Thursday, February 27, 2003
Copyright © Las Vegas Review-Journal
Bad luck on table games hurts Hard Rock's results
Casino property's parent company reports fourth-quarter loss
By CHRIS JONES
GAMING WIRE
Lucky gamblers and some big-ticket promotions contributed to a fourth-quarter loss of more than $4.6 million for the parent company of the Hard Rock Hotel
The company reported a net loss of $106,000 during the same period in 2001.
Net revenues during the quarter ended Dec. 31 totaled $29 million compared with the $27.8 million it reported a year ago.
However, operating cash flow, defined as earnings before interest, taxes, depreciation and amortization, or EBITDA, fell to $3.5 million in the fourth quarter of 2002. That was a significant reduction compared with the $6.3 million the company reported during the same period in 2001.
Bear, Stearns & Co., casino industry analyst John Mulkey said the company's cash flow was severely hindered by bad luck on its casino floor.
"Had their hold been a little better at the tables, their results would have been flat compared with last year. That's pretty impressive considering everything that's gone on this year," Mulkey said following Wednesday's conference call.
Wall Street had projected Hard Rock would end the quarter with a table games hold percentage of about 15 percent, Mulkey said. Instead, the company reported a disappointing hold percentage of only 9.7 percent, which meant the company kept approximately $9.70 of every $100 in accepted wagers.
Hard Rock Vice President and Chief Financial Officer Jim Bowen said the property's bottom line was also affected by increases in its quarterly marketing and entertainment expenditures linked to major events like a Nov. 29 concert by the Rolling Stones.
The company spent nearly $2.2 million on marketing during the quarter, nearly double its fourth-quarter 2001 total. In addition, the company also wrote off $1.7 million in costs related to the abandonment of a proposed Pink Taco restaurant and bar in West Hollywood, Calif.
For 2002, Hard Rock's net revenues totaled $128.1 million compared with the previous year's $120.2 million total.
Net income was $2.5 million, down from the previous year's $2.81 million total, and cash flow fell to $29.1 million from $30.1 million in 2001.
