Archon Corporation Reports Third Quarter Earnings

September 9, 2011

Archon Corporation reported a net loss of $368 thousand or ($0.06) per share on gross revenues of $6 million in the third quarter of 2011 which ended June 30. This compares negatively to net income of $142 thousand or $0.02 per share on gross revenues of $6.3 million in the third quarter of 2010. The casino operations continue to be a drag on results as gross revenues decreased by nearly 15% and promotional allowances increased 58%. For the nine months ended June 30, 2011, the company reported a net loss of $101 thousand or ($0.02) per share on revenue of $18 million This compares to net income of $888 thousand or $0.15 per share on gross revenue of $20.9 million in 2010. The balance sheet of the remains in good shape with cash and investment of $26.65 million and total current liabilities of $21.5 million. The Company’s total assets totaled $180.5 million versus total liabilities of $131.6 million.

In 2009 the company sold its property in Gaithersburg, Maryland which included an approximately 341,693 office building located on 51.57 acres for $76.3 million to the County of Montgomery. The County determined the property suitable for its intended use and is expected to proceed to close escrow by notifying the Company of a closing date. However, the agreement allowed for closing to be no later than April 30, 2014. The facility is currently net leased through that date and the Company continue to apply lease payment toward the reduction of the debt secured by the property. The current book value of the property is approximately $53.8 million with liabilities associated with the property of approximately $34.6 million.

The Company is involved in litigation that could potentially have a major adverse impact on the company. Multiple lawsuits have been filed regarding the Company’s redemption of its Exchangeable Redeemable Preferred Stock. In two of the cases, judgments have been entered against the company, however the company has appealed both cases to the Ninth Circuit Court of Appeals. In a third case that sought class certification, which is pending before the court, the Company most recently filed a motion for summary judgement.

Lastly, it should be noted that earlier this year the company effected a 1-for-250 reverse stock split immediately followed by a 250-for-1 forward stock split. As part of the split, the company bought out shareholder of less than 250 shares for $12.00 per pre-reverse stock split share. By cashing out these shareholders, the company was able to reduce the number of shareholders to under 300 allowing the company to voluntarily terminate its registration with the SEC. The Company’s believes this action will result in material cost savings and allow the management to focus on managing the business and growing shareholder value.

Disclosure: At the time this article was published, the author was long ARHN.PK.

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