Diversification key to improved quarterly results

Feb 12, 2002 6:31 AM

After listening to some of the major gaming companies report weaker quarters but better prospects on the horizon, investors were treated last week to positive news from some of the smaller operators. Particularly those that have diversified locations.

Leading the list was Harrah’s Entertainment Inc. (HET) that reported earnings of $0.46 a share compared to $0.20 a share in the fourth quarter of 2000. Not only did the company’s operations in various parts of the country improve dramatically but the company’s executives said they were pleased with the improvement in cash flow from the Rio Hotel Suites & Casino. The latter facility had suffered for several quarters because of its inability to deal with the so-called high rollers. Elimination of that exposure helped change the company’s balance sheet.

Another major factor, the company said, was the addition of the Harveys casinos to its growing list of properties. That coupled with major gains at its riverboats in the Midwest as well as major improvement at its two Atlantic City properties boosted its earnings.

Aztar Corporation (AZR) reported earnings of $0.33 a share compared to last year’s $0.13 for the same period. The company said the gains were widespread with only its Las Vegas facility, the Tropicana Hotel/Casino, reporting a decline in EBITDA.

Cost cutting as well as projected balance sheet improvements because of its move to acquire the 50% position in its Las Vegas real estate that it already doesn’t own is expected to boost operating results for the current year.

Boyd Gaming Corp. (BYD) surprised the analysts with a report of $0.15 earnings per share for the fiscal first quarter compared to a loss last year of $0.06 a share. Of all the properties operated by the company only the Stardust on the Las Vegas Strip saw a decline in cash flow.

Substantial increases in the company’s Downtown Las Vegas properties as well as its central region casinos helped boost the company’s earnings.

Still on the horizon, the company noted, are two major additions to its operations. The first begins on Wednesday when it will unveil its 1,498 slot machines at the Delta Downs Racetrack in Vinton, La. The second, of course, is the 2003 opening of The Borgata Resort in the Marina District of Atlantic City. The property is a 50% partnership with MGM MIRAGE Inc. (MIR).

Another hugely successful gaming company reporting last week was Penn National Gaming Inc. (PENN). The company said its earnings $0.35 a share for the fiscal first quarter compared to last year’s $0.18 a share. Revenue, the company said, improved 48.6% while EBITDA (earnings before interest, taxes, depreciation and amortization) jumped up by $67.5%.

Joining the group of gaming companies whose quarterly experience was ahead of the comparable reporting period was Ameristar Casinos Inc. (ASCA). Diluted earnings amounted to $0.40 a share, easily topping last year’s $0.04 and even better than analysts’ forecast of $0.36.

Net revenues of $160 million showed an increase of 72 million or 82% from the fourth quarter 2000. Income from operations was $27.7 million and EBITDA moved up to $38.5 million.

Showing a major decline during the period ended on Dec. 31, 2001, was the Las Vegas Sands Inc., owner of The Venetian Casino Resort. Net income was $1 million, down from $5.1 million in the last quarter of 2000.

The decline was attributed to the economic conditions experienced by Las Vegas in the aftermath of the Sept. 11, 2001, attacks in New York and Washington, D.C.

Also experiencing a substantial decline during the period was Sun International Hotels Limited (SIH), operator of the Atlantic Hotel/Casino on Paradise Island in the Bahamas.

The Atlantic generated EBITDA of $10.4 million, a 50% decline to last year’s $20.7 million. And the property’s occupancy rate during the period averaged 55% for the quarter, well below historical levels.

Blaming intense competition in the gaming industry, Pinnacle Entertainment Inc. (PNK) reported a fourth-quarter loss of $22.2 million or $0.87 a share compared to a net loss of $6.1 million, or $0.23 a share last year.