More space for Mandalay, Caesars

May 1, 2001 10:29 AM

Raising the stakes in the meeting and exhibit business, Mandalay Bay is adding 1.8 million square feet of convention space.

The 20-acre project, which will include the world’s largest ballroom, dedicates 1 million square feet for exhibit space and more than 600,000 square feet for convention and meeting rooms.

It’s a big step up for the south Strip resort, which currently has just 200,000 square feet available for conventions. With 3,000 rooms and an adjoining Four Seasons resort, Mandalay Bay is one of Las Vegas’ larger casinos. But its convention space has lagged behind such hotels as The Venetian, MGM Grand, the Las Vegas Hilton and Bally’s.

"We knew we were outgrowing ourselves from the beginning. We could only take one client at a time,’’ said John Marz, corporate vice president of marketing for Mandalay Resort Group.

Upon completion in summer 2002, Mandalay’s convention hall will eclipse the 1.2 million-square-foot Sands Expo Center and rank just behind the Las Vegas Convention Center.

The facility will contain a 100,000-square-foot ballroom with a seating capacity of 6,200. A freestanding kitchen will be erected to serve what Marz calls the "mega-ballroom.’’

Mandalay officials would not disclose the cost of construction.

In another Strip upgrade, Caesars Palace will build a 4,000-seat Colosseum to replace the demolished Circus Maximus showroom.

Plans for the new 22,000-square-foot stage and theater will be unveiled at the county Planning Commission this week. The $65 million project is positioned near the entrance to the Forum Shops in space formerly occupied by the Omnimax movie theater. A portion of the race and sports book, currently under renovation, will also be taken for the event center.

Breaking tradition, casinos eye a state lottery

With a green light from gamers, Nevada could finally be heading for a lottery.

A statewide lotto has been proposed by Assemblywoman Kathy McClain, D-Las Vegas. While similar efforts have been blocked by gaming lobbyists in the past, McClain’s bill deals the industry in on the action: Casinos would be the exclusive ticket sellers.

Assembly Joint Resolution 11 has attracted 32 bipartisan sponsors and awaits a hearing in the Assembly Taxation Committee. The panel’s chairman, David Goldwater, is one of the measure’s co-sponsors. So is Assembly Speaker Richard Perkins.

"It’s gaining momentum,’’ McClain said. "I’m getting a lot of positive response from all kinds of people.’’ As for the casino lobbyists? "Nobody’s said they’re against it,’’ she says.

Mike Sloan, senior vice president of Mandalay Resorts, said that although the Nevada Resort Association hasn’t taken an official position, "[AJR11] deserves a careful look from a state that is close to desperate for revenue.’’ According to industry sources, Strip megaresorts have been more bullish than neighborhood casinos, which fear that a lotto game could erode local slot play.

McClain’s bill would earmark all lottery revenues for education and protects the proceeds by using the funds "only to supplement and not to replace the money that a school district would otherwise receive.’’

California’s 16-year-old lottery has raised $12 billion for public schools by dedicating one-third of its revenues for education.

But before Nevada can start counting its loot, AJR11 must be passed twice by the Legislature and once by a statewide vote. The five-year, multi-step process is required to change the Nevada Constitution, which prohibits a statewide lottery.

The good news is that legislative resolutions are not held to the rigid deadlines that apply to other legislation. And McClain is betting on a favorable vote by the time lawmakers adjourn in June.

Her bill limits lotto ticket sales to establishments with non-restricted gaming licenses.

But a potential pitfall looms, according to legal analysts who have looked at AJR11. Because not every rural Nevada county has an unrestricted gaming licensee, McClain’s measure could have constitutional problems. She says the state’s lawyers are researching the matter.

Park Place Entertainment reports decline in net income

The first three months of the year showed profits were down for the largest gaming corporation in the world.

Park Place Entertainment (NYSE: PPE) blamed higher energy costs, bad weather in Atlantic City and an unfavorable calendar for a $7 million drop in net income from $52 million, or 17 cents per diluted share, in the first quarter of 2000 to $45 million, or 15 cents per diluted share. Cash flow, reported as earnings before interest, taxes, depreciation and amortization, was down $12 million.

Despite the decline, the company still beat Wall Street’s consensus estimate of earnings by four cents.

Caesars Indiana gave the best accounting of itself, posting the best percentage increases of any property in Park Place’s mammoth portfolio.

The company said the Ohio River casino is grabbing a larger share of the market. Slot handle was up 19 percent, table drop was up 9 percent. The results combined for 17 percent increase in revenues quarter over quarter, from $46 million to $54 million, and a 36 percent jump in cash flow, from $11 million to $15 million.

Revenue was down $9 million at Caesars Palace, where Park Place said it is moving ahead with plans to add 800 more hotel rooms. The company blamed most of the drop on the calendar, which placed the lucrative New Year’s weekend into the fourth quarter of 2000 rather than the first quarter. The Las Vegas Hilton was down $7 million in revenue and is clearly struggling with an identity crisis as Park Place works to shift its marketing away from high-end table play to conventions.

The transformation hasn’t been helped any by an abortive sale of the property to Los Angeles investor Ed Roski Jr. which is now mired in the courts.

On the plus side in Las Vegas, the combined Bally’s/Paris resorts saw revenues and cash flow increase $6 million and $1 million, respectively.

Revenues were up a combined $7 million at the company’s three casinos on the Atlantic City Boardwalk, but higher costs, bad luck and the harsh winter drove cash flow down $2 million compared with the first quarter of 2000.

In the hinterlands, results at the company’s three Grand casinos in Mississippi were either down or essentially flat.

