Press Release: Park Place Entertainment Corp.
November 1, 2001
LAS VEGAS, NV -- Park Place Entertainment Corp. (NYSE:PPE) yesterday reported adjusted net income of $17 million,
or $0.06 per diluted share, for the quarter ended Sept. 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 11 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:
Eastern Region
Eastern Region fundamentals remained strong throughout the third quarter as gaming volumes rebounded following
the September 11 terrorist attacks. The region generated $136 million in EBITDA for the third-quarter 2001 vs.
EBITDA of $138 million last year. The company's third quarter operating results were also enhanced by the June
1 addition of the Claridge Hotel and Casino to Park Place's portfolio of properties.
Caesars Atlantic City produced EBITDA of $51 million in the third quarter of 2001 vs. $55 million in 2000. Bally's
Atlantic City reported $55 million for the third quarter of 2001 vs. $58 million for the third quarter of 2000.
The Atlantic City Hilton earned EBITDA of $23 million for the third quarter of 2001 compared to $24 million in
the year-ago quarter. The declines in EBITDA at the properties were primarily due to lower levels of play associated
with the business disruption from the September 11 attacks.
The company's results in Atlantic City have continued to normalize during the month of October as slot and table
volumes for the first four weeks of October were down approximately 1% vs. last year. However, gaming revenue was
down approximately 4% in the first four weeks of October compared to last year due to a lower table hold percentage.
Western Region
The Western Region reported $60 million in EBITDA for the third quarter of this year compared to $121 million last
year. The EBITDA decline was primarily due to the overall business disruption associated with the September 11
attacks as well as a low hold percentage in Las Vegas, which compounded the region's EBITDA shortfall.
Paris/Bally's Las Vegas reported EBITDA of $30 million this quarter vs. $46 million in the third quarter of 2000.
The property generated $30 million in EBITDA through September 10 and operated at break-even for the last 20 days
of the quarter.
Caesars Palace generated EBITDA of $3 million, significantly down from last year's $26 million. The property's
operations were not only impacted by the September 11 attacks but also a 3 percentage point lower table hold vs.
last year as well as higher marketing costs associated with high-end table play. By normalizing hold at last year's
level, the property would have generated approximately $12 million more in gaming revenues.
Flamingo Las Vegas reported EBITDA of $20 million in the third quarter of 2001 compared to $25 million last year,
while the Las Vegas Hilton recorded an EBITDA loss of $5 million in the third quarter of 2001 vs. a loss of $1
million last year.
The company experienced positive trends in Las Vegas during the first four weeks of October. Occupancy levels exceeded
95% each weekend in October, with the average daily rate down 3% vs. the same weekends last year. However, the
company's weekday occupancy levels in Las Vegas during the first four weeks of October were approximately 84% vs.
last year's occupancy of 95%. Average daily rates this October were down approximately 5% vs. last year's rates.
From a gaming standpoint, table volumes were up approximately 13% during the first four weeks of October in Las
Vegas vs. last year while slot volumes were down approximately 7% vs. last year. The company is also continuing
to focus on opportunities to reduce operating costs throughout the Las Vegas properties.
``We have been very focused on reducing our variable costs throughout the company without jeopardizing the customer
experience,'' said Wally Barr, executive vice president and chief operating officer. ``These cost-saving measures
will help push more revenue to the bottom line going forward.''
Mid-South Region
The Mid-South Region also experienced lower gaming volumes immediately after the attacks; however, visitation rebounded
close to pre-September 11 levels by the end of the quarter. For the second straight quarter, Grand Gulfport and
Caesars Indiana generated EBITDA increases vs. last year's results. However, the continued competitive pressure
at the Tunica properties and a low hold percentage at Grand Biloxi resulted in a 14% regional decline in EBITDA
from $64 million in the third quarter of 2000 to $55 million this year.
Caesars Indiana recorded a 14% improvement in revenues to $57 million and a 7% improvement in EBITDA to $15 million
during the third quarter of 2001. The increases were driven primarily by the addition of the new 500-room hotel
that opened in late August. The $70 million hotel was completed on time and on budget.
On the Gulf Coast, Grand Gulfport generated a 9% increase in EBITDA from $11 million in the third quarter of 2000
to $12 million in 2001 as the property continued to successfully market itself as a locals' destination.
