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Caesars Entertainment suffers fourth quarter net loss

Investment community, meet Gary Loveman and Caesars Entertainment Corp.

That was the initial feeling Friday when the casino operator’s leadership handled the company’s first quarterly earnings conference call with Wall Street analysts and investors in more than 30 months.

Loveman, chief executive officer of the privately held casino operator, spent a portion of the hourlong discussion touting Project Linq, an entertainment, retail and dining corridor Caesars plans to build on the Strip along a thoroughfare that runs between the Imperial Palace and the Flamingo.

A large Ferris-type wheel Loveman likened to the London Eye in England will anchor the development, which will have 190,000 square feet of retail and restaurants.

“We control three-quarters of the 50-yard line of the city,” said Loveman, whose company changed its name from Harrah’s Entertainment last year. Caesars operates 10 casinos on the Strip, including Caesars Palace, Bally’s Las Vegas and Harrah’s Las Vegas.

“There are increasing numbers of customers visiting the city and not resident in our hotels and we need a dynamic that will bring them into our neighborhood so that we can entertain them in some capital-efficient way,” Loveman said.

On Thursday, Caesars said it would seek $400 million in financing to be used for Project Linq and complete a 660-room hotel tower at Caesars Palace. Company executives said they would invest between $100 million and $150 million of company cash toward Project Linq. Loveman compared the plans with The Grove, a retail and dining district in Los Angeles.

“(Project Linq) offers neither new hotel rooms nor additional casino space, both of which are in excess supply,” Loveman said of the development which could open in 2013.

Caesars Entertainment Corp. said Friday its nationwide casino operations lost $196.7 million in the fourth quarter but saw signs of economic recovery in Las Vegas. The company had net income of $295.6 million in the same quarter a year ago.

Caesars said revenue rose
1 percent in the quarter that ended Dec. 31 to $2.12 billion from $2.1 billion. Revenues were helped by last year’s purchase of Planet Hollywood Resort.

For all of 2010, Caesars lost $831.1 million compared with net income of $827.6 million in the previous year. Total annual revenue dropped 1 percent to
$8.82 billion from $8.91 billion.

Privately held Caesars reports financial results because it has $20.9 billion of long-term debt, much of it publicly traded.

The company announced plans for an initial public stock offering in November, but withdrew the proposal when it couldn’t agree with potential investors on an opening share price.

KDP Investment Advisors gaming analyst Barbara Cappaert thought the conference call was a move toward restarting the IPO process.

“This is a precursor to what we think will be a revised attempt to issue shares publicly over the next month to two months, assuming the equity markets are receptive,” Cappaert said. “A lot will depend … (on) investor tolerance for extremely leveraged gaming companies with little history of paying down debt with cash flow.”

Loveman said the company’s board “is continuing the evaluation process” for an initial public offering.

Caesars said casino customers have reduced spending in the past few years because of the recession, but Loveman added that Las Vegas, where revenue increased 11.9 percent in the quarter, is showing signs of stabilizing.

Atlantic City, where the company operates four hotel-casinos, revenue fell 10.6 percent.

“Caesars’ results are emblematic of gaming nationally especially as it boasts the largest portfolio of U.S. casinos,” Union Gaming Group principal Bill Lerner said. “In particular the company’s properties experienced mixed results, not unlike the bright and weak spots seen in jurisdictional data of the same period.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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