Las Vegas travel boom elevates Caesars Entertainment results

Thursday, July 22, 2004 | 11:04 a.m.

Profit at Caesars Entertainment Inc. more than tripled in the second quarter as the company reaped an $87 million gain on the sale of its Las Vegas Hilton resort, the Las Vegas company reported today. Profit still rose 46 percent without the gain, an increase largely driven by strong growth in Las Vegas and in line with recent earnings increases from competitors.

Profit was $148 million or 47 cents per share compared to profit of $41 million or 14 cents per share in the second quarter of last year.

Earnings were $60 million excluding one-time gains and charges such as the Hilton sale as well as a $3 million investment gain, promotional expenses of $3 million related to the opening of an outdoor plaza at Caesars Palace and a musical at Paris Las Vegas and $2 million related to executive contract terminations. That compares to adjusted earnings of $43 million for the year-ago quarter.

On a per share basis, adjusted earnings were 19 cents compared to 14 cents a year ago. Analysts expected the company to earn 18 cents per share.

Analysts said the company's Las Vegas casinos did better than expected, partially offsetting weaker than anticipated results in Atlantic City.

"These results follow weak results from Harrah's (Entertainment Inc.'s) Atlantic City properties and should raise questions as to the strategic rationale behind having more exposure to the Atlantic City market," Goldman, Sachs & Co. analyst Steven Kent said, referring to the pending acquisition by Harrah's of Caesars. The deal would give Harrah's five of that city's 13 major properties.

Caesars officials said they expect the company to earn from 19 to 21 cents per share in the third quarter compared to analysts' consensus estimates of 20 cents.

The company said it expects to earn from 69 cents to 71 cents this year compared to analyst estimates of 69 cents.

Revenue at Caesars' Las Vegas Strip properties rose 13 percent to $415 million from a year earlier. Cash flow increased 39 percent to $117 million. All of the hotels reported increased room rates from a year ago and most reported gains in occupancy rates.

Slot revenue rose about 22 percent on the Strip as more people gambled, while room rates also increased, executives said. The difference from last year was partly related to construction that wrapped up on several projects, including a casino walkway at Caesars Palace and the Margaritaville restaurant and bar at the Flamingo, they said. The introduction of "cashless" slots that accept and dispense paper tickets also helped returns, they added.

Among several improvements under way at Caesars Palace, the debut over the July 4 weekend of an outdoor retail plaza and ampitheater at the corner of the Strip and Flamingo Road has significantly boosted traffic into the resort, executives said. The Margaritaville restaurant, a joint venture with singer Jimmy Buffett, opened in January and is "fast becoming one of the highest grossing restaurants in the country," said Tony Santo, senior vice president for Caesars' Western and Mid-South regions.

Revenue rose 5 percent at Caesars Palace to $139 million while cash flow was flat. Occupancy was 98.4 percent compared to 95 percent a year ago and average daily room rates were $154, up $3 from last year.

The casino's gambling revenue fell 6 percent primarily due to lower baccarat volume and revenue.

During a conference call today, executives declined to discuss the recently announced merger with Harrah's but said they would continue with previously announced projects at Caesars Palace and other properties until the deal closes.

Chief Executive Wally Barr said the company wouldn't be "getting out" of the high-roller business in response to Caesars' baccarat losses and lower table game revenue in Las Vegas.

"It's a very competitive marketplace in Las Vegas," Barr said. "It's a function of the normal marketplace."

Caesars' stock fell 5 cents or less than 1 percent to $14.90 in early trading this morning.