Tuesday, April 21, 1998 | 10:09 a.m.
SUN staff report
Rio Hotel & Casino Inc., benefitting from major additions and investments to its popular Flamingo Road property, today reported a 38-percent increase in revenue and a big jump in its profit for the quarter ended March 31.
Rio, which reported revenue of $96.7 million, led a series of gaming industry earnings reports issued this morning. They included: --Harrah's, reporting improved results. --Primadonna Resorts, reporting declines in sales and earnings.
The Rio's profit of $8 million, or 32 cents per share, improved from operating earnings a year ago of $4.7 million or 22 cents. Rio actually had a loss of $2.4 million, or 11 cents, in the year-ago quarter. The 1997 period included one-time charges of $11.2 million for pre-opening costs of its Masquerade Village and 1,000 suites in the Masquerade Tower.
Chairman Anthony Marnell II said the Las Vegas company's quarter was marked by an increase in its bank credit line from $200 million to $275 million at reduced interest costs and work on the Rio's $200 million expansion that began in October.
"In February 1998 we received another significant honor when the Rio was named the world's best hotel value by the readers of Travel & Leisure Magazine," Marnell said.
"We are in the process of building a much needed valet/public parking structure that will open during the second quarter of 1998, adding a spectacular Palazzo Suites complex and expanded outdoor area, and a state-of-the-art convention/event facility that is scheduled to open in the first quarter of 1999. A new road is also under construction with a scheduled completion date of early 1999 that will provide additional access to the Las Vegas Strip," Marnell said.
"Our previous demand-driven expansion projects at the Rio have each resulted in significant financial returns to the company, and we are looking forward to the completion of our current projects and the benefits they will provide. Our bookings for the new convention/event facility have been even stronger than we had anticipated," Marnell added.
Harrah's Entertainment Inc. of Memphis, which is buying Showboat Inc., said earnings before extraordinary items were 27 cents for the quarter, up from 22 cents in the 1997 quarter. The operating profit of $71.1 million was up 11.2 percent.
Harrah's recorded record revenues for the quarter of $414.4 million -- a 10.8 percent increase over the prior year period -- thanks to record sales at Harrah's properties in Las Vegas, Atlantic City, Shreveport and North Kansas City.
Bear Stearns upgraded Harrah's from "neutral" to "attractive" after the company beat analysts' earnings estimates by 2 cents a share.
"It looks like they've really turned the corner," said Ader. "Business seems to be improving in the riverboat markets.
"Most significant, though, is that cross-market play in Las Vegas rose to 23 percent of their business this quarter from 13 percent last year. This is evidence that their 'Total Gold' marketing program designed to move players around the country is really working.
"If Harrah's invests in the new airline Mike Conway is trying to start up in Las Vegas, you're talking about a real pipeline of customers that will enable them to market more effectively than any gaming company that currently exists," Ader said.
"Harrah's really did a spectacular job last quarter in Nevada, which shows it has become a more effective competitor here," Ehlers said.
"Harrah's turned the corner in the first quarter of 1998," said CEO Phil Satre. "Our positive earnings per share comparison for the quarter despite unusual weather which severely impacted profitability in Northern Nevada is indicative that our strategy of geographic distribution and a focus on customer relationships is beginning to pay off."
Harrah's Southern Nevada casinos reported revenue of $85 million and an operating profit of $13.2 million; up from $64.6 million and $10.9 million a year earlier. Revenue increased 50 percent at the newly renovated Harrah's Las Vegas, which said occupancy was 92 percent.
Primadonna Resorts Inc. of Primm on I-15, owner of three hotel-casinos on the California border and half of the New York-New York hotel, said quarterly earnings of $5.8 million, or 20 cents per share, were down from $10.1 million or 34 cents in the 1997 quarter. Revenues of $66.6 million were down 7 percent.
Primadonna's share of operating income from New York-New York fell by $4.4 million to $10.2 million as the hotel-casino's business declined to more normal levels following its spectacular opening in 1997 -- when it was a must-see attraction.
CEO Gary Primm said net revenues for the Primm properties fell by 1 percent as the quarter was marked by renovation of Primm Valley Resort and bad weather in its Southern California feeder market.
Primadonna said it has refocused on Primm and scrutinized its cost structure.
"As a result, selective staff reductions and reassignments have been made and the marketing efforts redirected," the company said.
"As far as Primadonna, its stake in New York-New York shows you what's going on in Las Vegas," Ehlers said. "It posted a lower cash-flow margin, which is further evidence that we don't have enough visitors here."
Also reporting earnings today:
--Grand Casinos of Minneapolis, former operator of the Stratosphere in Las Vegas, said net earnings increased 19 percent to $17.4 million. Earnings per share of 40 cents were up from 34 cents. Revenue of $166.5 million increased 17 percent thanks to improved results at Grand's Mississippi casinos.
--Horseshoe Gaming L.L.C. of Las Vegas, owner of casinos in Louisiana and Mississippi, said its profit of $10 million for the quarter ended March 31 was down from $15 million a year earlier.
--Gaming industry supplier Casino Data Systems of Las Vegas said it earned $320,000, or 2 cents per share vs. a loss of $3.3 million or 18 cents in the year-ago quarter. Revenue of $12.7 million was off 4 percent.
"Achieving a profit in the first quarter of 1998 ended a string of five consecutive quarters of losses and reflected the positive impact of the restructuring of operations which took place in the fourth quarter of 1997," said CEO Kenneth Hardesty. "We have brought our spending more in line with the business level and we will continue to focus on growing revenue and lowering total costs as we progress through 1998."
"The new management group is obviously making some headway," Ehlers said. "Wall Street didn't expect this group to make a profit in the first quarter. They've stabilized the revenue decline and obviously cut the costs. Hardesty has been able to do a lot more in less time than anyone thought possible."
--Silicon Gaming Inc. of Palo Alto, Calif., which just opened a Las Vegas office, said it lost $6.7 million, or 51 cents per share, on revenue of $4 million. 1997 comparisons are not meaningful for the company, which was in the development stage a year ago. It makes Odyssey slot machines and other products.
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