Las Vegas Sun

October 20, 2018

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Station Casinos hit by new competition, road work

Station Casinos Inc. and Park Place Entertainment Corp. each reported weaker results for the fourth quarter today, as poor weather and increased competition took a bite out of the two Las Vegas companies' earnings.

Park Place's earnings decline was expected, following a company earnings warning several weeks ago. The gaming giant posted a net loss of less than 1 cent per share, down from a profit of 11 cents per share in the year-ago quarter.

Station also posted an income decline. The company reported net income before non-recurring items of $11.1 million, or 18 cents per share, a 25 percent decrease over the year-ago quarter. This was 3 cents below the consensus analyst estimate for the quarter.

By midday, Station traded at $13.94, off 88 cents. But the market was apparently prepared for Park Place's announcement, as Park Place stock rose 6 cents to $10.06.

Despite the lowered earnings, Station officials maintained optimism on the long-term outlook for the company.

"Investors should look at this as a transition year for Station Casinos," said Chief Financial Officer Glenn Christenson. "We're very optimistic about the company. We still love this market, and we think 2002 will be a very big year for us."

When non-recurring income and charges are included, Station earned $34.9 million, or 55 cents per share, up substantially from a loss of $75.4 million, or $1.20 per share. The 2000 quarter included a $41.7 million gain from the sale of Station's Missouri casinos; the year-ago period included an asset impairment charge of $137.4 million.

Net revenues showed a slight increase, rising 2 percent to $243.4 million, but cash flow sank 7 percent to $59.5 million. Station said the decline came from its former Missouri operations, and said these operations were affected by poor weather and the pending sale of the properties to Ameristar Casinos Inc. Station sold its casinos in Kansas City and St. Charles, Mo., to Ameristar on Dec. 20 for $475 million.

But Station's Las Vegas operations didn't offset this decline, as cash flow from the company's Las Vegas properties fell 1 percent to $51.1 million. Revenues from Nevada rose 9 percent to $163.6 million.

Part of the problem, Station said, was that Coast Resorts Inc.'s Suncoast hotel-casino, opened near Summerlin in September, was taking a bite out of Texas Station's business. The company also said results were hurt by continued road construction near Palace Station and "competitive supply increases" on the Boulder Strip. These issues should continue through 2001, Station warned, and should prevent same-store sales and cash flow growth this year.

"As time goes on, the impact of Suncoast will decline as the market absorbs the new capacity," Christenson said. "It will be the same situation for the East Las Vegas operations and Boulder Station."

However, the company still expects a 25 percent increase in cash flow in 2001 in Nevada, thanks to its buyouts of the Santa Fe, Fiesta and Reserve. Since Station is undertaking a sizable renovation of Santa Fe Station, the company said it expects the property's performance to be affected this year as well. Station estimated it will produce $250 million in 2001 cash flow, down from analyst estimates of $270 million.

The scope of the Santa Fe renovation has been expanded -- this morning, Station said it plans to add 25,000 square feet to the casino's floor space, adding 750 slots to the northwest Las Vegas property along with two more restaurants. In addition, the expanded plans will cost an additional $31 million, but the renovations are still projected to be done by June.

Station also announced it acquired a 49-acre land parcel at Flamingo Road and the Beltway from Seven Circle Real Estate Co., the owner of Regent Las Vegas, for $42 million in December.

In June, Swiss Casinos of America had talked optimistically about starting construction of a 900-room locals-oriented hotel-casino on the gaming-entitled land parcel, possibly in 2002. But those plans were apparently scratched with the bankruptcy of the Regent in November. The purchase gives Station an opportunity to expand into Summerlin for the first time.

"We were very disappointed when we didn't get that piece of property when it was up for sale a year ago, and when the opportunity came to use, we were very quick to take advantage of it," Christenson said.

Christenson said construction on a property won't proceed for at least three years, but that the company has already launched the design phase for a new hotel-casino there.

"The population has to grow a little more in that area," Christenson said.

Meanwhile, Park Place reported a net loss of $7 million, or less than 1 cent per share, down from a profit of 11 cents per share. That was in line with an earnings warning issued by the Las Vegas company earlier this month.

When non-recurring items are included, Park Place lost 2 cents per share, compared to net income of 5 cents per diluted share in the year-ago period.

Net revenue showed a substantial increase, rising 34 percent to $1.14 billion, while cash flow rose 24 percent to $240 million. But the 2000 gains were caused by the addition of Caesars World Inc., acquired Dec. 31, 1999. Without Caesars, Park Place cash flow would have been off 9 percent to $240 million.

Park Place blamed a quartet of problems for its weaker results -- low hold at its Las Vegas casinos, a decline in play at Paris Las Vegas, winter weather in New Jersey, Mississippi and Indiana, and growing competition in Mississippi.

The largest cash flow decline was reported by the Paris-Bally's Las Vegas complex, where cash flow plunged 26 percent to $40 million, as play fell and table game hold declined. But Caesars Palace provided $25 million in cash flow, up 47 percent from the year-ago quarter. Since the Caesars World acquisition wasn't closed in the year-ago period, cash flow from Caesars wasn't included in the 1999 cash flow numbers.

Cash flow also sagged at the Las Vegas Hilton; the property posted cash flow of $2 million, down from $13 million in the year-ago period. Park Place blamed a drop in table game play "associated with the property's held for sale status," as well as poor hold percentages. That property was to have been sold to Los Angeles developer Ed Roski Jr., but that sale has been called off and Park Place plans to retain it.

Cash flow at the Flamingo Las Vegas, meanwhile, remained flat at $18 million.

Cash flow in the East, meanwhile, was hurt by weather in December, after the company's properties performed to expectations in October and November.

Cash flow at Bally's Park Place dropped $1 million to $33 million, the Atlantic City Hilton was off $1 million to $9 million, and Caesars Atlantic City fell 7 percent to $28 million. However, because Park Place did not own Caesars in the year-ago period, cash flow for the Eastern region was up 68 percent to $74 million.

In the Southern region, cash flow was up 14 percent, again the result of Caesars World. Grand Biloxi cash flow fell 13 percent to $13 million, Grand Tunica was off 25 percent to $9 million, and Grand Gulfport was flat. Park Place, however, benefited from $11 million in cash flow from Caesars Indiana. Park Place blamed the declines on severe weather and increased competition in Tunica and increased marketing expenses in Biloxi.

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