RiverNorth Opportunities Fund, Inc.
Q1 2008 Earnings Call Transcript

Published: 27 May 2008

[Operator:]

Welcome to the first quarter 2008 Riviera Holdings Corporation Earnings Call. Today we have Mr. Bill Westerman, Chairman and CEO; Mr. Bob Vannucci, President and Chief Operating Officer of Riviera, Las Vegas; Mr. Doug Bitters, Riviera Holdings, Corporate Controller; and Mr. Nick Polcino, General Manager Riviera Black Hawk. Once the company has made its comments, we will open the call up for questions. Information that Riviera Holdings Corporation presents on this call may contain forward-looking statements as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include the words may, aim, foresee, potential, should, would, could, likely, estimate, intend, plan, continue, believe, expect, projections, or anticipate, and similar words and they include all discussions about Riviera's ongoing or future plans, objectives, or expectations. Risks and uncertainties could cause actual results to differ materially from the results anticipated in the forward-looking statements include among other factors uncertain hotel and casino market conditions, financing requirements, interest rates, proposals for the acquisition of Riviera, increases in energy costs, economic and political instability, disruptions affecting expansion and modernization, objectives and timetables, regulatory requirements, planned or unplanned capital expenditures and other risks and uncertainties detailed from time to time in Riviera's filings with the Securities and Exchange Commission. Forward-looking statements involve significant known and unknown risks, uncertainties and other factors that may cause Riviera's actual results, performance or achievements to differ materially. Riviera does not intend to update its forward-looking statements even though Riviera's situation or plans may change in the future unless applicable law requires it to do so. Mr. Westerman, please go ahead.

[Bill Westerman:]

Thank you, Operator, and thank you everyone for joining us today for Riviera Holdings Corporations first quarter 2008 earnings call. With me are Bob Vannucci, COO of Riviera Operating Corporation; Doug Bitters, our Corporate Controller; and Nick Polcino, General Manager of Riviera Black Hawk. As we announced on March 20, our CFO, Mark Lefever resigned to join the executive team at the Las Vegas Fountain Blue, our next door neighbor. For the last nine months, Mark also served as President of Riviera Black Hawk. Mark was instrumental in the very successful refinancing of our debt in June of last year and we wish him well. I have reassumed the Presidency of Black Hawk and am serving as interim CFO. Phil Simons has been appointed our Vice President of Finance, CFO, and Treasurer, effective May 12. Phil is a CPA and has extensive experience in gaming and hotel operations. Most recently serving as Vice President of Finance for the world renowned West Virginia Racino. For today's call, Doug Bitters will discuss the consolidated finances, Bob will discuss Las Vegas Operations, Nick will discuss Black Hawk Operations, I will make some closing comments, and then we will entertain questions. Go ahead, Doug.

[Doug Bitters:]

Thank you, Bill. For the three months ended March 31, 2008, the company's net revenue was $48 million, a decrease of $4 million or 8% from the 2007 period. Decreases in gaming, rooms, and food and beverage were partially offset by increases in entertainment and other revenue. Although our management did an excellent job containing costs, we could not offset the decline in revenues, especially gaming revenues which carry a relatively high profit margin. The company's adjusted EBITDA for the first quarter 2008 declined to $10.3 million, compared to $12.5 million in 2007, a 17.1% decrease. The company uses adjusted EBITDA as a measure of operating performance and included in our earnings release is a reconciliation between net income and adjusted EBITDA. In addition to interest taxes, depreciation and amortization , the company eliminates other costs such as equity-based compensation and merger costs while including costs related to Sarbanes-Oxley Act Compliance in adjusted EBITDA. The company incurred a net loss of $5.8 million for the quarter ended March 31, 2008, compared with a net profit of $2.5 million for the 2007 period. The negative variance in net income between the two periods was the result of the non-cash charge to account for the effect of decreased market interest rates on the swap agreement we entered into concurrently with our refinancing. As we reported previously, the swap essentially converted our floating rate of 2% over LIBOR to a fixed rate of 7.5%. We had no swap costs in the 2007 period. We still believe that entering into the swap was a wise decision, providing us with certainty of our interest cost over the life of the loan. Also, we have discussed in previous calls no matter how much we book as profit or loss to account for the swap, the expense will be zero when the note matures in 2014. It is important to note that the decrease of $2.1 million in EBITDA was more than offset by a decrease of $2.2 million in cash interest expense, associated with the lower interest rate on our new financing. As of March 31, 2008, the company had cash of $28.8 million plus the availability of our entire $20 million revolving line of credit. Capital Expenditures for the quarter ended March 31, 2008, were $3.1 million, with $2.6 million in Las Vegas and $566,000 in Black Hawk. We expect CapEx for 2008 to be $26.5 million, $23.5 million in Las Vegas and $3 million in Black Hawk. I will now turn the call over to Bob to discuss the Las Vegas results in more detail.

