LAS VEGAS HILTON HITS PPE EARNINGS

By Dave Berns
Review-Journal

July 23, 1999
LAS VEGAS-- Park Place Entertainment's second-quarter numbers were hampered by a 68 percent drop in cash flow at the Las Vegas Hilton, which saw the figure plummet to $7 million, from the $22 million recorded in the second quarter of 1998.

Company officials, in making the announcement Tuesday, said baccarat was the culprit, with fewer high rollers playing at the off-Strip casino in the second quarter, when compared with the same period a year earlier.

A commonly used measure of casino industry profitability, cash flow measures a property's earnings before payments for interest and taxes, and the accounting of depreciation and amortization.

Cash flows at the Flamingo Hilton and Bally's Las Vegas were relatively flat for the quarter, with double-digit increases at the company's Atlantic City, N.J., and Mississippi gaming properties driving Park Place's quarterly results.

"I wasn't surprised about the Las Vegas numbers, but I was surprised on the upside by Mississippi," said Dennis Forst, a McDonald & Co. gaming industry analyst.

The recent openings of Bellagio, Mandalay Bay and The Venetian all were expected to have an impact on Las Vegas megaresorts. But Park Place's three Mississippi gaming properties generated a 21 percent increase in second-quarter cash flow to $52 million, from $43 million, with the improved performance of the Grand Tunica driving the numbers.

Overall, the Hilton Hotels Corp. gaming spinoff reported net income of $40 million on net revenue of $739 million for the quarter ended June 30. That compared with second-quarter 1998 net income of $46 million on net revenue of $718 million.

The results were adjusted for the company's recent acquisition of Grand Casinos Inc., which added three Mississippi gaming properties to Park Place's portfolio.

Park Place shares were down 25 cents Tuesday on the New York Stock Exchange to close at $10.19 on a day when the Dow Jones industrial average fell 191.23 points to close at 10,996.45.

"It's all related to the Dow," Forst said of Park Place's one-day stock price decline.

Credit Suisse First Boston gaming analyst David Anders issued an upbeat analysis of the Park Place results.

"We believe investors are drawing incorrect conclusions about Park Place's position within the Las Vegas market, providing for a unique (stock) buying opportunity," Anders wrote in a Tuesday report. "Park Place is on track to open its new must-see Las Vegas resort ... and anticipates on closing on the Caesars acquisition in November."

Anders reiterated his "buy" rating of Park Place shares, with a target price of $15 a share.