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Best of Howard Stutz

Gaming Guru

Howard Stutz

Pinnacle reports $49 million loss in second quarter

30 July 2010

LAS VEGAS, Nevada -- Pinnacle Entertainment lost $49.3 million in the second quarter despite a jump in revenues following the opening of a suburban casino in St. Louis.

The Las Vegas-based company, which primarily operates in regional markets, said its results for the three months that ended June 30 were hurt by write-downs and other charges of $31.5 million. The biggest expense concerned Pinnacle's decision in April to cancel a casino project in Lake Charles, La.

The loss translated into a net loss of 81 cents per share. A year ago, Pinnacle reported a second-quarter profit of $4.7 million a year, or 8 cents a share. Analysts polled by Thomson Reuters predicted Pinnacle would have a net loss of 4 cents a share.

Pinnacle's River City Casino in south St. Louis County, which opened in March, contributed to an 8.4 percent increase in company revenues and a 58 percent increase in revenues in the St. Louis market, where the company also owns Lumiere Place in downtown. Pinnacle closed the aging President Casino in St. Louis last month.

Pinnacle reported revenue of $273.6 million for the quarter, up from $252.3 million a year ago.

Pinnacle CEO Anthony Sanfilippo told investors the company has reined in costs.

As part of several spending cuts, Pinnacle sold its corporate aircraft and two seaplanes for $12.1 million in the second quarter. The company expects to save $2.5 million a year by eliminating its aviation department.

Pinnacle also consolidated its Las Vegas corporate offices from three buildings to a single location and started centralizing all procurement activities.

"Pinnacle is still in the early stages of implementing strategies to improve both property revenues and operating margins," Sanfilippo said. "To enhance property revenue growth, we are evaluating all of our casino floors to further optimize the mix of table games and slot machines, as well as the specific selection of gaming products we offer our guests."

Wall Street has been supportive of Sanfilippo, a former Harrah's Entertainment executive who took over the company in April.

One of the first moves was to stop the stand-alone casino project in Lake Charles and make the facility an expansion of the company's L'Auberge du Lac resort. Pinnacle is attempting to sell 19.5 acres on the Atlantic City Boardwalk. The Wall Street Journal reported the company would most likely sell the site at a more than 70 percent discount to the parcel's $340 million acquisition price.

"Overall, Pinnacle continues to strengthen its balance sheet, focus on the core operations and improve property margins, while reducing corporate overhead," Macquarie Securities gaming analyst Chad Beynon told investors. "We expect management to continue to strengthen the company's position within existing markets and as a result drive the top line, while holding costs."