Casinos post mixed profit numbers

Gary Thompson

Thursday, Feb. 4, 1999 | 11:57 a.m.

MGM Grand Inc. led a host of gaming and lodging fourth-quarter earnings releases today, reporting record revenue and high-end baccarat play.

Also reporting results were Primadonna Resorts Inc., whose merger with MGM is expected to close March 1, and -- for the first time as separate companies -- Hilton Hotels Corp. and its gaming spinoff, Park Place Entertainment Inc.

MGM Grand reported fourth-quarter net income of $21.2 million, or 41 cents per diluted share, compared with net of $33.4 million, or 57 cents a share, in the 1997 fourth period. Shares outstanding averaged 52.2 million in the 1998 quarter, down from 59 million a year earlier.

Fourth-quarter revenue was a record $214.9 million, up from $212.6 million a year earlier, MGM said.

For all 1998, net income fell to $68.9 million, or $1.22 a share, from $111 million, or $1.89 a share, MGM said. Full-year revenue slipped to $773.9 million in 1998 from $827.6 million.

Primadonna said fourth-quarter net fell to $785,000, or 3 cents per diluted share, from $4.6 million, or 16 cents a share, in the 1997 quarter. Revenue slipped to $64.4 million from $66.9 million, Primadonna said.

For all 1998, Primadonna reported net income of $18.1 million, or 63 cents a share, down from $32.4 million, or $1.10 a share, in 1997. Revenue was $272.9 million in 1998, compared with $287.8 million in 1997.

Park Place released results on a pro forma basis, that is, assuming its spinoff from Hilton and acquisition of Grand Casinos had occurred on Jan. 1, 1997, rather than Dec. 31, 1998.

Park Place said fourth-quarter net income was $6 million, or 2 cents per diluted share, compared with a loss of $44 million in the 1997 quarter. Revenue was $712 million, compared with $685 million in the 1997 period.

For all 1998, Park Place said, net income was $139 million, or 45 cents a share, compared with net of $82 million, or 26 cents a share, in 1997. Revenue was $2.9 billion in 1998, compared with $2.68 billion in 1997.

Hilton also reported results on a pro forma basis, with fourth-quarter net income of $35 million, or 14 cents a share, compared with a $5 million loss in the 1997 period. Revenue was $496 million in the 1998 quarter, compared with $386 million in the year-earlier period.

Hilton said full-year net was $297 million, or $1.12 a share, compared with net of 4250 million, or 94 cents a share, in 1997. Revenue was $1.77 billion, compared with $1.48 billion in 1997.

In a conference call today, MGM Grand Chairman Terry Lanni said the fourth-quarter results "provide a positive early indicator of the merits of our strategic plan."

At the MGM Grand resort in Las Vegas, a lower-than-normal table-game hold percentage was offset by record baccarat volume and higher room and food-and-beverage revenue, Lanni said.

At New York-New York, the joint venture with Primadonna that MGM will own in full when the merger is consummated next month, full-year cash flow was $100.2 million, representing a 46 percent margin on revenue.

MGM's Australian and South African casinos also performed well, Lanni said, adding that the company expects to ultimately hold six South African gaming licenses in a partnership with local interests there.

MGM expects to open a temporary casino in Detroit this summer -- four to six months before competitors -- and to get a ruling on its efforts to obtain land in Atlantic City within four months, MGM President Alex Yemenidjian said. The company is involved in a lawsuit over a parcel of less than 1 acre that is holding up its development plans in New Jersey.

Lanni, Yemenidjian and MGM Chief Financial Officer Jim Murren also said the company will sell some Primadonna assets after the merger is completed, that the company will spend about $540 million on construction this year, including $300 million in Detroit, and that they expect continued strong play from key Asian customers.

"We think that after we unveil our entire approach and strategy to the Primadonna transaction, you'll agree that it was a good move," Yemenidjian said.

MGM said 1999 looks promising.

"January was the highest cash flow in MGM history, and table game drop was the highest by a big margin," Yemenidjian said. But he repeated concerns that the Las Vegas market may suffer some lean years due to overcapacity.

"Are there too many rooms being built? You bet? Would we like to see a couple of these things blown out? You bet ... But we think we're very well-prepared, with the strongest balance sheet in the gaming industry," he said.

"There is a capacity issue here in Las Vegas and our customer demographics are changing.

"When you're in this type of environment, a lot of (acquisition) opportunities can come up. We want to be prepared in case opportunities come up that will enhance value for our shareholders.

"This isn't about consolidation for the sake of consolidation. It's not about being the biggest. Our objective is to have the most profitable gaming company in the industry."

At Park Place, meantime, the Las Vegas Hilton reported cash flow of $9 million for the quarter, down from the year-ago quarter's $10 million. For the year, cash flow jumped 29 percent to $58 million.

Bally's Las Vegas, another Park Place property, reported quarterly cash flow of $17 million, down from $24 million in 1997's fourth quarter. For the year, Bally's cash flow was $84 million, down from $93 million the year earlier.

And Park Place's Flamingo Hilton-Las Vegas reported fourth-quarter cash flow of $29 million, which was relatively flat with fourth-quarter 1997 results. The Flamingo generated 1998 cash flow of $106 million, down from $109 million in 1997.