Three small firms report fourth quarter declines

Mar 10, 2008 6:00 PM

Earnings by Ray Poirier | Red ink continued to flow among gaming companies reporting their experiences for the most recent quarter.

Two companies that saw their shares removed from trading by the New York Stock Exchange because they were taken private by insiders or private equity firms – Station Casinos and Harrah’s Entertainment – both reported heavy expenses due to the takeovers.

That wasn’t the case for Isle of Capri Casinos Inc. (ISLE), Magna Entertainment Corp. (MECA), and Trump Entertainment Resorts Inc. (TRMP), representing three different segments of the gaming community.

Isle of Capri, whose riverboat properties are primarily located in smaller gaming areas, saw its quarterly loss from continuing operations fall to $13.8 million or $0.45 per share compared to a loss last year of $8.9 million or $0.31 per share.

For the period that ended on Dec. 31, the company’s net revenues increased 17% to $269.7 million. Analysts had expected revenues to increase to $283.8 million.

A smoking ban in Colorado and increased competition on the Gulf Coast where properties destroyed by Hurricane Katrina were reopened with bigger and better facilities were the main culprits, the company said.

Hoping to turn things around, Bernard Goldstein, chairman and CEO, said he was turning over the CEO post to experienced gaming executive Jim Perry.

Perry, who was instrumental in turning around the fortunes of Argosy Gaming before its sale, held the post of CEO of Trump Entertainment before accepting a position with Isle of Capri.

Following the announcement, Perry indicated that as soon as his appointment has been approved by the board of directors, he plans to attempt re-branding the company’s products.

"The main components of the strategic plan are to focus on organic growth opportunities and to consolidate our portfolio into two brands based on a variety of factors, including the size of the facility, amenities, and the size of the primary markets served," he explained.

Some holdings, such as the casino in Caruthersville, Mo., will become Lady Luck properties, while others such as those in Mississippi and Iowa will remain Isle of Capri properties.

Magna Entertainment

While it continues to struggle to remain a viable operating company, Magna Entertainment Corp. (MECA) reported a fourth quarter loss that was even bigger than that of a year earlier.

The company reported a $43 million loss, or $0.38 per share, compared with a loss of $12.5 million or $0.12 per share in 2006.

The Canada-based racetrack owner, North America’s largest, said the loss from continuing operations for the full year widened to $107.9 million or $0.99 per share, up from last year’s $79.6 million or $0.74 per share.

For the past year, the company has been refilling its empty coffers by selling large tracts of real estate.

Because of its declining share price, the company has been placed on notice that it will be delisted by Nasdaq is it fails to boost the share price above the $1 level.

Chairman and CEO Frank Stronach also announced that Joe DeFrancis, who with his sister sold the Maryland Jockey Club to Magna Entertainment, has resigned from the board of directors.

Part of the Maryland Jockey Club sales agreement required that if Maryland should allow racetrack slots at Laurel Racecouse or Pimlico or both that Magna Entertainment would pay the DeFrancis family 65% of the slots profit for the first five years, 50% for the next five years and 40% of the profits for the next decade.

Stronach indicated he would attempt to renegotiate the agreement and that DeFrancis being on Magna’s board would be a conflict of interest.

Also, Stronach announced he still has not found a CEO to take over the company and continues to personally fill that post.

Trump Entertainment

Armed with a $500 million loan from Texas billionaire Andy Beal, Trump Entertainment Resorts Inc. (TRMP) was able to pay some bills and continue operating but that didn’t stem the company’s losses.

For the fourth quarter of the 2007 fiscal year, the company said it lost $183.2 million or $5.89 per share compared with a loss of $9.7 million or $0.31 per share in the prior year.

The loss included asset impairment charges related to the refinancing of a credit agreement.

Revenue for the Dec. 31, 2007 quarter was $228.6 million down by 6% from the previous year’s $244.2 million. Analysts had expected revenues to be $229.2 million.

The lower revenues, however, were consistent with the general decline in activity reported by Atlantic City casinos that have been affected by Pennsylvania competition and a partial smoking ban.