Q1 Revenue Surges for Pinnacle

The results met some expectations but exceeded most. Analysts' average prediction was $0.24 per share on revenue of $221.2 million, according to a poll by Thomson Financial. Shares of the company jumped $0.96 (3.38%) on Tuesday to $29.39. More than double the average number of shares traded hands.

The company attributed the increased revenue to it year-old L'Auberge du Lac property and continued strong results at its Boomtown casino in New Orleans, which it says is benefiting from the Gulf Coast rebuilding effort. Boomtown revenue grew to $63.2 million in the first quarter from $30 million in the same year-earlier period.

Looking ahead, Pinnacle chief executive Daniel Lee says the company will open two casinos in Downtown St. Louis and St. Louis County in late 2007 and 2008. In addition, the company has entered into an agreement to purchase the President Casino in St Louis, a riverboat casino currently in bankruptcy. The $31.5-million purchase agreement is subject to a potential overbid by third parties at an auction on May 16, as well as approval by the Missouri Gaming Commission. The company also is in the running for a gaming license in Philadelphia and another in Chile and has a tentative agreement with Harrah's to trade its hurricane-destroyed property in Biloxi, MS, for Harrah's properties in Lake Charles, LA.

"Our existing casino in Lake Charles [L'Auberge du Lac] is pretty much maxed out because there is a limitation on its size, so the only way to get bigger is to get another license," he told analysts, reporters and investors during a Tuesday morning conference call. "We will look at all places in the state we could go where we aren't already. The obvious is Baton Rouge, the biggest market we are not already in; there are two casinos there now, both pretty sad looking."

Meantime, Pinnacle is in the midst of a bidding war for Phoenix-based Aztar Corp. Aztar's prize possession is the aging 34-acre Tropicana resort here, which is viewed as a major redevelopment opportunity. As of Friday, an affiliate of Kentucky-based Columbia-Sussex Corp. had topped Pinnacle's agreed to $48 per share deal with a $50 offer and Aztar had declared it "superior," putting Pinnacle on the clock to match the offer or walk away with a pocketful of cash as a parting gift if Aztar kills the deal in order to accept the Columbia-Sussex offer.

"If we choose not to respond, we will have $66 million in the bank account on Friday," says Lee, adding that about $16 million would go to bankers and lawyers involved in crafting the merger agreement.