Park Place misses numbers

Wednesday, July 25, 2001 | 11:18 a.m.

Cash flow fell for casino giant Park Place Entertainment Corp. in the company's second quarter -- and executives today offered only a cautious outlook for what the nation's shaky economy will bring during the rest of the year.

Las Vegas-based Park Place, which on and near the Las Vegas Strip owns Caesars Palace, Paris-Las Vegas, Bally's, the Flamingo and the Las Vegas Hilton, today reported earnings of $48 million, 16 cents a share, on revenue of $1.20 billion for the quarter.

That compares with earnings of $31 million, 10 cents a share, on revenue of $1.22 billion for the same period a year ago.

The previous quarter, however, included one-time charges of 8 cents per share; if those charges are excluded from the year-ago quarter, Park Place's earnings are down 11 percent on a per-share basis.

The company reported cash flow of $310 million, down from $335 million in the year-ago quarter as higher energy costs and unlucky play at some casinos hurt the firm's profits.

The company failed to meet analysts expectation as 17 analysts polled by Thompson Financial/First Call projected earnings per share of 17 cents, with forecasts ranging from 16 cents to 18 cents.

Park Place stock traded today at $10.30, down 20 cents.

Among the Las Vegas properties, the Las Vegas Hilton produced the largest drag on results. The company reported revenues at the Hilton were $54 million, compared with $70 million in the year-ago quarter, and cash flow fell to $6 million from $12 million during the same period.

The Hilton's losses have mounted over the past year since a failed bid to sell the property to Los Angeles developer Ed Roski Jr. for $365 million.

The company, now attempting to reposition the hotel as a convention and meetings property, has reacted over the past year by laying off employees. Today, the company said 220 full-time jobs have been trimmed since the second quarter of 2000. Gradual layoffs have occurred over the last year as management cut into duplicative operations.

Park Place President and Chief Executive Officer Thomas Gallagher said the company hopes to see convention hotel repositioning strategy to take hold by the end of the year when the Las Vegas Convention Center's South Hall expansion project is completed.

But a Las Vegas gaming analyst said Park Place should be cautious about the convention business turning the Hilton's fortunes around.

"It's the free and independent traveler that's important," said Dave Ehlers of Las Vegas Investment Advisors.

He said the nation's weak economy and added pressure from Indian gaming venues in California will continue to erode Nevada casino profits.

"If consumers feel a little scared (about the economy), I think casino and entertainment expenditures are going to be among the ones they hold back on," Ehlers said.

Park Place officials confirmed that sentiment in this morning's conference call announcing earnings results.

Gallagher said the company's Northern Nevada properties and Grand Tunica resort in Mississippi were affected by the slumping economy.

"Even though consumer trends aren't spectacular, we're still getting visitation," Gallagher said. "Even with the soft economy, our properties and brands are performing well.

"The Northern California economy has softened and as for Tunica, it is what it is. But even with more reserved consumer spending, they're still coming, still vacationing, but they're being a little more careful with their spending habits."

But Caesars Palace and Paris and Bally's, which are treated by the company as one unit, had good quarters. Caesars reported revenues of $135 million for the quarter, compared with $124 million for the same quarter a year earlier, and Paris-Bally's was at $170 million, up from $166 million. Cash flow improved by $1 million at each of those two divisions over last year's quarter.

Caesars generated cash flow of $34 million primarily due to an increase in slot play. The property also set a new hotel occupancy record of 99 percent for the quarter for second-quarter results from 1997 to the present

Higher table win was cited for the improved performance at Paris and Bally's.

Park Place is continuing to invest in Caesars with May's announcement of a $450 million, 29-story all-suites tower that will boost the room count at the property to 3,350 when the project is completed in 2004.

The company also is building new restaurants and a spa and a $65 million 4,000-seat entertainment venue designed to resemble ancient Rome's Colosseum.