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Best of Liz Benston

Gaming Guru

Liz Benston

Golden Nugget Cash Flow Up, Alliance Quarterly Results Improve

10 August 2004

LAS VEGAS -- The owner of the Golden Nugget casinos in Las Vegas and Laughlin reported increases in revenue and cash flow in the second quarter but profit fell as the company spent more on advertising and added marketing staff, among other things.

Marketing efforts such as "The Casino," a reality show on the Fox network that follows goings-on at the downtown Las Vegas property, are driving customer traffic, executives said. The property also is benefiting from a tourism boom that is helping casinos across Las Vegas, they said.

"Las Vegas continues to be one of the hottest travel destinations in the world," Golden Nugget co-owner Tom Breitling said.

Golden Nugget owner Poster Financial Group Inc. reported profit of $74,000 compared with profit of $262,000 for the second quarter of last year had Poster Financial owned the properties. Poster Financial bought the two casinos from MGM MIRAGE in January.

Revenue increased 19 percent to $65.7 million from a year ago. Those figures include promotional expenses. Cash flow -- a key performance indicator in the gaming industry -- grew 13 percent to $8.6 million.

Gambling revenue rose 30 percent to $46.9 million in part because the properties added table games and increased betting limits. The Golden Nugget in Las Vegas opened a 24-hour, nonsmoking poker room in April to coincide with the World Series of Poker at Binion's Horseshoe. It also added a high-limit salon with high-limit blackjack, European roulette and baccarat.

At the Las Vegas property, table game volume jumped by more than 57.5 percent from last year and slot wagering rose 7.5 percent from last year. At the Laughlin casino, table game volume rose 17 percent and slot handle rose 6.6 percent.

Food and beverage revenue grew 1 percent to $12.1 million as restaurant traffic rose and check sizes increased, officials said. Hotel revenue rose 9 percent to $12.2 million.

Advertising and marketing efforts are driving more customers to the property, executives said.

"The Casino" has attracted more than 7 million viewers worldwide each week, Breitling said. The series ends August 29.

The property has received hundreds of calls, emails and letters inquiring about the Golden Nugget as a direct result of the show, he said.

Separately, Alliance Gaming Corp. today reported an increase in quarterly profit though it said future earnings would be lower than expected.

The Las Vegas slot maker reported a profit of $45.9 million in its fourth fiscal quarter compared with a loss of $11.4 million for the same quarter a year ago.

Earnings for fiscal year 2005 would be "approximately flat" compared with a year earlier in part because of uncertainties surrounding casino initiatives in new gaming states, the company said. That's lower than the company's previous earnings downgrade in June, when it said game revenue would be down and certain games would be distributed more slowly than expected.

On a per share basis, earnings were 89 cents per share compared to a loss of 23 cents per share.

Excluding results from discontinued operations, earnings were $15.3 million or 30 cents per share compared with earnings of $14.1 million or 28 cents per share for the year-ago quarter. Analysts expected the company to earn 26 cents per share in the current quarter.

Revenue rose 41 percent to $162.8 million. Cash flow rose 16 percent to $38.1 million.

Analysts said they weren't surprised by news of the downgrade.

Both Alliance and competitor International Game Technology have indicated that they anticipate little sequential earnings growth over the next few quarters, Merrill Lynch gaming analyst David Anders wrote in a research note today.

The speed at which casinos replace slot machines has slowed, which will affect earnings this year, while a slower than expected rollout of slots in Pennsylvania may affect results the following year, he said.

"Going forward, we believe new casino construction will have to be a key driver for equipment suppliers, as the replacement cycle has clearly slowed," he wrote.

Alliance shares rose 36 cents to $12.45 per share in early trading today.