Gaming companies flying high
as revenues, profits soar

Feb 8, 2005 12:50 PM

If anyone worried about the popularity and growth of gaming during the past year, they need only have reviewed the fiscal reports of America’s two largest gaming companies, MGMMIRAGE Inc. (MGG) and Harrah’s Entertainment Inc. (HET).

The results were outstanding.

Yet, after telling Wall Street that his company had experienced record financial results for both the fourth quarter that ended on Dec. 31, 2004, and the full year 2004, Chairman and CEO Terry Lanni said, in effect, "You ain’t seen nothing yet!"

He was referring to the company’s acquisition of Mandalay Resort Group (MBG) that may be completed by the end of March. Combining the two companies will give the merged firm control of more than 36,000 rooms on the booming Las Vegas Strip.

Lanni noted that he foresaw continued strong customer spending and strong bookings, especially for the Super Bowl and Chinese New Year, both events that will take place this month.

Adjusted earnings per diluted share for the fourth quarter rose 42% to $0.51 compared to the previous year’s $0.36. This represented the company’s best fourth quarter performance in its history.

For the full year, the company earned $2.52 per share, up from the 2004 figure of $1.52 per share.

Lanni remarked, "The fourth quarter of 2004 provides an exclamation point on a tremendous year for all of us at MGM MIRAGE. In 2005, we will successfully integrate Mandalay Resort Group’s properties and employees, and begin executing on the vision of Project CityCenter."

As for guidance for the current quarter, the company said it felt the analysts’ consensus of $0.74 per share was reasonable.

Harrah’s Entertainment

Records fell at Harrah’s Entertainment Inc. with fourth quarter income from operations rising 33.4% to $165 million. Last year in the comparable quarter, earnings were $123.7 million, Diluted earnings per share for the fourth quarter was a record $0.68, a jump of 112.5% over last year’s $0.32 per share.

Boosting the fourth quarter results, the company said, were the contributions from the three Horseshoe Casinos that were acquired from gaming legend Jack Binion in July.

For the year, revenues rose 15.2% to a record $4.55 billion from the $3.95 billion in 2003. Adjusted earnings per share registered a record $3.37, or 15.8% higher than the $2.91 achieved the previous year.

And like its competitor, MGG MIRAGE, Harrah’s is looking forward to its acquisition of Caesars Entertainment Inc. (CZR) that is under review by the Federal Trade Commission. "We remain optimistic that we will be able to complete this transaction in the second quarter," said Gary Loveman, company chairman and CEO.

He added that the integration of Horseshoe "continues to proceed smoothly, an experience that will serve us well as we prepare for the integration of Caesars."

Ameristar Casinos

Joining the bandwagon of generating record operating results during the past quarter and for the year 2004 was Ameristar Casinos Inc. (ASCA). Net revenues for the fourth quarter reached $214.7 million, an increase of $17.6 million or 8.9% over the fourth quarter of 2003.

For the full year, the company reported consolidated net revenues of $854.7 million, an increase of $72.7 million or 9.3% over the previous year.

The fourth quarter’s net income amounted to $0.52 per diluted share compared to the $0.35 per share earnings of 2003. Full year earnings were $2.23 per share, or 26.7% more than a year earlier.

Craig H. Neilsen, chairman and CEO, noted that the results completed the third consecutive year of positive growth.

The company said that based on the operations to date it estimated operating income to be between $171 million and $179 million or on a per share basis, between $2.34 and $2.51 per share.

Penn National Gaming

Another company that benefited from its expanding operations was Penn National Gaming Inc. (PENN) that reported record fourth quarter results that even exceeded its previous guidance.

During the quarter, the company had net revenues of $276.7 million compared to last year’s quarterly revenues of $257.4 million. Income from continuing operations reached $49.9 million or $8.3 million higher that the previous year.

For the period, the diluted earnings per share reached $0.44, up from $0.32 in 2003.

On an annual basis, revenues were $1.14 million compared to $1.013 while per share earnings reached $2.09 compared to the $1.54 per share earnings recorded the previous year.

The company is in the process of acquiring Argosy Gaming Company.

Following the earnings announcement, the company’s directors voted to split the stock 2-1 on March 7 for shareholders of record on Feb. 14.

WMS Industries

Business improved substantially during the fourth quarter for WMS Industries Inc. (WMS) but concerns by some gaming analysts that the company’s bottom line was not reflecting the improvements caused the shares to fall in late trading last week.

The company said gross profit for the quarter increased 58% to $46.2 million while it shipped 5,811 gaming devices, an increase of 102%. And net income rose to $3.9 million or $0.12 per diluted share compared to last year’s loss of $400,000 or $0.01 loss per share.

For the fiscal third quarter, the company offered guidance of between $98 million and $103 million in total revenues. And for fiscal 2005, the company said it expects to have total revenues of $340 million to $360 million.

President and CEO Brian Gamache said he felt the fiscal year showed the gaming industry "that our customers and their patrons have strongly embraced (our) new products.

"We recognize the need to show greater improvement in our operating margins (and are) attempting to balance increasing our operating margins and meeting customer delivery expectations while at the same time ramping up for the dramatic growth we are now experiencing."

Alliance Gaming

Also in the midst of a turnaround is Alliance Gaming Corporation (AGI) whose new CEO, Richard Haddrill, took the helm last fall.

For the second fiscal quarter that ended on Dec. 31, 2004, the company said its experience was better than its previous guidance with revenues from continuing operations reaching $113.7 million, a 4.7% increase over the $108.6 million in the prior year quarter.

Operating loss from these operations amounted to $7.7 million compared to operating income of $27.5 million last year. However, the company took an inventory and asset write-down of $11.1 million for certain discontinued products, as well as used gaming devices and related ancillary assets.

"We are on track with our new product and operational initiatives," said Haddrill. "We are further building on our portfolio of leading technologies by putting the right strategy, people and processes in place to ensure a successful long- term future."

He said the company expects to return to profitability in both the third and fourth quarters of fiscal 2005, or sooner than had previously been anticipated.