Park Place numbers confirm LV rebound

By Liz Benston (contact)

Thursday, Oct. 24, 2002 | 11:04 a.m.

Park Place Entertainment Corp. today became the third major Las Vegas casino company to report a dramatic increase in third-quarter earnings compared to the year-ago quarter, which was hurt from a decline in business following the Sept. 11 attacks.

The company reported operating earnings per share of 16 cents per share, compared to 10 cents per share a year ago. Wall Street analysts had expected the company to earn an average of 15 cents per share. Harrah's Entertainment Inc. and MGM MIRAGE earlier in the week posted earnings increases.

Earlier this month, shares of Park Place tumbled after the company warned investors that weakness at its Caesars Palace casino resort in Las Vegas -- in addition to the effect of an energy contract change and storm damage -- would result in lower earnings for the quarter. Analysts had previously expected an average of 19 cents per share, with the company forecasting from 12 cents to 16 cents.

Casino cash flow at Caesars were hurt by losses to high-roller gamblers as well as disruption in business from construction projects, including a 4,000-seat replica of Rome's Colosseum expected to open in March in front of the property.

Including one-time charges totaling $10 million, the company earned 13 cents per share, or $40 million. The charges include $7.5 million related to the cancellation of an energy contract with Enron Corp. and $2.5 million for damage to Golf Coast casinos caused by tropical storm Isidore.

For the third quarter of 2001, it posted a loss of $101 million, or 34 cents per share, including goodwill amortization and one-time charges of $175 million for the write-down and sale of assets.

Revenues for the third quarter rose from $1.19 billion to $1.22 billion and cash flow -- a key indicator of performance in the casino industry -- rose 12 percent, from $259 million to $290 million.

Disruption at Caesars Palace will continue into 2003, though business should build throughout the year, Prudential Securities casino analyst William Lerner said.

Competition from Pennsylvania, expected to welcome expanded gambling facilities, and the launch of Borgata, a luxury casino resort expected to open in Atlantic City next summer, will also put pressure on the stock, Lerner said.

"We're still positive on the stock, particularly because there's a massive cost savings initiative under way that should take hold early next year. It's a longer-term view, but I think estimates ultimately could come up."

Like other major competitors, Park Place is aiming to reduce its debt load. The company has announced plans to cut as much as $100 million in operating costs next year. In the third quarter, it paid down $40 million in long term debt and repurchased 1.6 million shares.

Cash flow increased across the company's domestic properties, boosted by improved business since last year's terrorist attacks.

Cash flow for the company's western region properties jumped 45 percent from the year ago quarter, to $87 million.

At Caesars Palace, cash flow climbed below expectations, from $3 million to $5 million. Construction disruption resulted in about 350 fewer slot machines on the casino floor during the quarter, Park Place said.

Cash flow at Paris Las Vegas and Bally's Las Vegas was up 57 percent, to $47 million.

The Flamingo Las Vegas reported third-quarter cash flow of $21 million, up $1 million from the third quarter of 2001.

Other Nevada properties -- the Las Vegas Hilton, Reno Hilton, Caesars Tahoe and Flamingo Laughlin -- reported a combined $14 million in cash flow, double the cash flow in last year's third quarter.

Cash flow in the eastern region was up 3 percent, to $140 million, primarily due to improved casino revenues at Bally's Atlantic City and Caesars Atlantic City.

In the mid-south region, cash flow jumped 24 percent, to $68 million. Caesars Indiana, Grand Biloxi and Grand Gulfport casinos boosted performance. Cash flow rose 40 percent for the year at the company's Caesars Indiana riverboat casino, mainly driven by the ability to permanently dock the boat starting Aug. 1 and continued demand for rooms at its year-old, 500-room luxury hotel. These benefits offset increased gambling taxes in that state, Park Place said.

Separately, the International Brotherhood of Teamsters announced Wednesday that it has ended a month-long boycott of all Park Place properties following recent talks between Teamsters President James Hoffa and Park Place Chief Operating Officer Wallace Barr.

A Teamsters local in Atlantic City also agreed to drop unfair labor practice charges against the company as a result of the negotiations.

The talks primarily stem from a dispute over the fate of about 80 slot attendants who had struck the company's Caesars Palace Atlantic City last year. The company agreed to reinstate the workers -- about 30 of whom were still out of work -- as well as restore back pay, benefits and seniority.

Impediments holding up contract negotiations for a separate group of food and beverage service workers at the company's Bally's and Hilton properties in Atlantic City also have been cleared up, Teamsters spokesman Bret Caldwell said today. Those workers voted in the union nearly two years ago but do not yet have a labor contract.

Hoffa, in a statement issued Wednesday, expressed gratitude for union support during the boycott but encouraged members to begin patronizing Park Place casinos again.

"I urge all friends of labor to not only restore their business to Park Place, but to actively encourage their use," Hoffa said.

The union also said it would restore to Park Place about $6 million of convention and other business it threatened to withdraw in a boycott.

"We believed all along that once we sat down with the national Teamsters organization, we could resolve all the issues outstanding," Park Place spokesman Robert Stewart said.

The boycott -- the first in recent memory against the casino industry -- wasn't a publicity stunt, Caldwell said.

"It's not something we take lightly. You have to believe you're going to have an impact on a company."