Herbst Gaming reports results

6 November 2007

LAS VEGAS, Nevada -- (PRESS RELEASE) -- Herbst Gaming, Inc. and Subsidiaries ("HGI" or "Company") today announced the results of their operations for the three months and nine months ended September 30, 2007.

The Company reported net revenues of $583.6 million for the nine months ended September 30, 2007, an increase of 38.4%, or $161.8 million, compared with $421.8 million in the prior year's first nine months. The Company recorded a net loss of $34.1 million for the nine months ended September 30, 2007, compared with net income of $36.7 million in the prior year's first nine months.

The loss was primarily a result of the impact of the smoking ban on our route operations in Nevada, a decline in revenues at the Company's Lakeside, Iowa property and lower than anticipated revenues at the Company's newly acquired Primm properties. The results for the nine months also included two non-cash adjustments totaling $7.1 million. Approximately $3.9 million of this loss was a result of a non-cash charge to earnings related to the change in the value of an interest rate swap the Company employs for managing its interest costs, and $3.2 million of this loss was a result of a non-cash charge related to the recognition of the impairment of two of the Company's space lease contracts due to recent contract amendments. The Company's Consolidated EBITDA (as defined below) was $80.0 million for the nine months ended September 30, 2007, a decrease of 13.7%, or $12.6 million, compared with Consolidated EBITDA of $92.6 million for the same period in 2006.

The Company reported net revenues of $219.0 million for the three months ended September 30, 2007, an increase of 58.6%, or $80.9 million, compared with $138.1 million in the prior year's third quarter. The Company recorded a net loss of $28.9 million for the three months ended September 30, 2007, compared with net income of $8.2 million in the prior year's third quarter. The loss was primarily a result of the impact of the smoking ban on our route operations in Nevada during the quarter, a decline in revenues at the Company's Lakeside, Iowa property and lower than anticipated revenues at the Company's newly acquired Primm properties.

The results for the quarter also included two non-cash adjustments totaling $13.9 million. Approximately $10.7 million of this loss was a result of a non-cash charge to earnings related to the change in the value of an interest rate swap the Company employs for managing its interest costs, and $3.2 million of this loss was a result of a non-cash charge related to the recognition of the impairment of two of the Company's space lease contracts due to recent contract amendments. The Company's Consolidated EBITDA was $28.8 million for the three months ended September 30, 2007, an increase of 3.2%, or $0.9 million, compared with Consolidated EBITDA of $27.9 million for the same period in 2006.

The numbers for the first nine months ended September 30, 2007 included approximately six months of the results of the operations of the three casinos located in Primm, Nevada, acquired on April 10, 2007. The nine month results also include the operations Sands Regent casinos located in northern Nevada acquired on January 3, 2007.

The Company also announced the successful completion of the renegotiations of a majority of its largest space lease contracts to reduce the rate of rent for the space leased under such contracts. Based upon the amount paid by the Company with respect to the renegotiated contracts over the past twelve months, the Company estimates the reduced rates of rent will lead to annual savings of approximately $20 million. Several of these rent reductions became effective on August 1, 2007. As a part of these renegotiations, the Company sought and obtained, extended termination dates under these space lease contracts. Consequently, the average remaining life of these contracts increased, on a revenue weighted basis, from approximately 2.3 years to approximately 4.1 years.