Park Place Entertainment Corporation (NYSE: PPE) - which will change its name to Caesars Entertainment, Inc. in January 2004 - today reported financial results for the quarter and nine months ended September 30, 2003.
In the third quarter of 2003, Park Place reported net income of $48 million, or $0.16 per diluted share. That compares to net income of $40 million, or $0.13 per diluted share, for the third quarter of 2002.
Net income for the year-ago quarter included charges of $10 million related to the cancellation of an energy purchase contract and damage caused to Gulf Coast properties by Tropical Storm Isidore. Excluding those charges and pre-opening expense, adjusted net income for the third quarter of 2002 was $0.16 per diluted share.
Net revenue for the third quarter of 2003 was $1.220 billion, compared to $1.211 billion in the third quarter of 2002. Third quarter EBITDA - earnings before interest, taxes, depreciation and amortization, pre-opening expense and the $10 million in charges - was $284 million, down from $290 million in the year-ago quarter.
Net income for the first nine months of 2003 was $130 million - or $0.43 per diluted share - including $1 million in pre-opening expense recorded in the first quarter.
That compares to net income before the cumulative effect of the goodwill accounting change of $176 million - or $0.58 per diluted share - for the first three quarters of 2002.
Results for the first three quarters of 2002 include an investment gain of $44 million related to the sale of the company`s interests in Jupiters Ltd., an Australian casino company, as well as pre-opening expense and the $10 million in charges.
Including the effect of the accounting change, which was related to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” the company reported a net loss of $(803) million, or $(2.64) per diluted share, for the first three quarters of 2002.
Adjusted net income for the nine months ended September 30, 2003 - which excludes the $1 million in pre-opening expense - was $131 million or $0.43 per diluted share. Adjusted net income for the first nine months of 2002 - which excludes the investment gain, pre-opening expense, the $10 million in charges and the effect of the goodwill accounting change - was $144 million, or $0.47 per diluted share.
Net revenue for the first nine months of 2003 was $3.550 billion, compared to $3.546 billion in net revenue reported for the first three quarters of 2002. EBITDA for the first nine months of 2003 was $835 million, compared to $879 million for the year-ago period.
“Higher room rates at all of our Las Vegas properties and an improved performance by Caesars Palace resulted in better third-quarter results in the West, while our Atlantic City properties did better than expected in the face of new competition,” said Park Place President and Chief Executive Officer Wallace R. Barr.
“In the quarter, we also focused on development. We were selected by the Pauma-Yuima Band of Mission Indians to exclusively negotiate agreements to develop and manage a Caesars-branded casino in Southern California. We also submitted applications for new casino licenses in Illinois and Indiana and initiated discussions about a potential new Caesars casino project at the Mall of America in Minnesota,” Barr added.
In the third quarter of 2003:
—The Western Region reported EBITDA of $93 million, up from $87 million in the third quarter of 2002, reflecting increased room rates in Las Vegas. EBITDA margin for the Western region was 18 percent, equal to the 18 percent reported for the year-ago quarter.
—The Western Region saw improved performance at Caesars Palace, which reported significant increases in gaming volumes, a more normal table hold and a $17 - or nearly 15 percent - increase in revenue per available room (RevPAR). EBITDA at Caesars Palace was $23 million, up from $5 million in the third quarter of 2002.
—Eastern Region EBITDA was $130 million, down seven percent from the year ago quarter, but better than expected. The company earlier had predicted an EBITDA decline in Atlantic City of ten to 15 percent because of the opening of the Borgata, the city`s newest casino resort. Eastern Region EBITDA margin was 32 percent, down from 34 percent in the third quarter of 2002.
—In the Mid-South Region, EBITDA was $63 million, compared to $68 million in the third quarter of 2002. Higher total gaming volumes generally were offset by slightly lower hold percentages. EBITDA margin in the Mid-South was 22 percent, compared to 24 percent in the third quarter of 2002.
—The company announced plans to change its name to Caesars Entertainment, Inc., effective in January 2004, to better leverage the best-known brand in the gaming industry. The change was overwhelmingly approved by shareholders at a special meeting on September 10.
—The company paid down an additional $95 million of indebtedness, bringing its total debt to $4.65 billion as of September 30, 2003. Since January 2002, the company has reduced debt balances by approximately $665 million.
—The “Work Smart” program resulted in reduced expenses in targeted categories of approximately $8 million in the quarter. Since the program was started last year, the company has reduced costs in those categories by about $80 million.
—The Pauma-Yuima Band of Mission Indians in Southern California chose the company to negotiate development and management agreements for a Caesars-branded casino on tribal lands in northern San Diego County. The location is accessible to millions of people in Los Angeles, Orange, San Diego and Riverside counties.
—The company submitted applications to acquire casino licenses in the greater Chicago area and in French Lick, Indiana, and initiated preliminary discussions regarding the potential development of a Caesars-branded casino at the Mall of America in Bloomington, Minnesota.
—The number of Las Vegas room nights sold directly though Park Place web sites rose 20 percent - to nearly 112,000 - compared to the third quarter of 2002. In the quarter, more than 25 percent of all Las Vegas room nights sold to free and independent travelers were sold directly through Park Place web sites.
—The Connection Card customer loyalty program in Las Vegas and Atlantic City expanded to include Park Place casino resorts in Indiana and Tunica, Gulfport and Biloxi, Mississippi. The Reno Hilton, Caesars Tahoe, Bally`s New Orleans and the Flamingo Laughlin will join the Connection Card program before the end of the year.
—The 4,100-seat Colosseum at Caesars Palace was named by Billboard magazine as the top-grossing concert venue in the United States among facilities with fewer than 5,000 seats. Boardwalk Hall in Atlantic City, where Park Place has sponsored the majority of the major concerts over the past two years, headed Billboard`s list of top-grossing arenas in the 10,000 to 15,000-seat category.
—Celine Dion ended the quarter with her 105th consecutive sold out performance of “A New Day….” at The Colosseum.
—The company announced plans to build a 949-room hotel tower at Caesars Palace, to be completed in 2005. The project, which will bring total room capacity to nearly 3,400, is the final component of the master plan to renovate Caesars Palace. Work also progressed on the East Casino Connector, set to open late this year; the Roman Plaza, scheduled to open in the summer of 2004; and the 175,000 square-foot expansion of The Forum Shops, with a planned debut in late 2004.
“We showed progress in the quarter on the two financial strategies that we have been emphasizing internally - return on capital and reduced operating expenses,” said Park Place Executive Vice President and Chief Financial Officer Harry C. Hagerty.
“The significant investments we have made at Caesars Palace have led to improved operating earnings there and we hope for more of the same from the additional projects that are underway.
“As for reduced expenses, we are endeavoring to offset the negative effects of increased wages and employee benefits company-wide as well as new taxes in several markets. In fact, the decline in third quarter EBITDA was roughly equivalent to the increase in taxes in Indiana and New Jersey,” Hagerty added.