Vegas-based Park Place earnings dip, but exceed expectations
LAS VEGAS (AP) – Park Place Entertainment Corp. reported a sizable decline in earnings for the first quarter, but exceeded analysts’ expectations thanks in part to increased cash flow at Caesars Atlantic City and Indiana.
The nation’s largest gambling company on Tuesday reported a three-month net income of $45 million, or 15 cents per share. Net income was down 13.5 percent from the year-ago period, and dropped 12 percent on a per-share basis.
The Las Vegas-based company beat the Wall Street consensus estimate of 11 cents per share. As a result, Park Place stock gained 40 cents to close at $11.10, a 3.7 percent increase.
Tom Gallagher, Park Place chief executive officer, urged investors to look at his company’s bigger picture.
”We had a very good quarter, given where we finished last year,” he said.
For the quarter ended March 31, net revenues declined about 1 percent to $1.2 billion, while total cash flow for the quarter was $315 million, a 3.7 percent decline compared with the same period last year.
Cash flow at the Caesars properties increased 5.1 percent to $102 million, driven by a gains at Caesars Atlantic City and Caesars Indiana.
”The eastern region saw good performance despite bad weather,” said Gallagher ”We’re very bullish on Atlantic City.”
However, in Nevada, Park Place’s cash flow fell more than 4 percent to $152 million, despite increases in slot and table play, and a 7 percent increase in room revenues. Caesars Palace, Flamingo Las Vegas and the Las Vegas Hilton each posted cash flow declines of 11 percent to 12 percent.
Company executives attributed the decline to high energy costs and the unfavorable calendar, which among other things had one less day in the quarter and combined the lucrative Chinese New Year celebration and the Super Bowl on the same weekend.
”We exceeded our budgeted expectations, and our internal analysis confirms that we would have significantly exceeded last year’s results if we excluded the one-time issues relating to this year’s unfavorable calendar and poor weather in the East,” said Chief Financial Officer Scott LaPorta, who put the cost at $7 million.
Cash flow at Paris/Bally’s on the Strip increased 1.7 percent to $59 million, while the Las Vegas Hilton generated $16 million, an 11.1 percent year-over-year decline, but a substantial improvement over the past three quarters as the company continues to reposition the property as a convention hotel.
Gallagher reiterated that the company has no plans to attempt to sell the historic property again after the sale to California developer and Silverton hotel-casino owner Ed Roski collapsed.
”We’ve been to that movie,” he said. ”In the long run, the expansion of convention center is going to be tremendous boost.”
Results were mixed in the mid-South region as better than expected results at Caesars Indiana, which saw cash flow increase 36 percent to $15 million, were offset by lower results at Grand Tunica and the Belle New Orleans riverboat. The two have been affected by intense competition in their respective markets.
However, both Grand Biloxi and Grand Gulfport reported results in line with last year, indicating that trends might be firming up on the Gulf Coast.
Park Place also generated an incremental $133 million in net free cash flow during the quarter, which it used to repay $78 million in debt, repurchase 1.1 million shares at an average price of $10.45 and invest $43 million for new projects.
Those projects, however, don’t necessarily include the financially struggling Aladdin hotel-casino, of which Park Place owns one-third of the mortgage notes.
”Because it’s our next door neighbor, we’ll continue to look over the fence closely,” LaPorta said. ”If when the dust settles it doesn’t fit our criteria, we’re not going to chase it.”
Park Place will continue to invest in the expansion of Caesars Palace, including the addition of an 800-room tower and the 4,000-seat Colosseum, Gallagher said during Tuesday’s conference call.
As Park Place is expected to generate in excess of $2 billion in free cash flow over the next four or five years, some analysts think investors should benefit from the combination of aggressive debt reduction and share repurchases as well as any other optimistic use of these funds, said Jason Ader, Bear Stearns gaming analyst. ”As such, we maintain our attractive rating.”
LaPorta said the company is comfortable with analyst expectations of 17 cents to 18 cents per share for the quarter ending June 30.
Gallagher plans to share a detailed investment and marketing strategy for Park Place at the company’s annual shareholder meeting May 11 at Paris Las Vegas.
Park Place has an interest in 28 gambling properties, including Caesars, Flamingo and Hilton. It has 28,000 hotel rooms and 57,000 employees.
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