Trading was heavy in PPE at the end of last week. The stock closed Friday up 10 cents to $11.30.

Trump posts loss for the quarter

The Trump casino empire blamed bad weather and bad luck for a first quarter loss of $16.9 million.

Win was down more than $500 a day at the Taj Mahal in Atlantic City and more than $800 a day at Trump Indiana. With bad winter weather in the East, the results for Trump Hotels & Casino Resorts (NYSE: DJT) were a decline in casino revenues of nearly $3 million and more than $2 million in pre-tax earnings.

The net loss was less than the $18.5 million lost in the first quarter of 2000. On a per share basis, the company lost 77 cents, compared with a loss of 84 cents last year.

In a statement released with the earnings announcement on Friday, Chairman and CEO Donald Trump said he was "generally pleased" with the company’s performance, pointing to cuts in interest payments of $1.4 million and $3.3 million in other expenses. He said construction has started on the company’s joint-venture Indian casino in San Diego, scheduled to open in the spring of 2002.

Investors didn’t show much emotion either way. Trading was light as DJT closed Friday on the New York Stock Exchange up two cents to $2.02.

WMS enjoys record quarter

Earnings for the third fiscal quarter ended March 31 jumped 70 percent to a record $12.9 million for WMS Industries (NYSE: WMS).

Prior to accounting for corporate relocation costs, WMS earned 40 cents a diluted share, compared to 24 cents in the same quarter a year ago. Cash flow jumped to $24 million, up from last year’s $14.8 million.

The company said it was expensing $301,000 to consolidate its manufacturing, distribution, warehousing and corporate offices in Waukegan, Ill.

In announcing the results, Brian R. Gamache, president and CEO, said, "In the March 2001 quarter, WMS’ overall financial performance reached the highest level since we entered the gaming device business." He said the revenue growth was due to an increase in sales of gaming devices to 5,294 units versus 3,684 sold in the same period last year.

WMS was up $1.01 on heavy trading to close Friday at $20.06.

Anchor posts loss on lottery restructuring

Anchor Gaming (Nasdaq: SLOT) reported a loss of $94 million, or $6.41 per share, for the fiscal third quarter ended March 31. The loss was attributed to a one-time charge of $133 million on the restructuring of its lottery subsidiary, AWL.

Revenues of $122.9 million, adjusted for the sale of a New Mexico racetrack, were down 11 percent compared with the same period last year.

The slot-maker, which also operates an Indian casino in Southern California, reported that cash flow, designated as earnings before interest, taxes, depreciation, one-time charges and stock-based compensation expense, increased 12 percent to $49 million compared with the same period in 2000.

SLOT was down 47 cents Friday to $55.05.

Profits up at Argosy

Argosy Gaming (NYSE: AGY) reported increases in net revenue and net income for the first quarter. Revenue was up $6.4 million to $170.7 million, reflecting increases at all five of the company’s riverboat casinos.

The result was a $1 million increase in profits despite a drop of $1.7 million in income from operations to $40.1 million. Net income per diluted share was up four cents to 50 cents.

Argosy’s stock closed Friday up eight cents to $27.98.

Horseshoe posts solid gains

Horseshoe Gaming Holding Corp. reported increases in revenues and net income of $13 million and $5 million, respectively, for the first quarter, compared with the first three months of 2000. Revenues were $259 million, and net income reached $25.3 million.

Energy costs bite into Riviera’s quarter

Riviera Holdings (AMEX: RIV) reported a net loss of $658,000, or 18 cents per share, for the first three months of 2001 despite a 6 percent increase in net revenues over the same period last year. Cash flow was down 11 percent. The company blamed rising energy costs for the declines.

Despite the bad news, RIV was up five cents Friday to close at $6.10.

Mixed results for Dover Downs

Dover Downs Entertainment Inc. (NYSE: DVD) reported increased revenues but flat earnings per share for the first quarter of the fiscal year. Revenues of $47.4 million were up 8.3 percent, but earnings were six cents a share, equal to the first quarter of 2000.

The company also declared a quarterly dividend of 45 cents per share of common stock, payable on June 10 to shareholders of record as of May 10.

Investors responded, bidding DVD up 18 cents Friday to close at $12.65.

Derby dumps field, entry bets

Regardless of the number of starters that go to the post in the Kentucky Derby, Churchill Downs will accept wagering on each individual horse with no entries or field wagers.

Kentucky State law requires that entries be made of horses with identical ownership, but not if the horses have different owners but the same trainers.

Also, this year Churchill Downs has expanded its totalizator system so that individual wagers can be accepted on as many as 20 separate betting interests.

In previous Kentucky Derby races, only 14 betting interests were offered to pari-mutuel bettors. The bets included coupled horses (entries) as well as field horses. Those will no longer be offered.

Jacobs wins bid to buy Black Hawk

Jeffrey Jacobs, chairman and CEO of Black Hawk Gaming & Development Co., will buy the company and merge it with his own.

Jacobs will pay $12 a share for the shares he doesn’t already own and will merge Black Hawk with Gameco Inc., an entity he controls. Jacobs and his affiliates own about one-third of Black Hawk’s stock.

Jacobs upped his offer from $11 a share to beat back a bid by former Chairman Robert Greenlee to buy the company. Greenlee said he has withdrawn his $12 a share offer and will vote his 11 percent of the company in favor of the Gameco merger.

The agreement is expected to close in the fourth quarter, subject to the necessary approvals.

Black Hawk owns and operates casinos in Reno, Nev., and Black Hawk, Colo.


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