Park Place Entertainment Corporation (NYSE: PPE) today reported net income before a cumulative effect of accounting change of $40 million, or $0.13 per diluted share, for the quarter ended March 31, 2002. That compares to net income of $45 million, or $0.15 per diluted share, for the first quarter of 2001.
Revenues were $1.158 billion for the first quarter of 2002, compared to $1.161 billion for the first quarter of 2001. Earnings before interest, taxes, depreciation, amortization, pre-opening expenses and non-recurring items (EBITDA) were $279 million for the first quarter of 2002, down from $315 million for the first quarter of 2001.
In accordance with new national accounting standards established by the Financial Accounting Standards Board (FASB) that take effect this fiscal year, the company in the first quarter recorded a non-cash charge of $979 million to write down goodwill associated mainly with the 1996 acquisition of Bally Entertainment. Including the cumulative effect of this accounting change, results for the first quarter were a loss of $939 million, or $3.09 per diluted share.
“Park Place posted strong first quarter results in the East and Mid-South, and began a significant recovery in Las Vegas,” said President and Chief Executive Officer Thomas E. Gallagher. “In the Eastern Region, we reported record EBITDA of $97 million. In the Mid-South, we surpassed last year’s first quarter results. And in Las Vegas, we recorded significant month-to-month increases in revenue and EBITDA.
“We also continued significant reduction of debt. In the first quarter we paid down almost $100 million in debt, more than in all of last year. In April, we paid down an additional $120 million with the proceeds from the sale of our equity interest in Jupiters Limited,” Gallagher said.
In Atlantic City, including results from the Claridge Hotel and Casino (acquired in June 2001), Park Place reported a year-over-year EBITDA increase of 18 percent (15 percent excluding the Claridge). Unusually mild weather, coupled with successful strategic marketing initiatives, drove a $15 million increase over the first quarter of 2001.
In Indiana, Mississippi and Louisiana, Park Place properties recorded a first quarter EBITDA increase of 4 percent over last year, led by a strong performance at Caesars Indiana and a 9 percent EBITDA increase for the three properties in the Tunica market.
Park Place’s Las Vegas results significantly improved throughout the quarter, as the year-over-year EBITDA gap declined from 53 percent in January to 16 percent in March.
“We had a great first quarter in Atlantic City, Indiana and Tunica,” said Wallace R. Barr, executive vice president and chief operating officer. “As our Biloxi and Las Vegas properties continue to gain momentum, our domestic properties should produce solid quarterly results throughout the balance of 2002.”
Also during the quarter, Park Place continued its disciplined use of capital. The company:
* Paid down $99 million in debt using cash from operations - a greater debt reduction than in all of 2001.
* Entered into an agreement to sell its equity interest in Jupiters Limited in Australia while retaining the management contract there. The transaction, which closed on April 17, returned $120 million in gross proceeds to the company, which have been used to further reduce debt.
* Made new unit capital expenditures of $27 million. The majority of new project capital was invested in the Colosseum at Caesars Palace in Las Vegas and in the connector between Bally’s Atlantic City and the Claridge in Atlantic City.
* Issued $375 million of 7 7/8 percent senior subordinated notes to repay $300 million in 7 3/8 percent senior notes which mature in June 2002. Due to investor demand, the new issue was increased in size from a planned $300 million.
“The first quarter demonstrated the significant free cash flow potential of Park Place Entertainment,” said Executive Vice President and Chief Financial Officer Harry C. Hagerty. “We will endeavor to enhance that potential at every opportunity. We are carefully reviewing existing and future investments to be sure we are getting the best possible returns. Pending the development of attractive new projects with superior financial characteristics, we will continue to apply excess funds toward debt reduction.
“Just as important,” Hagerty added, “we are continuing the detailed review of our entire operations we began last year to capture systematic and sustained improvements in operating efficiencies. Our long-term goals are the best possible returns on revenues and the best possible returns on capital.”