Riviera Reports Results for First Quarter 2009

Riviera Holdings Corporation (NYSE Amex: RIV) reported its financial results for the three-month period ended March 31, 2009.

First Quarter 2009 Results

Net revenues for the first quarter of 2009 were $34.7 million, a decrease of $13.3 million, or 28 percent, from $48.0 million for the comparable period in the prior year. Net revenues decreased due to a 33 percent net revenue reduction at Riviera Las Vegas and an 11 percent net revenue reduction at Riviera Black Hawk. Income from operations was $1.5 million, a decrease of $5.2 million, or 78.1 percent, from $6.7 million for the comparable period in the prior year. The decrease was due primarily to an 87 percent decline in operating results at Riviera Las Vegas and a 17 percent decline in operating results at Riviera Black Hawk. The consolidated operating results for the first quarter of 2009 included $1.0 million in corporate payroll and related expenses and $0.2 million in equity compensation expenses. These expenses were in line with the prior year.

Adjusted EBITDA(1) for the first quarter of 2009 was $5.6 million, a decrease of $4.7 million, or 46 percent, from $10.3 million for the comparable period in the prior year. Adjusted EBITDA(1) consists of earnings before interest, income taxes, depreciation, amortization, stock based compensation, changes in the fair value of derivative instruments, mergers, acquisitions and development costs, gains from the extinguishment of debt and restructuring fees as more fully described within the footnote to the financial summary in this release. Adjusted EBITDA(1) was 16 percent and 22 percent of net revenues for the three months ended March 31, 2009 and 2008, respectively. The decrease in Adjusted EBITDA(1) was due to a 55 percent reduction in Adjusted EBITDA(1) at Riviera Las Vegas and a 17 percent reduction in Adjusted EBITDA(1) at Riviera Black Hawk.

Net loss for the first quarter of 2009 was $1.0 million, or ($0.08) per share on a fully diluted basis, compared to a net loss of $5.8 million, or ($0.47) per share on a fully diluted basis, for the same period in the prior year. The $6.8 million year over year turnaround was primarily attributable to a $10.0 million improvement in the amount recorded as change in the fair value of derivatives partially offset by the $5.2 million reduction in operating income. Change in the fair value of derivatives was an unrealized gain of $1.7 million for the three months ended March 31, 2009 compared to an unrealized loss of $8.3 million for the prior year.

As of March 31, 2009, the Company had $16.3 million in cash and cash equivalents which includes approximately $7 million in cash in the cages and on the casino floors. Net cash and cash equivalents increased $2.8 million during the first quarter as a result of $3.1 million in net cash provided by operating activities partially offset by $0.3 million in net cash used in investing activities due to maintenance capital expenditures at both Riviera Las Vegas and Black Hawk. Cash and cash equivalents would have decreased by approximately $1.2 million had the Company paid quarterly interest of approximately $4 million on the Credit Facility, which was due by March 31, 2009. Riviera and its restricted subsidiaries entered into a $245 million Credit Agreement (the "Credit Agreement" together with related security agreements and other credit-related agreements, the "Credit Facility") with Wachovia Bank, National Association (Wachovia), as administrative agent on June 8, 2007.

William L. Westerman, Chairman and CEO of Riviera, said, "We regret that current economic conditions forced us to make the decision to not pay our interest, which was due at the end of March. However, the continuing devastating competitive pressure on room rates, the rapidly declining visitation to Las Vegas, especially by convention attendees, verify we made the correct decision. It was necessary to retain the funds which would have been employed to pay the first quarter interest so as to maximize our liquidity.

"Both our Las Vegas and Black Hawk properties are generating positive free cash flow and this, combined with our cash balances, will help insure that we continue to pay all our operating costs on a timely basis and fund maintenance capital expenditures. There will be no effect on our team members, vendors and most importantly, our customers. Our lenders and the Company are well aware of the necessity of resolving this situation in an expeditious manner to preserve the long term viability and value of the Company. Our immediate priority is to address our untenable capital structure and with the aid of our financial advisors develop a restructuring plan with the goal of achieving a solution that either avoids the necessity for Chapter 11 proceedings or that results in a pre-negotiated plan of reorganization which would be confirmed through voluntary Chapter 11 proceedings."

Mr. Westerman continued, "The deteriorating trends in revenue and earnings experienced during 2008 continued as evidenced by our first quarter results. We expect this situation to continue as long as competitors in the Las Vegas market follow a strategy of sacrificing ADR to maximize room occupancy and the decline in convention business is unabated. In Black Hawk, payroll and marketing expenses will increase as we prepare for the implementation of Proposition 50 on July 2 (expanding games, limits and hours). Furthermore, we are concerned that the temporary or permanent suspension of construction by our next door neighbor in Las Vegas, Fontainebleau will reduce opportunities to market to "walk-in" traffic which we hoped would be a positive to our gaming and food and beverage revenue. We are confident that we will maintain sufficient cash flow to meet our operating obligations and maintain our properties. We expect to emerge through a restructuring with a capital structure which will enable the Company not only to survive, but to grow as the economy recovers and the competitive situation in Las Vegas returns to a more rational environment."

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