Friday, October 25, 2002
Copyright © Las Vegas Review-Journal

Park Place records third-quarter profits

Results remain lower than periods prior to terrorist attacks

Park Place Entertainment Corp. kept up its post-Sept. 11 recovery in the third quarter but has yet to match its pre-terrorist attack performance levels.

Park Place Thursday reported an unadjusted third-quarter net income of $40 million, compared with a loss of $101 million in the 2001 period and profits of $68 million in the quarter ending Sept. 30, 2000. For the year to date, Park Place posted an unadjusted 2002 loss of $803 million, down from a loss of $8 million in the first nine months of 2001.

Park Place posted an adjusted net income of $47 million in the quarter ending Sept. 30, 2001, compared with $29 million in the year earlier period.

For the year to date, Park Place posted adjusted earnings of $144 million, compared with $147 million in the first nine months of 2001. The 2002 adjusted figures do not include a $979 million pay down of good will earlier in the year.

Wall Street analysts said there were no surprises in the results Park Place released Thursday since the adjustments had been announced previously, and shares continue to be attractive values. Park Place shares closed down 28 cents at $7.48 on the New York Stock Exchange.

For the third quarter of 2002, Park Place reported revenues of $1.2 billion, up 2.2 percent from $1.8 billion in the year earlier period but just short of the $1.3 billion in revenues it posted in 2000.

It had revenues of $3.6 billion year to date, up 1.4 percent from $3.5 billion in 2001.

"With the exception of our results at Caesars Palace, we had a solid quarter in all of our regions. Our strategy remains focused on our major properties in the major gaming markets," said Park Place President and Chief Executive Officer Thomas Gallagher.

The company's Western region was critical, with earnings before depreciation, interest and taxes of $87 million in the third quarter of 2002, up 45 percent from $60 million for the third quarter of 2001.

At Paris-Bally's, earnings were $47 million, up 56 percent from the third quarter of 2001, when the property reported an unusually low table hold percentage. Paris-Bally's showed strong improvement in hotel revenue during the third quarter of 2002, with room rates and occupancy at Paris Las Vegas exceeding year-ago levels.

The Flamingo reported third-quarter earnings of $21 million, up $1 million from the third quarter of 2001.

Other Nevada properties, the Las Vegas Hilton, Reno Hilton, Caesars Tahoe and Flamingo Laughlin, on a combined basis had earnings of $14 million for the third quarter of 2002, double the $7 million reported for the third quarter of 2001.

Third-quarter results at Caesars Palace, however, did not meet the company's expectations because of an abnormally low hold percentage on table games and construction disruptions that resulted in lower slot and table volumes. Construction dislocation also resulted in approximately 350 fewer slot machines on the casino floor during the quarter.

Earnings in the mid-South region were $68 million, up 24 percent from the third quarter of 2001, and in the East were $140 million, up only 3 percent compared with the year earlier period.

"While construction and hold volatility at Caesars Palace affected our quarterly results, we're making strong progress in transforming that property into a premier destination worthy of the best brand in gaming," Gallagher said. "We'll begin to see the results with the opening next March of `A New Day,' the Celine Dion spectacular at our new Colosseum."

Gallagher expressed concern that "the focus on Caesars, the bulls'-eye location on the Strip, has led some investors to lose track of developments taking place elsewhere.

The company's slot club, the Park Place Connection Card, drove substantial increases in cross-property slot play in Las Vegas. Revenue from Las Vegas customers who played at more than one Park Place Las Vegas property in the first three quarters of the year was 2.3 times the total for the same period in 2001.

The company continued to expand its online relationship with customers. In the third quarter of 2002, online room reservations booked through company Web sites jumped more than 80 percent over the year-ago quarter. Online reservations accounted for nearly 15 percent of bookings at Paris Las Vegas and Bally's in Las Vegas in the quarter.

Gallagher said this program helped book 130,000 rooms in the quarter, 6 percent of total bookings, and demonstrates Park Place's ability to perform in an area where it faces significant competition.

"Work Smart," the company's program to improve operating efficiency, began to show results as operating costs and expenses declined 0.8 percent in the third quarter while revenues increased 2.2 percent.

"We're committed to find ways to work more efficiently and achieve major cost savings while maintaining and improving on the premier standards that our guests have come to expect from Park Place properties," said Park Place Chief Operating Officer Wallace Barr.