[Bob Vannucci:]

Thank you, Doug. Although we are disappointed with our first quarter results in Las Vegas, there were many positive factors to recognize. Our in-house convention business continues to be very strong and our rate of gaming play was stable to prior year. Overall customer response to our casino and room refurbishment projects had been very positive. Our management team did an outstanding job controlling expenses and improving operating efficiencies to mitigate the decline in revenues and the impact to EBITDA. Our first quarter results, total revenues for the quarter were down $2 million or 5.4%, compared to the first quarter of 2007. Due to declines in hotel occupancies and reductions in gaming revenues, attributable to the ramifications of the slower U.S. economy and encumbered access to our property due to neighboring construction. Our Las Vegas EBITDA of $7.4 million decreased by $1.2 million or 14%, compared with the same quarter last year. Our EBITDA margin was 20.3%, compared to 22.4% in 2007. Our cash ADR increased to $100.83, up $9.85 or 10.8% compared to prior year. We continue to see strong performance from our in-house conventions. Rooms occupied by convention guests increased by over 4400 in the quarter or 7.5% and comprise 42.6% of the total rooms we sold. Convention cash room revenue for the quarter was $7.3 million, an increase of $975,000 or 15.4% over prior year, and represented 49.5% of our total cash room revenue. Total room revenue in the quarter was $15.9 million, down $443,000 or 2.7% compared to 2007. Hotel room occupancy of 82% was down 11.6 points when compared to the same quarter last year. This is attributable to declines in lower rated leisure market segments. FIT tour operators and travel agent groups were down a combined 18% when compared to 2007 results. The leisure market decline is due to a combination of bad weather conditions throughout the East and Midwest, airline flight cancellations, and declining economic conditions. We are cautiously optimistic that our room pricing strategy offering an upscale room product at a mid-level price will help us to continue to improve our ADR and occupancy levels for the long-term. Our casino enhancements will position us to attract walk-in traffic created by the new resorts opening in our neighborhood. The overall property-wide pricing strategies will attract many of the guests staying in these new resorts to our property. Now, turning the call over to Nick in Black Hawk.

[Nick Polcino:]

Thank you, Bob. For the three months ended March 31, 2008, Black Hawk's net revenue was $11.5 million, a decrease of $2 million r or 15% from the same period 2007. Our decrease in revenue is the result of a 15% decrease in coin-in consistent with the overall decreases in the Black Hawk Central City markets. The decreases in the market are attributable to several factors, most importantly the ban on smoking in Colorado casinos which went into effect January 1 of this year. The weather conditions, the deteriorating economy, high gas prices also contributed to the decrease. It is difficult to quantify how much each factor contributed to the decrease but as the weather gets warmer, it should be less of a factor. EBITDA for the first quarter was $3.9 million, a decrease of $910,000 or 18.9%. The decrease was a result of the effects of the decrease in net revenues, partially offset by a decrease in operating and marketing expenses. Even with this decrease, we generated an excellent EBITDA margin of 34%. Our Black Hawk property generated a fair share for three months ended March 31, 2008, of a 124%, although down slightly from 127% in the 2000 period. We define fair share as a total slot coin-in in the market divided by the number of slot machines in the market and that's compared to our slot coin-in and the number of slot machines we have. In our previous conference call, we expressed concern over a potential initiative to permit VLTs, video lottery terminals, at racetracks elsewhere in the state. Fortunately, the proponents did not file the petition by the April 25 deadline which is good for us. I took over as General Manager Riviera Black Hawk in February of this year. I have over 29 years of gaming operations experience and most recently spent the last five years in Tunica, Mississippi where the similarities to Black Hawk are great. I have already taken steps to streamline the organization and improve efficiency in both the gaming and food and beverage operations. I look forward to working with our team to ensure Riviera will remain one of the leaders in the Black Hawk market. I'll turn the call over to Bill now.

[Bill Westerman:]

Thank you, Nick. Although we are maintaining tight control over our discretionary expenses, we are being very careful not to do so to the detriment of our customer service, ambience, and maintenance. Furthermore, we are continuing our aggressive capital investment program, especially the Las Vegas room project, in order to enhance our competitive position when the economy turns around. Although we are disappointed with our decline in revenues and income, they are consistent with the numbers reported by other gaming companies. The entire industry is suffering from the weak economy and especially the decrease in discretionary spending by consumers. In closing, I want to thank the many team members who have pitched into help me during the time I have served as interim CFO. Operator, we will now take questions.

[Operator:]

(Operator Instructions) We will take our first question from Larry Klatzkin with Jefferies & Company.

[Larry Klatzkin:]

Hi, guys, I may have missed it. But, hi, Bill, how you are doing?

[Bill Westerman:]

Okay.

[Larry Klatzkin:]

Forward bookings for the convention business, how are you seeing that compared to a year ago?

[Bill Westerman:]

Bob, do you want to answer that?

[Bob Vannucci:]

Yes, I'll take it. Very strong, Larry, especially on the in-house side. Citywide convention business is off a little bit, but our in-house convention is held very, very strong and look really good going forward.

