Las Vegas Sun

March 28, 2024

Park Place profit steady

Profits at Park Place Entertainment Corp.'s ongoing operations were steady in the second quarter and the casino company beat Wall Street's earnings estimates today.

The Las Vegas-based company reported continued improvement on the Las Vegas Strip after Sept. 11, helped by strong increases at its Caesars Palace hotel-casino, and at its Caesars Atlantic City property.

Park Place reported net income, after one-time events, of $96 million, or 31 cents per share, compared to $48 million, or 20 cents per share, for the same quarter a year ago. Cash flow of $310 million was equal to the year-ago quarter's number.

One-time events this year include an investment gain of $39 million, net of taxes, from the sale of the company's interest in Australian casino company Jupiters Limited.

Before one-time events, earnings were $57 million, or 19 cents per share, compared to $61 million, or 20 cents per share, a year earlier. Figures a year ago exclude goodwill amortization of $13 million.

Analysts had expected the company to earn 16 cents per share.

Excluding goodwill amortization, which is something not all companies adjusted for in their income statements, the company reported an increase in earnings and significantly beat earnings estimates, said Dennis Forst, a gaming analyst with McDonald Investments. Cash flow at the company's Las Vegas properties was up slightly for the quarter, representing a "more than satisfactory" recovery from the first quarter's double-digit declines, he added.

Executives said they expect the company to earn from 17 to 19 cents per share in the third quarter, in line with analysts' estimates of 19 cents.

The company's Las Vegas properties are recovering strongly from the effects of Sept. 11, and every other region of the country experienced a gain in cash flow for the quarter compared to a year ago, executives said today.

Cash flow -- defined as earnings before interest, taxes, depreciation and amortization -- is a key indicator of casinos' financial health.

Still, the market's recent turmoil has meant some "serious blows to people's economic well-being," Chief Financial Officer Harry Hagerty said.

Revenues in the second quarter were around $1.20 billion, up from $1.17 billion a year ago. Cash flow, before pre-opening expenses and the investment gain from Jupiters Limited, was $310 million for the quarter, even with last year.

The company's major Strip properties in Las Vegas reported increases in cash flow in part due to cost controls. Paris Las Vegas and Bally's combined reported a $1 million increase in cash flow, to $52 million, though revenue declined from $170 million to $165 million for the quarter. At Caesars Palace, cash flow increased 9 percent, to $37 million, while revenue fell from $133 million to $129 million.

Overall, cash flow in the western region increased by $1 million, to $134 million, while revenues declined from $532 million to $510 million.

Some analysts today responded with praise for the company's rebound in the Las Vegas market.

"While a portion of the upside was driven by better luck on the tables in Las Vegas, we are encouraged by the strength of (Park Place's) Las Vegas assets," said Todd Jordan, a gaming industry analyst with Dresdner Kleinwort Wasserstein. "Considering the recent weakness in the stock and low valuation, the potential for higher earnings going forward could be a catalyst for the stock."

Like other major gaming companies, Park Place was hard hit by the effects of Sept. 11 and has responded by strategic cost-cutting. It has also reduced debt along with its peers, paying down $255 million in debt during the second quarter.

At more than 14,000 hotel rooms and about 18,000 employees in Las Vegas, Park Place is a key indicator of Las Vegas Strip performance. The company, with about 29,000 rooms and about 55,000 employees worldwide, is the industry's largest when ranked by revenues.

Cash flow at properties in the eastern part of the country jumped from $108 million to $117 million, in part due to the strong performance of Caesars Atlantic City. Caesars' cash flow increased from $38 million to $43 million, while revenues jumped from $117 million to $131 million.

Company executives pointed toward several initiatives they hope will pay off in Atlantic City, including the completion of a $25 million walkway linking the Claridge Hotel and Casino, acquired in June 2001, to its adjacent Bally's Atlantic City. The company said it also expects to host more major entertainment and boxing events at the recently renovated Boardwalk Hall in Atlantic City, including a Sept. 28 performance by Paul McCartney. It also converted a theater into a high-limit slot area at Bally's Atlantic City.

Performance was mixed in the Midwest and South, while the strongest return came from the company's Caesars Indiana riverboat casino. That property increased cash flow by $4 million, to $18 million. Revenues jumped $16 million, to $67 million, benefiting from a new hotel at the property. Park Place expects to permanently dock the casino in the third quarter, hoping to offset the negative effect of a gaming tax increase recently authorized in Indiana, executives said.

Shares of Park Place moved higher along with other casino stocks in early trading this morning, rising nearly 8 percent, to $8.42.

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