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Riviera Holdings reports results

Second Quarter 2007

Net revenues for the quarter were $53.7 million, an increase of $1.2million or 2.3 percent from the second quarter of 2006. Income from operations was $9.4 million, up $2.5 million or 36.9 percent from the second quarter of 2006. Included in income from operations in the second quarter of 2007 was $354,000 in equity-based compensation costs related to stock option expense compared with $190,000 in 2006, and $238,000 of mergers, acquisitions and development costs in 2007 compared with $761,000 in 2006. Adjusted EBITDA (1) was $13.3 million in the second quarter of 2007 compared with $11.0 million in 2006. Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization, equity-based compensation, asset impairments, and mergers, acquisitions and development costs, as shown in the reconciliation with net income in the tables of this release (See Notes 1 and 2 to the Financial Summary table). Net income for the quarter was a record $3.6 million, or $0.28 per share on a diluted basis, an increase of $3.2 million from the second quarter of 2006. Net income included the effects of the increase in interest expense, offset by the favorable effect of $827,000 recorded as a gain on the derivative resulting from the interest rate swap on the Company's new term loan.

    Second Quarter 2007 Highlights

    -- Riviera Black Hawk net revenue increased $705,000 or 5.5 percent
    -- Riviera Black Hawk EBITDA increased $1.2 million or 31.2 percent
    -- Riviera Las Vegas net revenue increased $523,000 or 1.3 percent
    -- Riviera Las Vegas EBITDA increased $1.1 million or 12.6 percent
    -- The Company completed its refinancing and redeemed its 11 percent
       notes, and the new effective borrowing rate for the Company is now
       approximately 7.5 percent
    -- The Company has $31.5 million in unrestricted cash plus a $20 million
       revolver

Six Months Ended June 30, 2007

Net revenues for the six months ended June 30, 2007 were $105.7 million, up $1.6 million or 1.5 percent from the same period in 2006. Income from operations was $18.4 million, up $3.7 million or 25.3 percent from the 2006 period. Adjusted EBITDA (1) was $25.7 million, up $3.3 million or 14.9 percent from the 2006 period.

Included in operating income for the first six months of 2007 was $533,000 in equity based compensation costs related to stock option expense compared with $406,000 in 2006, and $288,000 of mergers, acquisitions and development costs in 2007 compared with $878,000 in 2006. Net income for the six months ended June 30, 2007 was a record $6.1 million, or $0.49 per share on a fully diluted basis, compared with net income of $1.7 million, or $0.14 per diluted share, for the six months ended June 30, 2006.

    Six-Month 2007 Highlights

    -- Riviera Black Hawk net revenue was up $997,000 or 3.8 percent
    -- Riviera Black Hawk EBITDA increased $1.8 million to $9.7 million or
       22.6 percent
    -- Riviera Las Vegas net revenue increased $569,000 to $78.7 million
    -- Riviera Las Vegas EBITDA increased $1.2 million to $18.0 million or 7.1
       percent

Riviera Las Vegas

"For the first six months of 2007, Riviera Las Vegas outpaced 2006 EBITDA by $1.2 million. Most of the increase occurred in the second quarter as we continued to capitalize on the reduced competition in our market segment," commented Robert Vannucci, Chief Operating Officer of Riviera Las Vegas. "We are also very excited about a new capital expenditure plan to upgrade our rooms, which we anticipate will continue to produce room rate increases.

"EBITDA in Las Vegas increased $1.1 million, or 12.6 percent for the second quarter. Revenue increases in our slots and room divisions combined with revisions in our entertainment operations and other controlled operating costs produced an EBITDA margin of 23.4 percent compared with 21.1 percent in the same quarter of 2006. The room revenue increase was attributable to an increase in the ADR (Average Daily Rate), which was $80.99 in the second quarter of 2007, increasing $7.20 or 9.8 percent compared with 2006. RevPar (Revenue per Available Room) increased $3.97, or 5.4 percent.

"During the quarter, the Company worked with the management of the Frontier to assist in placing their guests and some employees at the Riviera. We were able to obtain the list of Frontier gaming patrons and plan to aggressively market these customers similar to what we did with the Westward Ho customer list. We believe the effects of this arrangement will transition loyal Frontier guests into loyal Riviera guests as it did with former Westward Ho customers. Also during the recent quarter, our culinary union contract expired. We have started negotiations with the union, and it is our hope to reach an agreement that is fair and equitable to our people and property," said Mr. Vannucci.

Riviera Black Hawk

Mark Lefever, President of Riviera Black Hawk, said, "We are pleased with the second quarter results in Black Hawk and the Colorado market in general. Our EBITDA margin of 36.2 percent for the quarter, which we believe to be the highest in our market, is a result of our dedicated team, who continue to provide outstanding guest service.

"We have begun to make necessary changes in preparation of the statewide smoking ban, which becomes effective January 1, 2008. Our goal is to satisfy our guests, while complying with the state law and minimizing the potential impact the ban may have on operations."

Consolidated Operations

William L. Westerman, Chief Executive Officer, said, "Our team continues to focus on the daily operations at both properties, as shown in our record financial results. With our new financing in place, I am excited to announce a capital expenditure plan of $25 million over the next 30 months. Our plan is to refurbish all 2,075 rooms in Las Vegas, remodel the casino floor in Las Vegas and renovate our Black Hawk facility in order to meet the requirements of the smoking ban in Colorado and to increase the comfort level for our guests in Black Hawk. We believe these improvements will enhance our guests' overall experience at both properties, while generating stronger long-term financial results for our Company.

"Our third quarter 2007 net income will be adversely impacted by a one- time charge of approximately $12.9 million to record the call premium on the 11 percent notes we redeemed in July and the write-off of the remaining deferred financing costs and the discounts on the those notes.

"Over the last 18 months, net income has been adversely affected by over $1.5 million in merger and acquisition costs primarily related to the efforts to acquire our Company. Some of those efforts deserved and received our consideration and some of them deserved and received our opposition. When you consider the costs and distractions resulting from this process, we believe our results are impressive, and I want to thank all our team members for remaining focused on our operations.

"We are continuing to work with our financial advisor, Jefferies and Company on our strategic process to maximize shareholder value that we announced in May 2007."

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