[Larry Klatzkin:]

That's excellent. Okay. And then, so as far as proposal of the 24 hours and $5 bet limit being raised in Colorado, what do you think the chances are?

[Bill Westerman:]

We are not going to be involved in that. We think it's an exercise in futility.

[Larry Klatzkin:]

All right. So, you don't even think it's a long shot?

[Bill Westerman:]

We don't think it's worth the money that would be spent and the very possible short-term benefit is greatly exceeded by the long-term potential to reopen the door for the slot machines at Racino, which we consider is the biggest threat to the Colorado gaming future. And we think that going into this referendum is playing directly into the hands of the people, who are trying to accomplish that.

[Larry Klatzkin:]

All right. Understood. Well thanks, Bill. I appreciate it.

[Operator:]

Thank you. We will take our next question from [Robert Strogo with RIS Investments]. Please go ahead.

[Robert Strogo:]

You mentioned you had some expenses for looking at mergers or something along those lines. Would FX real estate, could you tell us what your involvement is exactly with them at this particular point? Obviously you're spending money or there was numbers on a table that were in the 30s, what's going to on with that situation? I know it's a difficult environment with Las Vegas Tropicana just went bankrupt so I was wondering more concerned about that than your operations. I know you have operations problems but everybody does in Las Vegas right now.

[Bill Westerman:]

Well, right now, we only know what FX is doing basically from their public filings. We are not involved in any discussions or negotiations. They have indicated in their filings that they have a continued interest in acquiring the Riviera, but we have said nothing specific and we've had nothing other than a casual major shareholder to the company discussion of operations in general.

[Robert Strogo:]

Well, they indicate they are involved with Muhammad Ali and the Presley family or they want to use your location, I believe, in Las Vegas. I mean, I read that just in their press releases. It's hard for me to believe that you guys aren't involved in some extent with them. You indicate you have quite a few million dollars worth of merger expenses or something, where are they going?

[Bill Westerman:]

Well, every time they enter into a proposal or propose something, the lawyers' meters start running, the accounts' meters start running and we have to respond. It's a very costly process and it has been going on for over three years. Since it's new, we do feel we have a fiduciary responsibility to respond to anyone who gives us a concrete proposal to benefit our shareholders, and we pursue that and that's just costly because when you do it, you got to spend a lot of money on legal costs. So we've researched, we respond to whatever they ask, but we are not proactive in soliciting any sort of an agreement from them.

[Robert Strogo:]

Well, we had our own agreement too. I think back when the stock was in the 30s and now it's closer to 16, it's like cut in half, talk about fiduciary duty, I mean, I'd be looking to embrace these people instead of engaging lawyers to put obstacles in their way, if I was concerned with fiduciary duty.

[Bill Westerman:]

Well, on our advice by lawyers, one that often you talk about in the 30s that had certain situations in it which would be very detrimental to most of our shareholders.

[Robert Strogo:]

I mean how is it going to be detrimental if it's a cash transaction?

[Bill Westerman:]

Well, there was no cash. You know the old story? Show me the money.

[Robert Strogo:]

Right. So, I mean, but wasn't there another bid at the same time some and there was cash involved in some of these transactions?

[Bill Westerman:]

There's a lot of talk with cash.

[Robert Strogo:]

Well, the stock was $32 at one time. I mean you like to say that the market wasn't real but we had an opportunity to sell the stock at $32 if we thought it wasn't real. It was up there and now you see the 16 is more real?

[Bill Westerman:]

We have no comment on that, whether the 16 or the 32, so our stock price is based primarily as it's serving as a substitute for speculation in Las Vegas real estate market and we don't control the speculative fever that will drive that price up or down. We entertain and give serious consideration to any legitimate offer and anyone that we would get that would have a likelihood of success, we would take to our shareholders.

[Robert Strogo:]

But isn't it also true that the land values about a year ago when those offers came out were very substantial in Las Vegas and now they've certainly receded a lot because of the debacle in real estate and especially in Las Vegas so the numbers may have been real then and the numbers may be real now as to where our stock is. But I think they're still willing to pay quite a premium for the company because they do have from what I saw in researching them that they have quite a plan that could benefit Las Vegas in the way of having Elvis Presley and Muhammad Ali and they have the rights to those people. So, I don't know why we are not embracing them rather than watching our stock go the way of Tropicana.

[Bill Westerman:]

Well, for one thing, we can't embrace somebody that doesn't make an offer, you know. That should answer your question. You can talk about as they do in their filings that they plan to do something. Well, planning to do something and putting dollars and cents and timing and providing sources of financing is a long way. For 10 years, we've had people want to embrace this company but at the end of the day, the money isn't there.

[Robert Strogo:]

Well, but I thought there was a management proposal to buy the company in the 20s as I recall and this was a counteroffer.

[Bill Westerman:]

No, there was no managed proposal.

