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| RIV > SEC Filings for RIV > Form 10-Q on 10-Nov-2008 | All Recent SEC Filings |
10-Nov-2008
Quarterly Report
Overall Outlook and Recent Developments
General
We own and operate the Riviera Hotel and Casino on the Strip in Las Vegas, Nevada ("Riviera Las Vegas"), and the Riviera Black Hawk Casino in Black Hawk, Colorado ("Riviera Black Hawk").
Our capital expenditures for Riviera Las Vegas are geared to maintain the hotel rooms and amenities in sufficient condition to compete for customers in the convention and mature adult markets. Room rental rates and slot revenues are the primary factors driving our operating margins. We use technology to maintain labor costs at a reasonable level, including kiosks for hotel check-in, slot club activities and slot ticket redemptions.
In Black Hawk, the $5 maximum bet restricts our ability to generate table games revenue, and the area is basically a "locals" slot customer market. Our capital expenditures in Black Hawk are geared toward maintaining competitive slot machines in comparison to the market.
Results of Operations
Three Months Ended September 30, 2008 Compared to Three Months Ended
September 30, 2007
The following table sets forth, for the periods indicated, certain operating
data for Riviera Las Vegas and Riviera Black Hawk. Income from operations does
not include intercompany management fees.
Third Quarter
Incr/ Incr/
(In Thousands) 2008 2007 $ (Decr) %(Decr)
---- ---- ------- --------
Net Revenues
Riviera Las Vegas $30,231 $37,940 $ (7,709) (20.3%)
Riviera Black Hawk 9,977 14,440 (4,463) (30.9%)
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Total Net Revenues $40,208 $52,380 $(12,172) (23.2%)
======= ======= =========
Property Income from Operations
Riviera Las Vegas $229 $4,572 $(4,343) (95.0%)
Riviera Black Hawk 1,241 3,695 (2,454) (66.4%)
----- ----- ----------
Property Income from Operations $1,470 $8,267 $(6,797) (82.2%)
====== ====== ========
Corporate Expenses
Equity Compensation (188) (206) 18 8.7%
Other Corporate Expense (1,028) (1,237) 209 16.9%
Mergers Acquisitions and
Development Costs (59) (160) 101 63.1%
---- ----- ---
Total Income from Operations $195 $6,664 $(6,469) (97.1%)
==== ====== ========
Operating Margins (1)
Riviera Las Vegas 0.8% 12.1% (11.3%)
Riviera Black Hawk 12.4% 25.6% (13.2%)
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(1) Operating margins represent income from operations as a percentage of net
revenues by property.
Riviera Las Vegas
Revenues
Net revenues for the three months ended September 30, 2008 were $30.2 million, a decrease of $7.7 million, or 20.3%, from $37.9 million for the comparable period in the prior year.
Casino revenues for the three months ended September 30, 2008 were $11.8 million, a decrease of $3.1 million, or 20.5%, from $14.9 million for the comparable period in the prior year. Casino revenues are comprised primarily of slot machine and table game revenues. In comparison to the same period in the prior year, slot machine revenue was $9.1 million, a decrease of $1.8 million, or 18.3%, from $10.9 million and table game revenue was $2.4 million, a decrease of $0.7 million, or 22.7% from $3.1 million. Slot machine and table game revenues decreased primarily due to lower slot machine and table game amounts wagered as a result of less hotel occupancy, the effects of the slow economy on consumer spending and encumbered access due to construction at neighboring projects. Slot machine win per unit per day for the three months ended September 30, 2008 was $107.88, a decrease of $18.66, or 14.8%, from $126.34 for the comparable period in the prior year.
Room rental revenues for the three months ended September 30, 2008 were $12.1 million, a decrease of $2.7 million, or 18.1%, from $14.8 million for the comparable period in the prior year. The decrease in room rental revenues was primarily due to a 12.9% decrease in occupied rooms and a 5.0% decrease in average daily room rates. The decrease in occupancy was primarily the result of lower leisure and convention segment occupancy due to weaker economic conditions and higher travel costs. The decrease in average daily room rates was due to lower leisure segment room rates. This was due to increased room supply at competing Las Vegas hotel and casino properties resulting in significant downward market pressure on hotel room rental rates.