The Grand Biloxi generated $12 million in EBITDA this quarter versus $19 million for the third quarter of 2000.
The property's results were impacted by lower gaming volumes post September 11 and a 2 percentage point lower table
hold during this year's third quarter.
Grand Tunica reported EBITDA of $10 million for the three months ended Sept. 30, 2001, compared to $12 million
for the three months ended Sept. 30, 2000. The property's table game volumes were essentially flat with last year;
however, slot volumes declined 14% in this quarter vs. last year due to the competitive situation in Tunica.
During the first four weeks of October, the Mid-South Region's gaming volumes declined 2% compared to the same
period last year.
International
On a combined basis, third quarter 2001 EBITDA from the company's non-U.S. properties decreased 18% from $28 million
to $23 million this year. The lower results were partially due to foreign currency translations as well as a reduction
in visitation to the Canadian-based casinos that the company manages due to tighter border control.
Corporate Items
In the third quarter, Park Place Entertainment paid down $75 million in bank debt, invested $51 million in growth
capital projects and repurchased approximately 1 million shares at $10.46 per share. All share repurchases during
the quarter were made prior to the September 11 attacks.
The company has not purchased any shares since September 11; however, 2.3 million options were exercised during
the quarter providing approximately $20 million in proceeds to the company. Over the last 12 months, the former
CEO's Estate has exercised approximately 7.2 million options, all of which would have expired on Oct. 19, 2001.
The Estate has remaining options to purchase an additional 6.0 million shares, however, those options do not expire
until October 2005.
``We continue to manage our business to maximize free cash flow to pay down debt and position ourselves for the
future,'' said Scott LaPorta, executive vice president and chief financial officer. ``Through the third quarter
of this year, we have aggressively paid down bank debt by $161 million and we have invested $155 million in exciting
growth projects, such as the Caesars Indiana hotel, which is already enhancing the cash flows of our company.''
Additionally, the company announced on Oct. 5 that it had entered into an agreement to sell the Flamingo Reno casino/hotel
to a subsidiary of Capital One, LLC. The company anticipates that the sale will close in early November.
Asset Writedowns
During the third quarter, the company recorded $175 million in non-cash write-downs and write-offs primarily associated
with the Las Vegas Hilton, Flamingo Reno, and an investment in Aladdin Discount Notes.
The company recorded a $124 million non-cash loss associated with its write down of the Las Vegas Hilton as it
continues to reposition the property in the Las Vegas market. A non-cash loss of $19 million was recorded in relation
to the proposed Flamingo Reno sale.
In addition, the Aladdin Hotel and Casino operating company filed for bankruptcy in September. Due to that event,
Park Place decided to write off its $29 million investment in the Aladdin holding company Discount Notes.
Park Place Entertainment is the world's largest gaming company and owns, manages or has an interest in 28 gaming
properties operating under the Caesars, Bally's, Paris, Flamingo, Grand Casinos and Hilton brand names with a total
of 2 million square feet of gaming space, over 28,000 hotel rooms and approximately 60,000 employees worldwide.
Additional information on Park Place Entertainment can be accessed through the company's 24-hour investor relations
service. Individuals may call toll-free 1-877-PPE-NYSE (1-877-773-6973) or visit www.parkplace.com to obtain the
latest company news and stock price information, or to request information by email, fax or postal mail delivery.
This news release contains ``forward-looking statements,'' intended to qualify for the safe harbor from liability
under the Private Securities Litigation Reform Act of 1995. All statements that are not historical statements of
fact are ``forward-looking statements'' for purposes of these provisions and are subject to numerous risks and
uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking
statements. Forward-looking statements include all financial projections, including projections of revenue, market
share, earnings, or free cash flow, statements of management's plans, objectives or expectations of future economic
performance, statements regarding new products or services, statements of belief, and statements regarding anticipated
construction, development, or acquisition. Additional information concerning potential risk factors that could
affect the company's future performance are described from time to time in the company's reports filed with the
Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended Dec.
31, 2000, and on Form 10-Q for the quarters ended March 31, 2001, and June 30, 2001. These reports may be viewed
free of charge at the following Web site: www.sec.gov.