[Robert Strogo:]

I thought someone owned a lot of stock one time. I thought there were two offers on the table at one time?

[Bill Westerman:]

There has been so many offers on the table.

[Robert Strogo:]

I thought they were competing against each other and I read reports that the numbers were in the 30s, the high-30s, the mid-30s and now all of a sudden we're in the 16.

[Bill Westerman:]

Well, there have been a lot back and forth about proposals.

[Robert Strogo:]

I'm not quarreling. I know it's a difficult environment in Las Vegas temporarily. You guys are good operators. You've been there a long time and I've been to your facility many times and you've got the Convention Center and I do appreciate all of the years of hard work that you put in there. It's just that right now, it's nice to think that we had everybody wooing us and all of a sudden we're paying a lot of legal expenses to fight people, who may have some good ideas.

[Bill Westerman:]

Well, first of all, let me say, on the last several quarters, our merger and acquisition expenses have been relatively small compared to last year when we were having aggressive negotiations. Right now, they basically amount to taking in any information you should receive transmitting it to our investment advisors and having them follow up to see if these people are prepared to enter into confidentiality agreements and can provide some reasonable assurance that they can consummate a deal. So our costs actually in this quarter I don't have them in front of me but I think they're one of the lowest quarterly M&A costs I've seen in the last two years.

[Robert Strogo:]

You had a rights offering recently and they extended it, but I think they did raise the money and I guess they were raising the money for some sort of offer for you guys. That's the opinion I got. Could I be wrong in that opinion?

[Bill Westerman:]

I can't comment on what they say in their rights offering. I have read it and I am not clear in any way of where the money is coming from and where the money is going and how it affects their major properties like the one up by Aladdin and how it affects us. There is nothing really specific that I could put my finger on or I think you could.

[Robert Strogo:]

All right. Well, you guys have very good real estate located in one of two large parcels in Las Vegas. Archon has the other one and Archon has a contract to sell their land and the rumor was that your land was worth obviously in the 30s with the company and the rumor was just how high it should be worth, whether it was 37 or 40 or the low-30s. And right now, we are $16 level and I am not quarreling because the price of land has come down. Do you have any independent appraisal of what that land is worth now, vis-a-vis what it was worth a year ago?

[Bill Westerman:]

We haven't done any recent appraisals. We did a lot of appraisals at the time they had their preliminary. These were not formal, but we had appraisals and it's a function of so many things and the time and the configuration, it can run anywhere between $12 million and $40 million an acre. There is no unique price for an acre of land. It all depends on where it is and how it's configured.

[Bob Vannucci:]

Yes, let me interject one thing, Bill. If you look at the most recent comps in the area, they are all in the 30s.

[Robert Strogo:]

Right. Well, I mean if you figure that number, the company is worth quite a bit of money?

[Bob Vannucci:]

It certainly isn't reflected in the stock price, is it?

[Robert Strogo:]

No, not at all. I mean can we buy our stock back? Are we in a position to do that? Do we have any money to do that?

[Bob Vannucci:]

No.

[Robert Strogo:]

So can't borrow the money? I mean who wants to borrow money today. But, so that's a problem. But look, I appreciate the work you did, you've done and like I said, we've been involved in your company for many, many years and we seen this go up from very low numbers. I remember when Donald Trump sold his stock years ago and he sold it for practically nothing before you split it few times.

[Bill Westerman:]

Yes, he sold it for $7 or $8.

[Robert Strogo:]

Before you split it I think.

[Bill Westerman:]

Yes.

[Robert Strogo:]

And so it's good that we've been there that long. I just hate to see what we have on the table go.

[Bill Westerman:]

Well, we all do and we will continue to pursue any offer that comes in that we think can be financed and can be consummated and would be of a significant price that would interest the 60%. We have to have 60% of our outstanding shareholders vote in favor of a merger, which is a relatively high threshold.

[Robert Strogo:]

I mean, so it's how much now?

[Bill Westerman:]

Well, if you describe the insiders as the company, probably less than six including ESOP.

[Robert Strogo:]

Okay. All right. I thought there were some large holders that were--?

[Bill Westerman:]

A lot of large holders but they aren't insiders. If you refer to our proxy, they will indicate the people who have over 5%.

[Robert Strogo:]

Okay, guys. Thank you very much. I know you are doing the best job you can in this difficult economic environment.

[Bill Westerman:]

Okay. Thank you very much for your interest.

[Robert Strogo:]

Thank you.

[Operator:]

Thank you. We will take our next question from Bill Garrison with Ironworks Capital.

[Bill Garrison:]

Thank you. Just a follow-up on the whole land discussion. Could you identify how many significant parcels of land there are that would be considered available for sale currently on the strip?

[Bill Westerman:]

Well, right now it's sort of hard because of the real estate market. Some are for sale, some are not for sale. I think Bob Vannucci and maybe if you could just define it?

[Bob Vannucci:]

Basically--?

[Bill Westerman:]

Maybe define it from Sahara up to Spring Mountain, and from Paradise to Industrial, Bob?