Hotel room occupancy percentage for the three months ended September 30, 2008, was 87.1% compared to 93.9% for the same period in the prior year. The hotel room occupancy percentage is calculated by dividing total occupied rooms by total rooms available for sale. Room renovations were the primary reason that 7.3% of the hotel rooms were unavailable during the third quarter of 2008. During the third quarter of 2008, 50.1% and 34.7% of the occupied rooms were leisure and convention segment rooms, respectively. Average daily room rental rate, or ADR, was $75.17, a decrease of $3.96, or 5.0%, from $79.13 for the comparable period in the prior year. The decrease in ADR was due primarily to a $16.85, or 24.6%, decrease in leisure segment room rental rates to $51.58 from $68.43 for the comparable period in the prior year. Revenue per available room, or RevPar, was $65.47, a decrease of $8.81, or 11.9%, from $74.28 for the comparable period in the prior year. The decrease in RevPar was the result of decreases in occupied rooms and average daily room rental rates as described above.
Food and beverage revenues for the three months ended September 30, 2008 was $5.6 million, a decrease of $0.9 million, or 14.6%, from $6.5 million for the comparable period in the prior year. The decrease in food and beverage revenue was due primarily to a $0.8 million decrease in food revenue. Food covers decreased 9.7% and the average check decreased 5.8% from the comparable period in the prior year as a result of the weak economy, reduced hotel occupancy and strategic closure of select food and beverage outlets during low volume periods. Food and beverage revenues include $1.3 million in revenues related to items offered to high-value guests on a complimentary basis.
Entertainment revenues for the three months ended September 30, 2008 were $3.5 million, a decrease of $0.6 million, or 13.5%, from $4.1 million for the comparable period in the prior year. The decrease in entertainment revenue is due to lower ticket sales in all our entertainment venues primarily as a result of lower occupancy and the weaker economy.
Promotional allowances for the three months ended September 30, 2008 were $4.4 million, an increase of $0.5 million, or 12.4%, from $3.9 million for the comparable period in the prior year. Promotional allowances are comprised of food, beverage, hotel room nights and other items provided on a complimentary basis primarily to our high-value casino players. The increase in promotional allowances is due primarily to more aggressive offerings designed to increase casino and hotel room rental revenues.
Costs and Expenses
Casino costs and expenses for the three months ended September 30, 2008 were $6.7 million, a decrease of $1.2 million, or 14.8%, from $7.9 million for the comparable period in the prior year. The decrease in casino expenses is primarily due to a reduction in slot and table game payroll and related costs which partially offset the $3.1 million decrease in casino revenue.
Room rental costs and expenses for the three months ended September 30, 2008 were $6.4 million, a decrease of $1.1 million, or 15.2%, from $7.5 million for the comparable period in the prior year. The decrease in room rental expenses partially offsets the $2.7 million decrease in room rental revenues and is primarily due to reduced payroll and related costs in conjunction with a 12.9% decrease in occupied rooms.
Food and Beverage costs and expenses for the three months ended September 30, 2008 were $4.6 million, a decrease of $1.1 million, or 19.1%, from $5.7 million for the comparable period in the prior year. The decrease in food and beverage costs and expenses was due to reduced food and beverage cost of sales, less payroll and related costs and less food and beverage operating expenses to partially offset the $0.9 million decrease in food and beverage revenues. Plus, to manage costs, several food and beverage outlets were closed during lower occupancy periods.
Entertainment department costs and expenses for the three months ended September 30, 2008 were $2.0 million, a decrease of $0.7 million, or 24.6%, from $2.7 million for the comparable period in the prior year. The decrease in entertainment department costs and expenses is primarily due to $0.4 million reduction in contractual payments to the entertainment producers as a result of less ticket sales and entertainment revenues.
Income from Operations
Income from operations for the three months ended September 30, 2008 were $0.2 million, a decrease of $4.4 million, or 95.0%, from $4.6 million for the comparable period in the prior year. The decrease is principally due to decreased casino, room rental and food and beverage revenues without offsetting costs and expenses reductions.
Operating margins were 0.8% for the three months ended September 30, 2008 in comparison to 12.1% for the comparable period in the prior year. Operating margins decreased primarily due to revenue decreases in the high margin slot and room rental operations without correlating decreases in costs and expenses. Slot revenues decreased $1.8 million, or 18.3% and room revenues decreased $2.7 million, or 18.1%. Occupied rooms decreased by 12.9% and the average daily room rental rate decreased by 5.0%.
Riviera Black Hawk
Revenues
Net revenues for the three months ended September 30, 2008 were $10.0 million, a decrease of $4.4 million, or 30.9%, from $14.4 million for the comparable period in the prior year. The decrease was primarily due to a slot machine revenue decrease of $4.2 million, or 31.1%, to $9.5 million from $13.7 million for the comparable period in the prior year. Slot machine revenue per unit per day was $125.24, a decrease of $41.60, or 24.9%, from $166.84 for the comparable period in the prior year. The decrease in slot machine revenues was primarily the result of less slot machine wagering due to increased fuel costs, weak economic conditions and the effects of the smoking ban in Colorado which went into effect January 1, 2008.
