry that market could be oversaturated should other gaming companies build $500 million megaresorts in the region.

Steven Ruggiero, an analyst with Stamford, Conn.-based CRT Capital Group, said Riviera Holdings' fourth-quarter performance was "softer then expected." The company's net revenue was 4.75 percent below his prior projections, while cash flow missed his estimate by 4.6 percent.