Park Place Entertainment Corporation (NYSE: PPE) today reported adjusted net income of $17 million, or $0.06 per diluted share, for the quarter ended September 30, 2001. That compares to adjusted net income of $68 million, or $0.22 per diluted share, for the third quarter of 2000. Adjusted net income represents net income before pre-opening expenses, asset dispositions and impairments.
Cash earnings (net income before pre-opening expenses, asset dispositions, impairments and goodwill amortization) for the third quarter were $0.10 per diluted share, compared to $0.26 per diluted share in the same period last year. The Company recorded a net loss for the quarter of $101 million, after recording one-time charges primarily related to the write-down of the Las Vegas Hilton, the write-off of the Aladdin Senior Discount Notes and the sale of the Flamingo Reno.
In the third quarter, the Company generated net revenues of $1.22 billion and EBITDA of $259 million. That compares to $1.25 billion in net revenues and $338 million in EBITDA in the year-ago quarter. EBITDA is earnings before interest, taxes, depreciation, amortization, pre-opening expense, asset dispositions and impairments.
The third quarter earnings shortfall was due primarily to a $45 million decline in revenue in the Western Region coupled with increased expenses. The revenue shortfall was a product of the decline in travel and leisure spending after the September 11th terrorist attacks as well as a 2 percentage point decline in table hold at the Company’s Las Vegas properties. As a result, the Western Region posted a $61 million decline in EBITDA from last year’s third quarter.
Park Place’s geographic diversity helped offset poor market conditions in Las Vegas during September. The Company experienced quarter over quarter EBITDA growth at both Caesars Indiana and Grand Gulfport, and also maintained relatively strong cash flows in Atlantic City. These three markets accounted for approximately 63% of the Company’s EBITDA for the third quarter of 2001, compared to 48% in the third quarter of 2000.
For Park Place properties outside of Nevada, cash flow for the quarter was down approximately 10%, compared to the third quarter of 2000. Cash flow for the Nevada properties was off 50%.
“The events of September 11 had a serious impact on our third quarter business, particularly in Las Vegas,” said Park Place Chief Executive Officer Thomas E. Gallagher. “The good news is that our wide reach into regional gaming markets across the country helped cushion the blow and will continue to help us going forward. We’ve also begun to see some improvement in our Las Vegas business, particularly on weekends.
“The entire travel and resort industry will continue to face challenges in the immediate future, but Park Place is well positioned to manage through this difficult time given our geographic and customer diversity,” Gallagher added.
The Company announced in September that it has postponed construction of a new $475 million hotel tower at Caesars Palace Las Vegas to conserve capital and redesign the project to achieve greater operating efficiencies and a better return on investment. The Company is continuing its Colosseum project at Caesars Palace, a 4,000-seat concert venue now budgeted at $95 million, that is scheduled to open with Celine Dion in March 2003. “The Colosseum is an important part of our core strategy to enhance Park Place’s overall entertainment product,” Gallagher said.
Other highlights from the quarter include:
* Opened a 500-room hotel tower in late August at Caesars Indiana
* Reached an agreement to sell the Flamingo Reno
* Caesars Indiana and Grand Gulfport EBITDA up over last year by 7% and 9%, respectively
* Paid down $75 million in debt
* Invested $51 million in new unit projects
* Issued $425 million in Senior Notes at 7.5% for an 8 year term to pay down bank debt