Food and beverage revenues for the three months ended September 30, 2008 were $1.4 million, a decrease of $0.1 million, or 6.0%, from $1.5 million for the comparable period in the prior year. The decrease was due primarily to less customer redemption of player points earned and coupons for complimentary food and beverage items. Food and beverage revenues include revenues related to items offered to high-value guests on a complimentary basis. These revenues represent approximately 70% of total food and beverage revenues.
Costs and Expenses
Casino expenses for the three months ended September 30, 2008 were $4.8 million, a decrease of $1.2 million, or 19.9%, from $6.0 million for the comparable period in the prior year. The decrease in casino expenses is due primarily to a reduction in slot machine related labor costs to partially offset the $4.2 million decrease in slot machine revenue.
General and administrative expenses for the three months ended September 30, 2008 were $2.4 million, a decrease of $0.2 million, or 10.0%, from $2.6 million for the comparable period in the prior year. The decrease in general and administrative expenses was primarily due to payroll and related costs reductions to offset the $4.4 million reduction in net revenues.
Income from Operations
Income from operations for the three months ended September 30, 2008 were $1.2 million, a decrease of $2.5 million, or 66.4%, from $3.7 million for the comparable period in the prior year. The decrease is related primarily to the decreased slot revenues as described above.
Operating margins were 12.4% for the three months ended September 30, 2008 in comparison to 25.6% for the comparable period in the prior year. Operating margins decreased primarily due to a $4.2 million decrease in slot machine revenues within our high operating margin slot operation without correlating reductions in costs and expenses.
Consolidated Operations
Other Expense
Other expense for the three months ended September 30, 2008 was $3.7 million, a decrease of $21.2 million, or 85.3%, from $24.9 million for the comparable period in the prior year. The decrease is primarily due to a $12.9 million loss on retirement of debt recorded during the third quarter of 2007 and a decrease of $8.1 million in the amount recorded for unrealized loss on derivatives. The loss on retirement of debt was related to the retirement of our 11% Notes as described below under Liquidity and Capital Resources. Unrealized gain on derivatives for the three months ended September 30, 2008 were $0.6 million compared to a loss of $7.5 million for the comparable period in the prior year. The gain and loss on derivatives is the result of changes in the valuation of our interest rate swap agreement which is referenced in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
Net Loss
Net Loss for the three months ended September 30, 2008 was $3.5 million, a decrease of $14.8 million, from $18.3 million for the comparable period in the prior year. The decrease in net loss is primarily due to the $21.2 million decrease in other expense as described above partially offset by a $6.5 million decrease in consolidated income from operations.
Nine Months Ended September 30, 2008 Compared to Nine Months Ended
September 30, 2007
The following table sets forth certain operating data for Riviera Las Vegas and
Riviera Black Hawk for the periods indicated. Income from operations does not
include intercompany management fees.
Nine Months
Incr/ Incr/
(In Thousands) 2008 2007 (Decr) (Decr)%
---- ---- ------ -------
Net Revenues
Riviera Las Vegas $101,206 $116,597 $(15,391) (13.2%)
Riviera Black Hawk 32,579 41,475 (8,896) (21.4%)
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Total Net Revenues $133,785 $158,072 $(24,287) (15.4%)
======== ======== =========
Income from Operations
Riviera Las Vegas $9,983 $19,277 $(9,294) (48.2%)
Riviera Black Hawk 5,580 10,204 (4,624) (45.3%)
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Property Income from Operations 15,563 29,481 (13,918) (47.2%)
Corporate Expenses
Equity Compensation 620 759 139 18.3%
Other Corporate Expenses 2,900 3,210 310 9.7%
Mergers, Acquisitions and
Development Costs 104 448 344 76.8%
--- --- ----
Total Income from Operations $11,939 $25,064 $(13,125) (52.4%)
======= ======= =========
Operating Margins (1)
Riviera Las Vegas 9.9% 16.5% (6.6%)
Riviera Black Hawk 17.1% 24.6% (7.5%)
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(1) Operating margins represent income from operations as a percentage of net revenues by property.
Riviera Las Vegas
Revenues
Net revenues for the nine months ended September 30, 2008 were $101.2 million, a decrease of $15.4 million, or 13.2%, from $116.6 million for the comparable period in the prior year.
