Higher profits reported by Strip casino operators

David Strow

Tuesday, July 25, 2000 | 11:08 a.m.

Big Strip operators Park Place Entertainment Corp. and Las Vegas Sands Inc. each posted large increases in second-quarter earnings.

Park Place today met analyst expectations for the quarter ending June 30, posting net income of $56 million, or 18 cents per diluted share, a 20 percent increase over the year-ago period. Revenues rose 69 percent, to $1.25 billion, while cash flow soared 87 percent to $335 million.

Much of the increases came from the addition of Caesars World Inc., acquired by Park Place in December. Park Place recorded $110 million in cash flow from the Caesars assets during the quarter.

The actual income booked by Park Place for the quarter, however, was diminished by the Las Vegas company's recent announcement that it would sell the Las Vegas Hilton to Los Angeles developer Ed Roski Jr. for $365 million. Park Place said it recorded an asset impairment of $55 million before taxes as a result of the sale, but said its losses were tempered by an $18 million gain from the sale of the Kansas City Flamingo to Isle of Capri in early June.

This charge, combined with other one-time charges, reduced Park Place's actual earnings to $31 million, or 10 cents per share -- a 23 percent decrease from the year-ago quarter.

In mid-day trading on Wall Street, Park Place shares retreated 44 cents to $12.69.

Gains in cash flow, Park Place said, were driven by the opening of Paris Las Vegas on Sept. 1, as well as an 18 percent increase in same-store cash flow growth. Of the $176 million in free cash flow produced for the quarter, Park Place said it used $100 million to reduce debt, and an additional $49 million to repurchase 4 million shares of stock. The final $27 million was used on capital spending.

"We plan to use our free cash flow and proceeds from the disposition of non-strategic assets to reduce debt, buy back stock and invest in high (return)-driven projects," said Park Place Chief Executive Arthur Goldberg.

The biggest gain posted by Park Place came at Caesars Palace, which recorded cash flow of $33 million during the quarter. That's up 83 percent from the cash flow it recorded in the year-ago quarter, a gain Park Place attributed to a 15 percent increase in table game drop.

The Paris/Bally's Las Vegas complex recorded cash flow of $50 million for the quarter, up from the $21 million recorded by Bally's in the year-ago quarter.

The about-to-be-sold Las Vegas Hilton also showed signs of recovery, recording cash flow of $12 million, up 71 percent from the year-ago period. Flamingo Las Vegas recorded a 3 percent increase in cash flow, to $31 million.

Meanwhile, Las Vegas Sands -- owner and operator of the Venetian -- saw its financial performance improve drastically over the year-ago period, though the resort slowed considerably from its torrid first-quarter pace.

For the quarter ending June 30, the Venetian's parent company posted cash flow Monday of $46.6 million, compared to just $800,000 in cash flow during the year-ago quarter. Revenues were $155.6 million, up nearly $113 million, and net income before one-time charges was $1.6 million, compared to a net loss of $30.9 million in the year-ago period.

The company recorded an actual net loss of $1.2 million during the second quarter of 2000, the result of a $2.8 million loss taken on the early retirement of debt.

The Venetian opened on May 4, 1999, recording just 58 days of operation during the second quarter of 1999.

Compared to the first quarter of 2000, the Venetian's performance cooled. Cash flow decreased 22 percent from the first three months of 2000, while revenues fell 6 percent. Net income was well off the first quarter, when Las Vegas Sands posted income of $16.6 million. The decreases, the company said, were the result of a 11 percent decline in casino revenues, a 6 percent drop in food, beverage and retail revenues, and a 1 percent decline in revenues from the Grand Canal Shops.

Offsetting these declines, however, were continued gains in the Venetian's high-end hotel room product. Occupancy averaged 96.3 percent for the quarter, up from 94.1 percent in the first quarter, and the Venetian recorded an average daily room rate of $183, up from $181 earlier this year.

Overall, the Venetian posted room revenue of $48.5 million, up 3 percent from the first quarter.

Also reporting earnings today was Mikohn Gaming Corp. of Las Vegas, which posted net income of $1.4 million, or 13 cents per share, for the quarter ending June 30. That's a 16 percent increase over the year-ago period. Revenues moved in the opposite direction, falling 10 percent to $26 million.

Mikohn said decreased revenues were the result of "reduced sales of certain traditional products and systems," as well as the sale of its 50 percent ownership in its former Australian subsidiary. However, net income rose as a result of its rapidly-growing recurring revenue business, driven by leases of a popular new slot based on dice game "Yahtzee."

Mikohn said it installed 544 Yahtzee machines during the quarter, and now has more than 1,000 in operation.