[Bob Vannucci:]

Right.

[Bill Westerman:]

That's a real close neighborhood so I'll ask Bob to describe that for you.

[Bob Vannucci:]

Pretty much all of the property on the strip has been acquired. You got two major parcels between Sahara and Spring Mountain that has not been required one is the old Argon piece which is the old wet and wild property which is currently up for sale and the Riviera property and beyond Spring Mountain at this point in time, I'm not aware of anything that's up for sale, possibly Tropicana in the future but that's yet to be determined.

[Bill Garrison:]

Okay. Very good. A couple operational questions. I know in the past, you've talked about not wanting to bring room rates down at all to compete with some of the lower end folks. I guess if you could just comment in terms of your views towards trade-off between rates and occupancy in the current economic environment. Is it reasonable to assume that occupancy will stay at kind of the lower end of where you'd like it to be?

[Bob Vannucci:]

Yes, I'd say that's the case. And when we look at the room rate, we have a competitive set that we compete against and we are classified as a three diamond property and we compete against three diamond properties. And we obviously keep our rates very competitive against those properties. And our strategy especially now with our room remodel is to offer a very upscale product at a mid-level room price. That's worked very well for us. The fact that the FIT market and the leisure markets have declined I think is a major result of the economy and what's happened to the country and I'm certainly sure that will come back and when it does, I think we can capitalize on that. We are not going to try to chase occupancy by drastically reducing our room rates to try to compete with properties that are well below those ratings and offer significant lower room rates because all we would be doing there is trading off revenue or trading off room rate for less revenue to get occupancy and I don't think the net effect of that would result in improvement to EBITDA.

[Bill Garrison:]

All right. And at $100 or so room rate currently, where are you, is there additional room or where are you relative to your peers in the three diamond category?

[Bob Vannucci:]

Yes, we are below. We stay just below the three diamond category peers.

[Bill Garrison:]

Okay. Secondly, I believe the CapEx number has gone up a little bit versus the last call. Could you be able to detail the 26.5 million in terms of how much of that is going into the growth or the remodeling initiatives versus maintenance?

[Bob Vannucci:]

23.5 of that amount is going into Las Vegas. About 20 of that has gone into the room remodel portion of the project which includes improvements we have made to the casinos and our public areas. Our room remodel project will be completed approximately at the end of October and that will give us a room product that will compete against anybody in the city. If you get a chance to come out, we would be happy to show you some of our new rooms and I think you'll agree it gives a very, very competitive product at a very, very modest rate.

[Bill Garrison:]

Okay. I guess, originally I thought some of that would carry over into 2009. Is that an accelerated schedule on the remodels?

[Bill Westerman:]

No, actually, Bob was referring to this year's project. The Monte Carlo Tower which is by far nicest tower and in the least need of renovation is scheduled to be done in 2009.

[Bill Garrison:]

Okay, did the whole project was 25 million or so?

[Bill Westerman:]

Probably yes.

[Bill Garrison:]

That leaves another 5 million or so in '09?

[Bill Westerman:]

Yes.

[Bill Garrison:]

Okay. And then lastly, could you describe kind of the state of affairs in Black Hawk with respect to promotional activity among your competitors, any update on the trends there?

[Bill Westerman:]

From what we can see with the smoking ban and with the downturn in the economy, they've been getting very aggressive with a lot of their promotions and a lot of their points back, cash back. We have sort of had a philosophy that there's just a limited amount of people that are going to come to Black Hawk and a limited amount that they're going to spend under this economic circumstances. So, we should be concentrating on our guests who do come there on a regular basis, make sure they get the absolute optimum benefits rather than try and advertise and market to the entire market.

[Bill Garrison:]

Okay. And in the first quarter, it seemed like you certainly held your own from a share standpoint, anything in particular that has allowed you to maintain that presence in spite of not being more aggressive on marketing?

[Bill Westerman:]

Nick, do you want to comment on that?

[Nick Polcino:]

Yes. We had an upgrade of our slot product. We stayed really competitive with our slot product and our food and beverage perception over the last 60 days has increased drastically, so that's really helping us a lot. Our food is one of our biggest amenities or probably is our biggest amenity besides our slots.

[Bill Garrison:]

Okay. All right. Thank you very much.

[Operator:]

Thank you. We will take our next question from Olivia Morrow with Lehman Brothers.

[Jane Pedreira:]

Hi, Bill, this is Jane Pedreira.

[Bill Westerman:]

Hi, Jane.

[Jane Pedreira:]

Hi. Just had a couple questions on the convention business. Looks like you're doing a pretty good job there. Can you comment on the convention mix overall as a percentage of your room nights overall and also, maybe just give us some more commentary on if you're seeing any cancellations or deferments and what kind of deposits you would typically take in advance so if there were a cancellation, how much of that revenue would you really lose?

