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Best of Liz Benston

Gaming Guru

Liz Benston

Losses widen at Herbst Gaming in 2Q

18 August 2008

LAS VEGAS, Nevada -- Under the threat of bankruptcy, casino and slot machine operator Herbst Gaming today reported a loss of $62.3 million in the second quarter compared with a loss of $1.4 million a year ago. Revenue fell 5 percent to $214.2 million.

The company in June created an independent committee composed of John F. O'Reilly and John N. Brewer to evaluate and negotiate restructuring proposals, which could include the sale of the company. The committee will make recommendations to the board of directors, which includes the Herbst brothers Edward, Timothy and Troy.

Slot route revenue fell 11 percent from the same period a year ago, primarily because of the weak economy. Earnings before interest, taxes, depreciation and amortization rose $1.8 million, or 24 percent, in the second quarter, in part because of a decrease in space lease expenses.

The smoking ban had a limited effect on results because it was already in place by the second quarter of last year, management said in a Securities and Exchange Commission filing.

The company's casino division reported an 8 percent decline in revenue in the second quarter compared with a year ago and a 31 percent decline in earnings before interest, taxes, depreciation and amortization. Declines at the company's three stateline casinos in Primm, brought on by the sinking economy and higher gas prices, were primarily to blame.

Herbst paid $394 million to acquire the Primm casinos from MGM Mirage in April 2007, a purchase that proved to be too costly in the weakening economy. Casino revenue fell 8 percent at the Primm casinos in the second quarter and the company has written off any goodwill value associated with the properties.