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Rod Smith

Analysts Hail Caesars

23 April 2004

NEW YORK -- Because of both an unusually high average table hold in its casinos and the strength of the Las Vegas economy, Caesars Entertainment on Thursday posted record earnings and beat all Wall Street performance projections.

Caesars reported 2004 first-quarter net income of $79 million, or 25 cents per diluted shares, up 93 percent from $41 million, or 14 cents per share, a year earlier.

Caesars Entertainment President Wally Barr said in a conference call with analysts that his company set records for net income, earnings per share, cash flow and revenue, driven by surging demand for leisure travel and the performance of its Strip properties.

"They had a fantastic quarter. Not only are they benefiting from the overall strength of Las Vegas, but they're turning the corner and some of their investments are paying off," said Deutsche Bank analyst Marc Falcone.

"If they can continue their run rate, they'll exceed all expectations on the Street (for the year as a whole)," he said.

Joe Greff, gaming analyst for Fulcrum Global Partners, an independent Wall Street investment research firm, noted that Caesars Entertainment's performance was a different story from the other major operators that have recently posted record results.

"This is still a turnaround story and it's proving the Caesars (Palace) brand, Paris Las Vegas and Bally's are all moving in the right direction," he said.

However, Goldman Sachs analyst Steve Kent pointed out that Paris Las Vegas and Bally's both say gaming volumes declined despite strong hotel operations.

Nevertheless, he added, improved casino operations at Caesars Palace more than compensated for that slippage.

Barr said the company is deliberately consolidating casino play at Caesars Palace to improve efficiencies and to avoid cannibalizing its own customer base.

Kent, in an investor advisory, also said that following the releases Wednesday from Harrah's Entertainment and MGM Mirage, Caesars' performance is further evidence of the continued strength of the Las Vegas market.

In Atlantic City, the company's portfolio of properties also came in ahead of expectations, suggesting that Borgata's opening did not have a negative effect on Caesars's Boardwalk properties, Kent said. Also, he added, the Mid-South region was roughly in line with expectations.

Adjusted net income for the first quarter was a record $71 million, or 23 cents a diluted share, up 73 percent from $41 million a year earlier.

Adjusted income for the first quarter of 2004 excluded results from the Las Vegas Hilton, which are being treated as a "discontinued operation" because of the pending sale of the property.

First-quarter cash flow, a key measure of profitability, increased to a record $312 million, up 17 percent from $267 million a year earlier.

Net revenue rose 10 percent to a record $1.2 billion from $1.1 billion.

Caesars Entertainment closed Thursday at $14.30, down 2 cents, or 0.14 percent, on 3.6 million shares traded, double normal trading volume.