[Bill Westerman:]

Sure, not a problem. Number one, our convention business looks very strong through the end of this year. The conventions represented in the first quarter about 40% of the total room nights sold and going forward we'll probably average out to around 35% this year. That's comparable to prior years and this range anywhere in the mid to mid-30s. As far as our convention contracts, they all contain attrition clauses. If a client comes in, books convention, reserves space and they don't use at least 80% of the total room nights and they are subject to attrition clauses and penalties which would recover the room revenue for us and the convention space rental revenues for us going forward.

[Jane Pedreira:]

I guess one of my questions is if room rates are coming down and let's say you've negotiated these contracts six months a year ago, I don't know when, wouldn't guys be tempted to just book room rates through the general website as opposed to going through the convention, the contract?

[Bill Westerman:]

Most of the rooms that come through the website, we protect our convention rates. They all have cutoff dates that are required in the contract. So up until 30 days prior to the convention, the convention rate is protected on all of the different rate sources that we have. So it's rare that we see the book around. I think at the high point and this was right after 9/11 we saw about a 12% effect on the book-arounds, on the back end we see about a 7% effect. We mitigate all the convention blocks. We have a special software we develop where we go back in and we look at everybody staying in a hotel to make sure that they didn't do the book-arounds so we can tell if someone booked around the convention.

[Jane Pedreira:]

Very clever.

[Bill Westerman:]

Yes, we did that right after 9/11, we figured we better find a way to do this.

[Jane Pedreira:]

That's very clever. Okay. And then it looks like your entertainment revenues are up which is also somewhat counterintuitive. Is that coming from cash customers in the convention business or are you comping more to try to induce more visitation?

[Bill Westerman:]

No, it's mostly cash customers and there's an effect that we had this year, we had ICE, the show from Russia. Last year we didn't have a main show. Splash had closed in October and it hadn't been replaced yet in the first quarter. So that's a big accounting of the revenues, but the revenues are all cash. All of our shows are on what we call four wall contracts where producers are responsible for the performance of their own shows and their expenses and we basically are a landlord or a participant in the revenues.

[Jane Pedreira:]

I got you so that's your share that you're booking?

[Bill Westerman:]

Correct. No, we're booking the total revenues and then just showing it as a full accounting.

[Jane Pedreira:]

Okay. So you take the expenses out down below?

[Bill Westerman:]

Correct.

[Jane Pedreira:]

Okay. That makes sense. And then I don't know if you can provide commentary on you indicated that leisure is weak. That's no secret. But can you comment in any way on where you see weakness, is it more coming out of California per se, or is it from the Midwest, is it any particular pocket or geography?

[Bill Westerman:]

From our own perspective, we just did some analysis. We saw a little bit more weakness out of the Midwest, okay. Both the West Coast and East appeared to be down and this is strictly looking at room nights. They were down about just under 11%. The Midwest was down about 17% and that just relates to booking room nights here at the Riviera.

[Jane Pedreira:]

Okay. That's interesting. And then any comments on tone of the market into April and May? We've heard other companies in Las Vegas commenting that things are getting a little bit better, but I'm wondering from your perspective are you seeing anything there?

[Bill Westerman:]

The convention business remains strong. We are still seeing weakness in the leisure markets. May is picking up, starting to see more booking patterns coming in for May, so we are cautiously optimistic that we will see improvements in May and June.

[Jane Pedreira:]

And then Summer where you probably don't have huge mix of convention, do you have any window that far out if other guys start promoting and discounting rooms? Do you just have to follow that, or is there anything else you can do to kind of buttress your business?

[Bill Westerman:]

We are very fortunate to have inroads into what we call a sports market. We do tremendous amounts of tournaments with foosball and darts and pool and you name it and a lot of that business stabilizes us through the Summer. We are all the way into the beginning of June when we have pool tournaments and then we have dart tournaments in July and then more pool tournaments in August. So our Summer business isn't as suspect as many of the other properties so we aren't as reliant on the FIT market as many of the properties would be.

[Jane Pedreira:]

Okay. That's good. All right. Well, thank you very much. I appreciate the color.

[Bill Westerman:]

Thanks, Jane.

[Operator:]

Thank you. We will take our next question from Derek Stevens with Desert Rock Enterprises. Please go ahead.

[Derek Stevens:]

Hi, Bill, hi, Bob, how are you?

[Bill Westerman:]

Hi, Derek.

[Bob Vannucci:]

How are you doing?

[Derek Stevens:]

Real good. One question relative to the 800,000 share block that traded at $16 a couple weeks ago. Has there been anymore information on who the buyer or the seller was?

[Bill Westerman:]

They have not filed a 13D at least as of yesterday, have they, Tullio?

[Tullio Marchionne:]

No, nothing yet. No filings. We've inquired of the broker and he has not revealed the transaction as to who bought.

[Derek Stevens:]

Okay. And then I have a couple operational questions for you. Relative to the convention and the group bookings, has the weak dollar helped at all with potentially some of your overseas customers, particularly in Europe and whatnot?