PARK PLACE ENTERTAINMENT
Summary Income Statement
(Amounts in millions, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Net revenue $ 1,222 $ 1,247 $ 3,621 $ 3,673
Operating costs and expenses 948 896 2,697 2,636
Depreciation and amortization 133 115 394 375
Pre-opening expense 1 1 2 2
Non-recurring items 175 -- 175 37
Operating profit (loss) before
corporate expense (35) 235 353 623
Corporate expense 15 13 40 37
Operating income (loss) (50) 222 313 586
Net interest expense 96 107 294 321
Income (loss) before taxes and
minority interest (146) 115 19 265
Income tax provision (benefit) (45) 47 25 114
Minority interest, net -- 1 2 1
Net income (loss) $ (101) $ 67 $ (8) $ 150
Net income per share, before
pre-opening expense and
non-recurring items
Basic $ 0.06 $ 0.23 $ 0.37 $ 0.58
Diluted $ 0.06 $ 0.22 $ 0.37 $ 0.57
Net income (loss) per share
Basic $ (0.34) $ 0.22 $ (0.03) $ 0.50
Diluted $ (0.34) $ 0.22 $ (0.03) $ 0.49
Cash earnings per share, before
pre-opening expense and
non-recurring items
Basic $ 0.10 $ 0.27 $ 0.51 $ 0.71
Diluted $ 0.10 $ 0.26 $ 0.51 $ 0.70
Weighted average shares outstanding
Basic 299 300 298 302
Diluted 299 308 298 309
PARK PLACE ENTERTAINMENT
Property Operating Information
(Amounts in millions)
(unaudited)
Revenues EBITDA(a)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000 2001 2000 2001 2000
WESTERN REGION
Paris/Bally's $ 153 $ 164 $ 506 $ 507 $ 30 $ 46 $ 140 $ 154
Caesars Palace 105 115 369 377 3 26 68 94
Flamingo Las Vegas 70 75 225 236 20 25 77 88
Las Vegas Hilton 48 58 175 208 (5) (1) 17 29
Other 106 115 301 306 12 25 43 62
482 527 1,576 1,634 60 121 345 427
EASTERN REGION
Bally's Atlantic
City 156 160 437 442 55 58 136 144
Caesars Atlantic
City 141 139 378 382 51 55 122 127
Atlantic City
Hilton 85 88 244 248 23 24 56 61
Other 44 2 61 7 7 1 12 4
426 389 1,120 1,079 136 138 326 336
MID-SOUTH REGION
Grand Biloxi 63 69 185 190 12 19 44 51
Caesars Indiana 57 50 162 145 15 14 44 38
Grand Gulfport 50 50 145 145 12 11 37 34
Grand Tunica 58 65 170 192 10 12 32 42
Other 49 52 150 162 6 8 25 29
277 286 812 834 55 64 182 194
INTERNATIONAL 37 45 113 126 23 28 71 80
CORPORATE -- -- -- -- (15) (13) (40) (37)
TOTAL $1,222 $1,247 $3,621 $3,673 $259 $338 $ 884 $1,000
(a) EBITDA is earnings before interest, taxes, depreciation and
amortization, pre-opening expense and non-recurring items.
PARK PLACE ENTERTAINMENT
Statistical Highlights
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
WESTERN REGION
Average Daily Rate $ 83 $ 83 $ 91 $ 88
Occupancy Percentage 90% 94% 92% 93%
Table Hold Percentage 13% 15% 15% 15%
EASTERN REGION
Average Daily Rate $ 100 $ 104 $ 93 $ 94
Occupancy Percentage 98% 99% 98% 97%
Table Hold Percentage 15% 14% 15% 15%
MID-SOUTH REGION
Average Daily Rate $ 58 $ 54 $ 58 $ 53
Occupancy Percentage 92% 97% 92% 94%
Table Hold Percentage 16% 16% 16% 16%
INTERNATIONAL
Average Daily Rate $ 83 $ 89 $ 83 $ 92
Occupancy Percentage 67% 66% 69% 70%
Table Hold Percentage 17% 18% 17% 17%
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Contact:
Park Place Entertainment Corp., Las Vegas
Investors: Matt Maddox, 702/699-5269
Media: Robert Stewart, 702/699-5043