Park Place posts loss on two settlements

By Liz Benston (contact)

Thursday, Feb. 6, 2003 | 11:20 a.m.

Park Place Entertainment Corp. today reported a loss in the fourth quarter but said it managed to slightly beat Wall Street expectations at a time when its two other major competitors on the Las Vegas Strip were forced to slash earnings estimates on lower than hoped-for results.

During a conference call with investors, Park Place executives said they are turning a corner at the company by cutting costs and improving efficiency.

"After a year of hard work, Park Place clearly is on the right path," Park Place Chief Executive Officer Wallace Barr said. "Our cost reduction program is producing tangible results and we've strengthened our balance sheet."

Last year, the company saved more than $40 million in operational and promotional costs at its 11 largest resorts and reduced long-term debt by $398 million.

Barr also named a new chief executive of its flagship Caesars Palace resort in Las Vegas. Mark Juliano, chairman of the Atlantic City Convention and Visitors Authority, will replace John Groom, who resigned last month. Juliano was president and chief operating officer of Caesars Atlantic City and began his casino career at Mirage Resorts Inc.

Groom's resignation was followed by the departure of Park Place General Counsel Kim Sinatra.

Also at Caesars, the company is revisiting plans to build a hotel tower of about 1,000 rooms for roughly $350 million. Executives declined to reveal further details about their plans. Another plan to add hotel rooms at Caesars Atlantic City for roughly $200 million is on hold pending an outcome of a potential tax hike in New Jersey, Barr said.

Former CEO Tom Gallagher's resignation was widely viewed as a way to jump-start the company's floundering stock and install an operations guru who could deliver on promises to cut costs and improve efficiency.

Barr said today he will continue those initiatives.

They include the installation of more than 19,000 "coinless" slot machines made by International Game Technology across its properties, activating the devices' paper voucher system in nearly 40 percent of them. Operators have claimed cost savings and better returns from such machines, which require less maintenance and accelerate play because they don't require coins.

The company reported a loss of $18 million, or 6 cents per diluted share, compared to a loss of $16 million, or 5 cents per share, for the year-ago quarter.

Excluding non-recurring items, fourth-quarter earnings were 5 cents per diluted share compared to a loss of 1 cent per share a year earlier.

Analysts had expected the company to earn 3 cents per share excluding special items.

Non-recurring items in the fourth quarter include $9 million related to a contract settlement with Gallagher, who resigned in November. The company also recorded a $43 million charge in connection with the buyout of its partner in Bally's Lakeshore Casino in New Orleans, the settlement of litigation involving the partnership and the re-valuation of the property, the company said.

Revenue for the quarter was $1.06 billion, up slightly from $1.02 billion a year earlier.

Cash flow increased 18 percent during the period, to $228 million, primarily due to cost-cutting efforts. Operating expenses in the fourth quarter were down 4 percent from last year, to $864 million.

The company expects to reinvest in existing properties as a first priority this year to remain competitive, Chief Financial Officer Harry Hagerty said. Second and third priorities will be reducing debt and repurchasing shares.

"In a quarter marked by internal transition and external challenges, management in all of our domestic regions did a terrific job implementing programs to lower costs and improve profitability," Hagerty said.

Separately, Aztar Corp. earnings for the fourth quarter slipped compared to last year but the company still managed to beat Wall Street's expectations.

The Phoenix company -- which owns the Tropicana hotel and casino in Las Vegas -- reported earnings of $12.1 million, or 31 cents per share, compared with $12.8 million, or 33 cents per share, for the same period a year ago. Analysts had expected the company to earn an average of 29 cents per share.

Cash flow fell about 10 percent, to $43.3 million.

Aztar blamed the decline in part on an irregular calendar that cut earnings by about 5 cents per share. The company's fiscal fourth quarter in 2002 included 13 weeks compared to a 14-week fiscal fourth quarter in 2001. The company also received a $1 million income tax settlement in the fourth quarter from the Internal Revenue Service relating to an examination of tax returns in 1992 and 1993.

Some analysts said Wednesday that they remain cautious about the company because of the struggling economy and this week's announcement of a planned increase in casino revenue taxes in Atlantic City -- where the company generates from 50 to 60 percent of its cash flow.

The company anticipates a tough year this year as it tries to fend off a potential tax increase and feels the effect of the Borgata, a joint project of MGM MIRAGE and Boyd Gaming Corp. and the city's first major luxury resort in more than a decade.

The company's Tropicana casino resort in Las Vegas reported fourth-quarter revenue of $34.6 million compared to $35.9 million in the year-ago quarter. Cash flow was $5.1 million compared to $5 million. Hotel occupancy was 88 percent compared to 86 percent.

And Ameristar Casinos Inc. of Las Vegas said it earned $5 million or 19 cents per share for the fourth quarter ended Dec. 31, down from $9.2 million or 40 cents. Revenue of $181.6 million was up from $152 million for Ameristar, which operates casinos in the Midwest and South as well as in the Northern Nevada town of Jackpot.