[Bob Vannucci:]

You would think it really would but we haven't seen a huge increase in our market especially from Asia. There has been some increase, but not the increase you would have expected with the decline of the dollar.

[Derek Stevens:]

And then how has the first few months of the Crazy LeRoy's worked out for you? Has it met expectations?

[Bob Vannucci:]

Worked out very well for us. I think it's met their expectation because as you know that's a leased operation. It certainly met our expectations. We are seeing, the customers love it in there. The volumes look pretty good. We participate with them as a small percentage of what they write.

[Derek Stevens:]

Sure.

[Bill Westerman:]

Yes, I might point out that that was an investment made really to position ourselves for the next couple of years as the neighborhood develops around here, so there will be a nice comfortable sports bar where you can drink and smoke and you make your bets unlike having to go into one of the big casinos to do all of that. So that's got a long range objective.

[Derek Stevens:]

Sure.

[Bob Vannucci:]

You ought to come out, Derek. We'll sit down and watch a 51 game there.

[Derek Stevens:]

All right. Well, maybe I'll stop by this afternoon. I appreciate it.

[Bob Vannucci:]

Okay.

[Bill Westerman:]

Take care.

[Operator:]

Thank you. We will take our next question from [Robert Strogo with RIS Investments]. Please go ahead.

[Robert Strogo:]

Yes, in looking at your big institutional holders and other holders, I see that 10 institutional holders have almost 60% of your stock. And then the gentleman who was just on from Desert Rock, he's got 1.24 million shares as last filing indicating that he's got an almost 10% of your stock as well. And Flag Luxury has approximately 11.28% on top of the 60%. And they at least are listed as other holders. And when I look at that and I see like who's who, Starwood real estate (inaudible) people involved, Harbert Management, all of these companies have anywhere from 7 to close to 10% sure, Plainfield Asset Management. So just the top institutional holders, the top 10 have 56% of your stock, top 25 have 67.41% of your stock and that doesn't include these other holders such as the gentleman who was just on the phone who have another 20% of your stock, with Black Flag Luxury and Desert Rock so that's like 70% of your stock really highly concentrated and you don't have that many shares outstanding, I congratulate you on that for not doing what Corporate America has done and that is flood the world with their shares.

[Bill Westerman:]

Well, let me say, I think if you look at the proxy which you should have received or you will receive, I think you got some double counting in there. The Flag Group, of about 19%, that includes about 9% for Starwood, so it's not 20% plus the 10% for them. And the only property, only group that affiliate that over 10% is the Flag Group with 19, and what's in that the 19 is about half Flag Luxury and about half Starwood. After that it's about 10% for the people you mentioned.

[Robert Strogo:]

Well, Starwood, do they have any, I mean your Sternwood was rumored to be wanted to take over the Riviera many, many times when he was affiliated with Starwood and Starwood is a great company, and you have any operational involvement with Starwood?

[Bill Westerman:]

No, we don't. I know Mr. Sternwood, we have had many discussions but we have never had any along an operational basis.

[Robert Strogo:]

No, it seems that you have so many really top notch institutions and people that have been circling around you guys. I remember when [Michel Nicholas] used to be involved with your company, whatever happened to him? But you always been out there because you have great land and you're the oldest operators in Atlantic City, actually in Las Vegas and having the Convention Center.

[Bill Westerman:]

We still think we're a great company. We have great potential. And just to answer the questions that came before, our Board is responsive to any credible cash offer that we believe could gain the support of 60% of the outstanding shares. One of the disadvantages of having these large groups or number of groups is it only takes one or two of them to put the kabash on anything because 40%, some of them, people may not vote and maybe one or two of the 10%ers say no, I want more, so you get sort of, you get put in impasse.

[Robert Strogo:]

We have no restrictions to keep anybody from buying more than 20%?

[Bill Westerman:]

Nobody can buy more than 20%. Nobody actually can buy more than 10% with an exception that was, we resolved in court last year with Flag, where they got to go up to 20%.

[Robert Strogo:]

Well, it seems to me that in this time, that maybe we should rescind that because there are a lot of 10% holders just under 10% it seems like everybody is under 10% and the other ones are at 20% so if you let one of the lions out of the cage, our stock may be going, there may be a fight for whatever stock is left. Do you ever think about lifting that restriction?

[Bill Westerman:]

Yes, we have. We feel that it was inappropriate that we got one to the 20%. It was unintentional and it came about through a number of different situations. Our bylaws since the company was organized in 1993 has had a very, very firm super poison pill that if you want to acquire more than 10% of our stock, be our guests. Make a cash offer for everybody but don't do a creeping tender offer or as to quote one of our famous Directors, just get your nose under the tent and then screw up everybody else.

[Robert Strogo:]

Well, it's interesting. It seems like you have so many different holders that they're like, it's like a tug of war, nobody wants to move and they all have a certain percentage so no one can really move. So it's worked the other way instead to me. That's just the way it seems to me right now. It seems like everybody is holding everybody at bay.

