Wednesday, Oct. 25, 2000 | 11:13 a.m.
Park Place Entertainment Corp., the owner of four big Las Vegas Strip resorts, today reported increases in revenue, net income and earnings for its third quarter, surpassing analysts' expectations.
The Las Vegas-based owner of 28 hotel-casinos reported net income after special charges of $68 million on revenues of $1.3 billion for the quarter, resulting in earnings per share of 22 cents. That compares with net income of $58 million on revenues of $839 million and 11 cents-per-share earnings in the third quarter of 1999.
Results beat a consensus of analysts polled by First Call Corp., which had projected per-share earnings of 21 cents. One analyst said Park Place's strength on both coasts led to the favorable results.
"Their significant geographic diversity is playing well for them," said Andrew Zarnett, a gaming analyst with Deutsche Bank Alex. Brown. "They're strong on the East Coast in Atlantic City. They're strong on the West Coast with Nevada. They may be a little soft in the South."
Zarnett said the third-quarter results and reports that bookings for the rest of the year appear to be strong overshadow rumors of impending market weakness.
"Those reports of weaknesses in the market seem unfounded," Zarnett said. "With those strong fundamentals in Atlantic City and Nevada, Park Place should continue to report strong numbers in the future."
Investors seemed to agree today, pushing Park Place's stock price up slightly. This morning, the stock was up 13 cents over Tuesday's closing price to $13.69 a share. Of 15 analysts following the stock, 13 offer a "strong buy" or "buy" recommendation for the issue.
Results in both the 1999 and 2000 third quarter were affected by preopening expenses. This year, the company opened an expansion to the Wild Wild West Casino in Atlantic City, connecting Bally's Park Place to Caesars Atlantic City. The $30 million expansion added more than 300 slot machines and an additional 4,400 square feet of meeting space at Caesars, a center Boardwalk property.
The comparative figures for the 1999 third quarter were offset by preopening expenses for Paris Las Vegas.
The company said the 2000 third quarter one-time costs had a $1 million impact on earnings while the 1999 Paris expenses had a $37 million impact in last year's quarter.
Before those expenses, earnings per share were 26 cents in the third quarter 2000 compared with 22 cents a share last year, an 18 percent increase.
The company said cash flow increased significantly at its Las Vegas properties. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the period from 1999 to 2000 increased from $19 million to $26 million for the quarter at Caesars Palace, from $31 million to $46 million at Paris and Bally's, which the company counts together, and from $23 million to $25 million at the Flamingo.
The company said Caesars Palace replaced its Cafe Roma with Cafe Lago, a 24-hour casual dining restaurant overlooking the swimming pool area on Sept. 29, and an exterior facade resurfacing project will be completed by the end of the year.
The company also reiterated that the sale of the Las Vegas Hilton to Ed Roski Jr. was approved by the State Gaming Control Board and is on Thursday's Nevada Gaming Commission agenda. Park Place plans to use proceeds of the sale to pay down debt and buy back stock.
In separate deals, the company also agreed to acquire a Boulder City golf course and 5.5 acres in Atlantic City from MGM MIRAGE for about $60 million during the quarter.
Today's earnings announcement was almost an afterthought in the wake of last week's company news. The sudden death of Chief Executive Arthur Goldberg and the naming of Thomas Gallagher as president and chief executive officer earlier this week weren't mentioned in today's company earnings news release.
"Arthur Goldberg left a collection of assets and a management team that will leave Tom Gallagher a lot of room to grow," Zarnett said.
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