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Most gaming companies see modest gains in Q3

Oct 29, 2002 4:48 AM

   A plethora of gaming companies reported on their quarterly financial experiences last week including Churchill Downs Inc. (CHDN), a racetrack company that hosted the Breeders’ Cup World Championship Races at its Arlington International Racetrack in Chicago, Ill.

   The company reported record third-quarter revenues and improved net earnings for the third quarter that ended on Sept. 30. Net revenues for the period totaled $125.6 million, an increase of 3.6% over the previous year. Net earnings per share were $0.59 a share on a diluted basis compared to last year’s $0.54.

   Calling it a “solid” quarter, Tom Meeker, president and CEO. Said it resulted from cost controls and “a sound cash management strategy. Looking ahead, we are confident that our fourth quarter will generate earnings consistent with our full-year estimate of $1.77 to $1.80 per diluted share.”

WMS Industries

   WMS Industries Inc. (WMS) saw its share ratings listed by two major gaming analysts as “underperform” following its announcement that earnings for the fiscal first quarter of 2003 amounted to $0.02 a share. This was substantially lower than the $0.18 reported in the comparable quarter of fiscal 2002.

   First Call consensus estimate for the period was $0.03 a share.

   Revenues declined by 8.4% to $42.4 million. Machine sales dropped to $16.1 million from last year’s $20.9 million.

   A Bear Stearns’ equity research paper noted, “We have revised our estimates slightly to account for the upside in the first quarter of ’03. Our estimate for the second quarter remains unchanged at $0.05, however we have revised our 3Q03 and 4Q03 estimates to $0.07 and $0.12, respectively. We maintain our “underperform” rating.

   CIBC World Markets also maintained its “underperform” rating with earnings forecasts for fiscal year 2003 at $0.25 from $0.53 and fiscal year 2004 to $0.52.


   Although MGM MIRAGE Inc. (MGG) reported an increase in revenues of 2.1% to $1.12 billion and net income of $69.6 million or $0.43 per share for the third fiscal quarter, analysts expressed concern over what they described as “the quality of the earnings.”

   Jason Ader of Bear Stearns said some of the earnings were attributed to “several one-time benefits,” while Robin Farley of UBS Warburg said she was concerned by “some accounting flexibility (that) contributed to today’s results.”

   Earnings before write-downs, restructuring and one-time charges brought income down to $81.8 million or $0.51 a share, beating the analysts consensus figure of $0.47 a share.

   Earlier, the company said it was postponing all development plans in Atlantic City and would concentrate on reducing debt and applying resources to new developments that they expected to be available both in the U.S. and in foreign jurisdictions.

Boyd Gaming

   Showing marked improvement over last year, Boyd Gaming Corporation (BYD) reported $0.23 a share earnings for the third fiscal quarter of 2002, a substantial jump over last year’s $0.09 a share. Also EBITDA, or earnings before interest, taxes, depreciation and amortization, jumped 21.8% better than a year ago.

   Strong performers for the company were its Par-a-Dice and Blue Chip riverboat properties while its racetrack operation at Delta Downs in Vinton, La., reported EBITDA of $5.8 million for its second full quarter. This represented about 13.4% less than what was registered during its first quarter. The company said that daily slot win per unit declined by $16 to $227.

   Of particular interest was the notation that The Borgata, the $1.3 billion destination resort being constructed in Atlantic City, was both on time and on budget. It’s expected to open in mid-2003. The property is co-owned equally by Boyd Gaming and MGM MIRAGE.

Harrah’s Entertainment

   Record quarterly results were reported by Harrah’s Entertainment Inc. (HET) despite weakness being shown among its Midwest properties.

   Third quarter income from operations rose 42.5% to a record $228.8 million, up from last year’s $160.6 million. Diluted earnings per share was a record $0.89. Last year, the third quarter earnings per share was $0.59.

   According to Chairman and CEO Phil Satre, who gives up his CEO post in January to Gary Loveman, both revenues in Las Vegas and in Atlantic City rose sharply, while central region revenues were mixed.

   Satre said the continued success of the company can be credited to its geographic diversification that permits it to operate casinos from North Carolina to California. Also, he said, “our investment-grade credit rating and strong balance sheet provide us with the ability to move rapidly on new expansion opportunities as they arise.”

Aztar Corp.

   Poor table gambling luck in Atlantic City contributed to a decline in earnings for Aztar Corp. (AZR), according to company officials. They said net income declined to $16.6 million or $0.43 a share from last year’s $17.8 million or $0.46 a share.

   Yet, income for the third quarter of 2002 was virtually the same as income for the comparable period in 2001.

   Company officials said the expansion project of the Tropicana Atlantic City property is scheduled to open by March 1, 2004. It will create the largest hotel, and third largest casino in Atlantic City. The project is expected to place the property in a better competitive position with the development of The Borgata.

Argosy Gaming

   Despite concerns over the impact of increased gaming taxes and significant increased competition, Argosy Gaming Company (AGY) reported higher third quarter operating results when compared with those of a year ago.

   For the quarter ended on Sept. 30, the company reported net income of $19.1 million or $0.65 a share compared to last year’s $17.2 million or $0.58 a share. This was slightly better than the $0.63 a share earnings guidance given a few weeks ago.

   Addressing the experience, James Perry , company CEO said, “ We absorbed the impact of increased gaming taxes and significant capital investments by competitors in our markets. Coming out of the quarter, we remain confident that our sound operating disciplines and strong balance sheet will position the company for future growth.”

Pinnacle Entertainment

   Pinnacle Entertainment Inc. (PNK) reported improved revenues for the Sept. 30 quarter with revenues reaching $144.6 million, an increase of 3.9% over last year’s $139.3 million.

   Operating income more than doubled to $15.5 million versus last year’s $7.4 million.

   It was an initial opportunity for Dan Lee, the new chairman and CEO to speak on the company’s financial position. He noted that the company has $148.1 million on hand and total indebtedness of $494.2 million. He said the company had not as yet drawn on the available $110 million bank credit facility.

   Lee is the former chief financial officer of Mirage Resorts and recently succeeded R.D. Hubbard as PNK’s leader. The company has been rumored to be interested in partnering with Colony Capital in making a stalking bid for the bankrupt Aladdin Resort on the Las Vegas Strip.

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   In other financial filings, Riviera Holdings Corporation (RIV) reported a loss for the quarter of $4.89 a share compared to a net loss of $0.89 a share last year; Penn National Gaming Inc. (PENN) reported net income for the quarter of $0.25 a share, adjusted to reflect a two-for-one stock split in June. Last year, the earnings per share also amounted to $0.25 a share; Dover Downs Gaming & Entertainment Inc. (DDE) reported net in earnings of $0.24 a share compared to last year’s $0.20 a share.

   Trump Hotels & Casino Resorts Inc. (DJT) recorded its best quarter in his history. Revenues were $102 million, an increase of nearly $10 million over its comparable quarter in 2001. Net income was $9.6 million, or $0.44 per share. Last year it was $9.5 million or $0.43 a share.