[Bill Westerman:]

Well, that's just about what it is but we're certainly not going to put our shareholders in a position where somebody can acquire 20 or 25% of the company and then squeeze everybody else out at an unfair price.

[Robert Strogo:]

Okay. Well, I hope you get one of the poker players to show his hand and maybe the rest of them will also.

[Bill Westerman:]

Okay.

[Robert Strogo:]

Thank you.

[Bill Westerman:]

Thank you.

[Doug Bitters:]

Bill, there's one more added business we should discuss and that's the stockholders meeting?

[Bill Westerman:]

Yes, please.

[Doug Bitters:]

We announced on May 6, 2008, that our annual meeting of stockholders will be adjourned from May 13, 2008 and rescheduled will be held on May 28, 2008 here at the Riviera Hotel and Casino at 11 a.m. Las Vegas time. The annual meeting will be adjourned to May 28, 2008 due to delay in the mailing of proxy materials to certain stockholders, and to provide stockholders with additional time to receive and review the proxy materials. The record date to vote at the Annual Meeting will remain April 1, 2008.

[Bill Westerman:]

Thank you. Anymore comments from anyone?

[Operator:]

Yes. We will take our next question from Louis Sarkes with Chesapeake Partners. Please go ahead.

[Louis Sarkes:]

Hi, Bill. Can you help me out or just give me your view on what if any effect the rebate checks from the stimulus plan may have in operations? We've heard comments from other gaming companies and I just wanted to get your perspective?

[Bill Westerman:]

Well, first of all they seem too good to be true, so we're not booking them and we're pursuing them, pursuing the additions, we filed the additional returns and they could amount to a substantial amount of money when, as, and if we get them. However with the state of Nevada and its financial state, we're not going to the bank with it right now.

[Louis Sarkes:]

What I was on another vein asking is that with the President's stimulus plan--?

[Bill Westerman:]

Oh, I'm sorry.

[Louis Sarkes:]

--that was enacted by Congress, some other games companies, actually a lot of companies have indicated that they expect if historical trends hold that they expect that it would help operations including gaming companies have helped them in the past and I just wanted to see if you had a view if we could see some temporary boost in business over the Summer as people begin to get their stimulus checks back that will qualify for them?

[Bill Westerman:]

Okay. First of all let me apologize because I misunderstood your question.

[Louis Sarkes:]

Not a problem at all.

[Bill Westerman:]

I thought it was about a hopeful tax rebate.

[Louis Sarkes:]

Well, I'd like to hear about that too.

[Bill Westerman:]

I'll let Bob answer that question.

[Louis Sarkes:]

Okay.

[Bill Westerman:]

We frankly, a couple of hundred dollars, we don't think is going to have a big impact, but I'll let Bob say what he thinks.

[Bob Vannucci:]

Yes. Well, and it's too soon to tell. I mean the checks are just basically getting to some peoples accounts now so I think it's too soon to tell. In the past the stimulus package helped and we're certainly hopeful it will help in the future. I think it's just too soon to tell.

[Louis Sarkes:]

Okay, thank you.

[Operator:]

Thank you. We will take our next question from Bill Garrison with Ironworks Capital. Please go ahead.

[Bill Garrison:]

Yes, thank you. Just one quick follow-up. For modeling purposes, can you make any comments with respect to operating expense trends, I guess they were down close to a couple million dollars year-over-year, if revenue were to kind of stay at these levels, do you think the first quarter experience is representative of what the expense structure would look like? Thanks.

[Bill Westerman:]

Yes, I think we would, we have not done massive layoffs. We've adjusted our workforce with attrition, with shared work weeks, we have cut back various outlet hours, but not to sound boastful. But we run a pretty mean and tight operation and unlike years in the past when we had some real downswings in 1990 when we organize 91 after 9/11, we are not cutting to the bone. We are continuing, we've added additional preventive maintenance people, additional engineering people, additional public service area people, so we are not getting, we're not cutting down and I'd say right now, we're pretty down about as low as we're going to get now. We will be very discrete in how we spend our marketing dollars. But as far as personnel are concerned, we think we've got it just about where we are going to have to keep it.

[Bill Garrison:]

Is it reasonable to think that operating expenses could actually be a little bit lower in '08 than they were in '07?

[Bill Westerman:]

They will be lower, whether they will be lower as proportional to revenue I can't tell you.

[Bill Garrison:]

Yes. Okay. Thank you.

[Operator:]

Thank you. That concludes our question-and-answer session. At this time, I'd like to turn it back over to Mr. William Westerman for any closing remarks. Please go ahead.

[Bill Westerman:]

Well, we look forward to seeing you at our shareholders meeting as Adam mentioned. As always, we welcome your visit to Riviera Las Vegas or Riviera Black Hawk. Thank you again for your interest and we look forward to talking to you on our second quarter conference call as well.

[Operator:]

Thank you. That concludes today's conference. We appreciate your participation. You may now disconnect.