Park Place earnings rise

Gary Thompson

Monday, Oct. 25, 1999 | 11:36 a.m.

Park Place Entertainment Corp. of Las Vegas, the world's largest gaming company, today reported a 35.7 percent gain in third-quarter per-share net income before one-time expenses related to the opening of its Paris Las Vegas resort.

After deducting $37 million of pre-opening charges, Park Place posted net income of $34 million, or 11 cents a share, compared with earnings of $44 million, or 14 cents a share, in the 1998 third quarter. Revenue rose to $839 million from $752 million.

Excluding the one-time charge, per-share net was 19 cents for the latest quarter, as the Las Vegas-based company recorded cash-flow gains from all four operating regions and additional cost savings from the acquisition of Grand Casinos Inc. earlier this year.

"I think this really vindicates the strategy we laid out a year ago, namely to diversify our bases and not rely on any one area for an abundance of our earnings," said Park Place Chairman Arthur Goldberg in a morning conference call with analysts and reporters.

"We have delivered these results due to our diversification across geographic markets and customer segments, our powerful cross-marketing network and our strict attention to investing in high return projects," he said.

Goldberg also lobbed a few thinly veiled shots at rival casino magnate Steve Wynn, suggested heavyweight Mike Tyson may never fight in Las Vegas again, and hinted Park Place may have increased its stake in Aladdin Gaming bonds.

"We're still one of the companies that break out our numbers," Goldberg said, a reference to Park Place's disclosure of financial data on a regional and property-by-property basis.

Wynn is chairman of Mirage Resorts Inc., which stopped breaking down results by property, claiming it provides too much information to competitors.

In another reference to Wynn, Goldberg said, "I don't know what he's directly talking about, as usual." The comment came in response to an analyst's question about rising entertainment costs, which Wynn cited in a conference call on Mirage earnings last week.

"We're not going crazy with (entertainment) numbers at any of our places," Goldberg said.

The Park Place chairman also had some pithy comments about Saturday's Mike Tyson-Orlin Norris heavyweight fight, which ended in controversy after just one round.

"I think the fight was a fiasco," Goldberg said. Suggesting the Nevada Athletic Commission might yank Tyson's license, he added, "I don't think you'll see him again in Nevada."

Responding to another question, Goldberg said he'd had discussions with executives of Aladdin Gaming about buying an equity stake in the company that is building a hotel-casino next to Park Place's new Paris Las Vegas resort on the Strip.

"We were talking to some of the folks at Aladdin and they said, 'Hypothetically, how much would you pay for our equity value?"' he said.

Months ago, Park Place bought a large though undisclosed stake in steeply discounted Aladdin Gaming bonds. Goldberg reasoned that if the issuer had financial trouble, Park Place might assume control, but if Aladdin did well, the bonds would pay off handsomely.

Goldberg didn't elaborate on the discussions regarding buying an equity stake in Aladdin Gaming, prompting a followup question from an analyst.

"You haven't increased your position in the bonds?" the analyst asked.

"I didn't say that," Goldberg responded tersely.

Aladdin Gaming President Richard Goeglein reacted angrily to Goldberg's comments today.

"What Arthur said is patently not true," Goeglein said. "There's no one in Aladdin Gaming who has ever had any discussion with him. He's never had discussion with any 'folks at Aladdin.'

"Four or five months ago, the company's financial advisors, while looking at the possibility of third-party investors, contacted Park Place and were told there wasn't any interest.

"What he has said is patently incorrect and simply not true, and I would say is shocking," the Aladdin executive said. "To think the chief executive officer of a major public company would make such a statement, particularly considering his legal training and background, is implausible."

Goldberg said the pending $3 billion acquisition of Caesars World from Starwood Hotels & Resorts is still awaiting approval from regulators in New Jersey and Indiana, where Caesars operates a large riverboat. The closing has been pushed back a bit, as Indiana officials aren't meeting the Park Place executives until late November.

Goldberg said Caesars Atlantic City performed will during the third quarter, though he was less sanguine about Caesars Palace in Las Vegas.

"They're not hitting the numbers I think they could hit and I think there's a lot of room for upward potential," he said, implying the Strip resort relies too much on business from the Far East and isn't capitalizing enough on the draw of the Forum Shops.

Park Place reported cash-flow increases for the third quarter at most of its Western Region properties, which include hotel-casinos in Las Vegas, Reno and Laughlin.

Park Place Chief Financial Officer Scott LaPorta said Paris Las Vegas, which was open for only one month during the quarter, added $13 million in cash flow to the combined Bally's Las Vegas-Paris complex. The adjacent properties posted $31 million in in cash flow in the latest quarter, up from a pro-forma $20 million in the 1998 quarter.

The Flamingo Las Vegas, which LaPorta said continues to post the highest return on investment margins of any hotel-casino on the Strip, saw cash flow rise $1 million, to $23 million. The Las Vegas Hilton's cash flow rose 33 percent, to $16 million.

Park Place also reported revenue and cash-flow gains at its Atlantic City and most of its Mississippi properties, and said the performance of its international division was enhanced by higher cash flow from two Australian casinos.

"Park Place fired on all cylinders during the third quarter, and the Las Vegas casino revenues and hotel-room prices were the primary reasons that earnings exceeded expectations," Bear Stearns & Co. Senior Managing Director Jason Ader said today. Analysts had projected per-share net, before pre-opening charges, of 14 cents to 16 cents.

"Given the current trends in Las Vegas, Atlantic City and Mississippi, we expect Park Place to continue to beat estimates for the foreseeable future," said Ader, who reiterated his "buy" rating on the company's stock.