Casino revenues for the nine months ended September 30, 2008 were $39.3 million, a decrease of $8.3 million, or 17.3%, from $47.6 million for the comparable period in the prior year. Casino revenues are primarily comprised of slot machine and table game revenues. In comparison to the same period in the prior year, slot machine revenue was $29.5 million, a decrease of $5.0 million, or 16.6%, from $34.5 million and table game revenue was $8.2 million, a decrease of $1.9 million, or 19.1% from $10.1 million. Slot machine win per unit per day was $117.86, a decrease of $17.49, or 12.9%, from $135.35 for the comparable period in the prior year. Slot machine and table game revenues decreased primarily due to lower slot machine and table game amounts wagered as a result of reduced hotel occupancy, the effect of a weak economy on consumer spending and encumbered access due to construction at neighboring projects.
Room rental revenues for the nine months ended September 30, 2008 were $41.6 million, a decrease of $4.7 million, or 10.2%, from $46.3 million for the comparable period in the prior year. The decrease in room rental revenue was primarily due to a 25.3% decrease in leisure segment occupied rooms due to higher travel costs and the weaker economy. Hotel room occupancy percentage for the nine months ended September 30, 2008, was 84.4% in comparison to 94.1% for the comparable period in the prior year. The hotel room occupancy percentage is calculated by dividing total occupied rooms by total rooms available for sale. Room renovations were the primary reason that 6.5% of hotel rooms were unavailable in 2008. For the nine months ended September 30, 2008, 41.3% and 40.2% of occupied rooms were leisure and convention segment rooms, respectively. Average daily room rental rate, or ADR, was $88.29, an increase of $5.16, or 6.2%, from $83.13 for the comparable period in the prior year. The increase in ADR was due primarily to an $8.40, or 8.5%, increase in convention room rates. Revenue per available room, or RevPar, was $74.51, a decrease of $3.73, or 4.8%, from $78.24 for the comparable period in the prior year. The decrease in RevPar was due to lower occupancy as described above.
Food and beverage revenues for the nine months ended September 30, 2008 were $18.6 million, a decrease of $2.4 million, or 11.4%, from $21.0 million for the comparable period in the prior year. The decrease is due to a $1.8 million food revenue and $0.6 million beverage revenue reduction primarily as a result of the weak economy, reduced hotel occupancy, less gaming customers and strategic closure of select food and beverage outlets during low volume periods. Food covers decreased primarily in the buffet, coffee shop and the sports book delicatessen and drinks served decreased primarily in the casino bars. Food and beverage revenues include items offered to high-value guests on a complimentary basis.
Entertainment revenues for the nine months ended September 30, 2008 were $10.2 million, an increase of $0.2 million, or 2.3%, from $10.0 million for the comparable period in the prior year. The increase is due to additional ticket sales at our show in the Versailles Theater ("ICE"), which opened April 23, 2007. Ticket sales decreased in all other entertainment venues.
Costs and Expenses
Casino costs and expenses for the nine months ended September 30, 2008 were $21.6 million, a decrease of $3.4 million, or 13.6%, from $25.0 million for the comparable period in the prior year. The decrease in casino costs and expenses is due primarily to a reduction in slot and table game payroll and related costs in order to partially offset the $8.3 million decrease in casino revenue.
Room rental costs and expenses for the nine months ended September 30, 2008 were $19.6 million, a decrease of $2.0 million, or 9.1%, from $21.6 million for the comparable period in the prior year. The decrease in room rental costs and expenses was due primarily to reduced payroll and related costs and less operating expenses in order to partially offset a $4.7 million decrease in room rental revenues.
Food and beverage costs and expenses for the nine months ended September 30, 2008 were $15.3 million, a decrease of $2.1 million, or 12.2%, from $17.4 million for the comparable period in the prior year. The decrease in food and beverage cost and expenses is due primarily to a reduction in food and beverage cost of goods, payroll and related costs and other expenses to offset a $2.4 million food and beverage revenue decrease. Additionally, several food and beverage outlets have been closed during low volume periods to reduce costs and expenses.
Income from Operations
Income from operations for the nine months ended September 30, 2008 was $10.0 million, a decrease of $9.3 million, or 48.2%, from $19.3 million for the comparable period in the prior year. The decrease is primarily due to lower casino and room rental revenues without offsetting reductions in costs and expenses.
Operating margins were 9.9% for the nine months ended September 30, 2008 in comparison to 16.5% for the comparable period in the prior year. Operating margins decreased primarily due to a $5.0 million revenue decrease in our high margin slot operations resulting in a $17.49, or 12.9%, reduction in slot machine win per unit per day and a $4.7 million decrease in room rental revenues resulting in a $3.73, or 4.8% reduction in RevPar.
Riviera Black Hawk
Revenues
Net revenues for the nine months ended September 30, 2008 were $32.6 million, a decrease of $8.9 million, or 21.4%, from $41.5 million for the comparable period in the prior year.
