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Rod Smith

Aztar Results Drop

12 February 2004

LAS VEGAS --Aztar Corp., owner of the Tropicana in Las Vegas, had a tough fourth quarter despite getting a big boost from the rebounding visitor market in Las Vegas, the company reported Wednesday.

Net income dropped to $11.7 million in the fourth quarter, down 3 percent from $12.1 million a year before, while earnings per share increased to 32 cents, up 3 percent from 31 cents in the year-earlier fourth quarter.

The results were seriously affected by the the partial collapse of the Tropicana Atlantic City's parking garage, which forced the evacuation of 600 rooms and closed major entrances to the property, Aztar Chairman Paul Rubeli said in a conference call with analysts.

He said it is still unclear how much money will be recovered through insurance claims or when it will be collected.

Deutsche Bank analyst Marc Falcone said the construction accident makes it difficult or impossible for investors to draw conclusions from the quarter's financial performance.

"The results were below expectations, but you have to take into account future proceeds from insurance claims," he said. Those should bring the company's performance back into line with Wall Street expectations, he said.

The company's 2003 fourth-quarter cash flow, another key measure of profitability, dropped to $30.2 million, down 25 percent from $40.3 million from the fourth quarter of 2002. Cash flow is generally defined as earnings before interest, taxes, depreciation and amortization.

Fourth-quarter revenue fell 7 percent to $185.3 million from $199.1 million.

For the year, Aztar's net income increased to $60.9 million, up 3.5 percent from $58.9 million the year before, while earnings per share increased to $1.72, up 10 percent from $1.56 in 2002.

Aztar's cash flow fell to $175.9 million for 2003, down 6 percent from $187 million the year before.

Twelve-month revenue slipped 3 percent to $813.1 million from $834.3 million.

Rubeli said the company's fourth-quarter performance was particularly strong in Las Vegas, with cash flow of $6.2 million, up 27 percent from $4.9 million a year earlier. Revenue per available room was up 19 percent.

Falcone said the delayed opening of the $245 million Tropicana Atlantic City expansion, now planned for September, will get the company back on track.

Rubeli said the partial removal of garage rubble is under way and construction has resumed on the new 500-room hotel tower and portions of the entertainment complex.

The company plans to open its new hotel tower and entertainment complex, called The Quarter, all at once to make the most of consumer interest, Rubeli said.

Bear, Stearns & Co. estimated the Atlantic City expansion will add $30 million to $40 million to cash flow and 45 cents to 50 cents to earnings per share in 2005.

Aztar has only one property on the Strip, the Tropicana, which limits its exposure to high-stakes table play and business travel, but also limits the boost it can expect from the upswing in convention business and leisure travel.

However, it is proceeding with a $700 million redevelopment of its Las Vegas hotel-casino, which is expected to be financed with a combination of free cash flow and additional debt.

Plans call for partially demolishing and rebuilding the existing hotel-casino and adding a 401-foot, 720,000-square-foot tower with 2,550 rooms.

The south portion of the resort would retain its 820-room tower, bringing the total number of rooms to 3,370, up from the resort's present 1,875 rooms.

Aztar shares rose 10 cents, or 0.43 percent, Wednesday to close at $23.33 on the New York Stock Exchange. They are up 2.7 percent for the year.