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Investors ignore solid quarter,
sell Isle of Capri Casinos shares

Nov 18, 2003 5:10 AM

Investors reacted negatively Friday upon hearing the financial results for the second quarter of Isle of Capri Casinos Inc. (ISLE) despite the news that the company had net income of $10.7 million or $0.35 earnings per share.

This compared favorably with last year’s net income of $6.8 million or $0.22 per diluted share.

The income announced beat street-estimates by three cents a share, yet, within the first hour of trading on Friday, the company’s shares fell some 10%.

Announcing the quarterly results, Bernard Goldstein, chairman and CEO, said that the company’s "business model produced positive results in a quarter in which we faced increase competition and markets that did not grow as anticipated."

Tim Hinkley, president and COO, credited the company’s geographic diversity with providing strength during the quarter. "Although we experienced a slight decline in the Louisiana and Mississippi markets," he said, "the numbers in our northern region allowed us to produce another good quarter."

Just last week, the company announced that it had become the first U.S. gaming company to receive gaming board approval to own casinos in England. Before year end, the company expects to have closed on its acquisition of a majority interest in Blue Chip Casinos PLC, the English firm that will operate a pub-style casino in Dudley, England, near Birmingham.

At the close of the trading on Wall Street Friday, Isle of Capri shares had fallen to $20.58, down $2.36 for the day.

Pinnacle Entertainment

Costs attributed to its Lake Charles, La., project, resulted in a loss for Pinnacle Entertainment Inc. (PNK) during the third quarter of its fiscal year that ended on September 30.

Revenues rose to $140.1 million from the $139.4 million reported in the comparable quarter of 2002 but the company recorded a net loss of $16.4 million or $0.63 a share compared to net income of $2.5 million or $0.10 per share last year.

"Our Belterra (Indiana) and New Orleans (Louisiana) properties continued their impressive gains over 2002, generating record quarterly results at both locations during the 2003 third quarter," explained Dan Lee, chairman and CEO.

The new competition from Native American casinos in California and continued competitive market conditions in the Gulf Coast market impacted our Reno (Nevada) and Biloxi (Mississippi) locations, as both properties had declines in the third quarter."

Lee added that the company had begun construction on its $325 million Lake Charles (Louisiana) project that will have a single level dockside casino surrounded on three sides by a 700-room hotel. The casino is expected to open in April 2004.

Mohegan Sun

Although the Mohegan Tribal Gaming Authority, operators of the Mohegan Sun Resort in Uncasville, Conn., is not a public corporation, it does report its fiscal experiences on a quarterly basis.

For the fourth quarter that ended on Sept. 30, the tribe reported net income of $30.6 million, a 40% decline from last year’s $50.5 million.

The profit decline, the tribe said, was "primarily due to a $27.4 million loss on the payment of debt related to a refinancing."

Revenue for the quarter was up 6.8% to $322.8 million that included an increase in slot machine revenue of 6.4%.

Net income for the fiscal year was $95.7 million, down 4.3% from last year. However, revenue for the year was $1.19 billion, a 14% increase over the last fiscal year.

Bill Velardo, president and CEO of Mohegan Sun, said he was pleased with the results since the resort had faced a number of challenges, including "significant increases in medical, state unemployment and workers compensation insurance costs."

Lakes Entertainment

While Lakes Entertainment Inc. (LACO) does not have an operating casino, it has developed another source of revenue in the increasingly popular World Poker Tour that is now in its second season.

Revenues for the quarter that ended on September 29 totaled $400,000 as against no revenues recorded in the comparable quarter. Net loss for the period was $1.3 million or $0.12 per diluted share. A year earlier, the loss was $1.7 million or $0.16 per share.

The company said revenues for the second season of World Poker Tour that is televised on the Travel Channel will be recognized in 2004.

For the most recent period, selling, general and administrative expenses remained nearly constant at $2.5 million for the 2003 quarter, down slightly from the $2.7 million recorded last year.

The company has development and management agreements with four separate Native American tribes. Two of these have proposed casinos in California, one in Michigan and another in New England.

Meanwhile, Lyle Berman, chairman and CEO of Lakes Entertainment, said he was "very excited about the continued and growing popularity of the World Poker Tour Series. We anticipate that this new arrangement with the Travel Channel, along with other potential revenue opportunities puts the project in a position to be self-sufficient and profitable in future years."

Riviera Holdings

Relatively flat revenue for the third quarter of 2003 was reported by Riviera Holdings Corporation (RIV).

During the period that ended on Nov. 30, the company had net revenues of $49 million, up 1.1% from the $48.5 million in the third quarter of 2002.

Income from operations was $3.6 million, up $138,000 or 3.9% from last year.

For the nine-month period, net revenues were $144.8 million compared with the $144.6 million in 2002. Income for the period was essentially the same as the previous year.

The company said that income from operations at the Riviera Las Vegas property decreased 9.4% to $2.6 million. Occupancy during the period was 96.7 % compared to 92.5% in 2002. However, the average daily room rate decreased to $57.32 while revenue per available room was comparable to the third quarter of 2002.