Casino revenues for the nine months ended September 30, 2008 were $31.7 million, a decrease of $8.7 million, or 21.4%, from $40.4 million for the comparable period in the prior year. The decrease was primarily due to a slot machine revenue decrease of $8.5 million, or 21.5%, to $30.9 million from $39.4 million for the comparable period in the prior year. Slot machine revenue per unit per day was $131.34, a decrease of $27.82, or 17.5%, from $159.16 for the comparable period in the prior year. The decrease in slot machine revenue was primarily the result of less slot machine wagering due to the effects of high fuel costs, a weak economy and the smoking ban in Colorado which went into effect January 1, 2008.
Costs and Expenses
Casino costs and expenses for the nine months ended September 30, 2008 were $14.7 million, a decrease of $2.7 million, or 15.5%, from $17.4 million for the comparable period in the prior year. The decrease in casino expenses is primarily due to a reduction in slot and table game payroll and related costs which partially offset the $8.7 million decrease in casino revenue.
General and administrative expenses for the nine months ended September 30, 2008 were $7.0 million, a decrease of $0.8 million, or 10.4%, from $7.8 million for the comparable period in the prior year. The decrease in general and administrative expenses was due to a credit adjustment of $0.4 million for employee benefits and a reduction in accrued management incentives of $0.4 million.
Income from Operations
Income from operations for the nine months ended September 30, 2008 were $5.6 million, a decrease of $4.6 million, or 45.3%, from $10.2 million for the comparable period in the prior year. The decrease is primarily due to the decrease in slot machine revenue without offsetting reductions in costs and expenses.
Operating margins were 17.1% for the nine months ended September 30, 2008 in comparison to 24.6% for the comparable period in the prior year. Operating margins decreased primarily due to an $8.5 million slot machine revenue decrease in our high margin slot operations.
Consolidated Operations
Other Expense
Other expenses for the nine months ended September 30, 2008 were $11.1 million, a decrease of $26.1 million, or 70.1%, from $37.2 million for the comparable period in the prior year. The decrease is primarily due to a $12.9 million loss on retirement of debt, a decrease of $8.2 million in the amount recorded for unrealized gain (loss) on derivatives and a decrease of $4.9 million in interest expense, net of interest income. The loss on retirement of debt was related to the retirement of our 11% Notes as described below under Liquidity and Capital Resources. Unrealized gain on derivatives was $1.6 million for the nine months ended September 30, 2008 compared to an unrealized loss on derivatives of $6.6 million for the comparable period in the prior year. The gain and loss on derivatives is the result of changes in the valuation of our interest rate swap agreement which is referenced in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q. Interest expense decreased as a result of reduced borrowing costs associated with our New Credit Facility executed June 2007.
Net Income
Net income for the nine months ended September 30, 2008 was $0.8 million,
an increase of $12.9 million, or 108.8%, from a $12.1 million net loss for the
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Liquidity and Capital Resources
At September 30, 2008 we had cash and cash equivalents of $20.5 million. Our cash and cash equivalents decreased by $8.3 million during the nine months ended September 30, 2008 due to $18.0 million in net cash used in investing activities partially offset by $7.2 million in net cash provided by operating activities and $2.5 million in net cash provided by financing activities. Cash and cash equivalents increased $7.7 million during the nine months ended September 30, 2007 due to $17.3 million in net cash from provided by operating activities partially offset by $8.9 million in net cash used in investing activities and $0.7 million in net cash used in financing activities. Net cash used in investing activities includes $14.4 million and $1.5 million in capital expenditures related to our Las Vegas hotel room renovation project for the nine months ended September 30, 2008 and 2007, respectively. Additionally, net cash used in investing activities for the nine months ended September 30, 2007 included a $2.7 million reduction for restricted cash set aside for our workers compensation self insurance program. Net cash provided by operating activities included $4.0 million and $1.8 million in cash reductions due to changes in operating assets and liabilities for the nine months ended September 30, 2008 and 2007, respectively. The cash reductions due to changes in operating assets and liabilities for the nine months ended September 30, 2008 were due primarily to a $4.9 million decrease in accounts payable and accrued expenses principally due to payment timing differences. The cash reductions due to changes in operating assets and liabilities for the nine months ended September 30, 2007 were due primarily to a $1.8 million decrease in operating inventories. Net cash provided by financing activities for the nine months ended September 30, 2008 included $2.5 million drawn against our Revolving Credit Facility and net cash used in financing activities for the nine months ended September 30, 2007 included a $215.9 million payment to retire our 11% Notes described below and $225.0 million in proceeds from our New Credit Facility.
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