Hollywood Park buffeted by financial loss, layoffs, lawsuits.

Hollywood Park Inc. is expected to announce this week a significant financial loss for the quarter while at the same time it is laying off employees at its new card club and battling shareholder lawsuits.

The company, operator of Hollywood Park race track and the new Hollywood Park Casino in Inglewood, projected late last month it would post a loss for the third quarter rather than the previously forecast profit. It also said analysts were way off in projecting earnings of 48 cents a share for the full year -- off by 45 to 48 cents.

Following that announcement, Hollywood Park Inc.'s stock price plummeted from $20 a share to $14 on Sept. 29. Last week, it was still trading in the $14 a share range, down from a 52-week high of $27.

Following the stock drop, at least two shareholder suits were filed alleging that company officers made overly optimistic statements and projections about revenues and profits. At the same time, there were lay-offs at the new card

club casino that opened July 1.

But despite the troubles, some Wall Street analysts and gaming experts remain bullish on the company in the long term and say its troubles are only short term.

"I would call it (the company's recent problems) growing pains," said Thomas M. Ryan, senior gaming analyst with New York investment firm Ladenburg, Thalmann & Co. Inc.

The company stated in late September that it expects a per-share loss of between 14 cents and 18 cents for the third quarter ended Sept. 30. Based on 18.4 million shares outstanding, that would tally as much as $3.2 million.

A year ago, the company reported third-quarter earnings of 5 cents a share, or net income of $1.3 million, on revenue of $8.5 million.

Martin Cosgrove, an analyst with L.A. investment firm Wedbush Morgan Securities, said it was "very serious" for full-year earnings to be 45 cents less than projections. "And the stock will probably not go up until there is some credibility established in projections," he said.

But Cosgrove added, "Certainly I don't think it's a disaster. The card club is doing very well in the amount of players."

The company stated the earnings disappointments were caused by a revenue shortfall at its Kansas City, Kan.-based Woodlands horse and dog track and higher than projected food and beverage operations costs at its Hollywood Park Casino.

Attendance declined at the Kansas City track as a result of competition from river-boat gambling in Missouri, which began in spring 1994, Hollywood Park stated.

At the Inglewood casino, "training and overtime costs have been higher than planned," the company said. It stated in September that it "has taken steps to bring these costs under control."

Last week, card club General Manager Tom Bowling said about 93 of the club's 1,700 employees have been laid off.

Bowling told the Business Journal that revenue from the card games, excluding food and beverage charges, would be about $50 million for the first year of operation. He declined to make any more projections but said food and beverage revenues can be significant.

Last July, Michael Finnigan, the company's chief financial officer, projected card club revenues in the first year of operation of $100 million.

Finnigan was on vacation last week and was unavailable for comment and Chairman R.D. Hubbard did not return a phone call for comment.

Industry analysts and shareholders said in interviews and the lawsuits that management overestimated revenues and underestimated costs in connection with the card club and horse tracks. The result was the announcement late last month of the expected loss for the latest quarter and lower than expected earnings for the year, which sent the stock into a tailspin and prompted the lawsuits.

Spokesmen for Hollywood Park Inc. and the company that manages the casino, Pacific Casino Management, acknowledged problems but said they are common to any new operation in any industry.

They dismissed the allegations in the lawsuits and said they are without merit. The spokesmen declined further comment on the lawsuits.

Hollywood Park Inc. acknowledges that at least two shareholder lawsuits have been filed since the stock dropped. But those involved with the lawsuits said there could be as many as four and that they all may be consolidated into one action.

In one class action, filed in federal court in Los Angeles, shareholders in the Turf Paradise race track in Phoenix allege Hollywood Park officers deliberately inflated revenue and earnings projections to drive up the value of Hollywood Park stock. The higher stock price then enabled the company to buy Turf Paradise in July, the suit alleged.

David Siegel, attorney with the Century City-based law firm of Irell & Manella, said, "The company will deny and does deny any wrongdoing and intends to defend itself against these lawsuits." Irell & Manella is Hollywood Park Inc.'s outside counsel.

Wall Street analysts may have expected that the casino would generate $100 million in annual revenues, but people working in the gaming industry did not, said Michael Meczka, an L.A.-based market research consultant specializing in the gaming industry.

Meczka noted the "two largest and most successful" casinos in L.A. County, the Commerce Casino and the Bicycle Club, post revenues of about $85 million to $90 million.

"It is absolutely unrealistic that a new casino would do $100 million in its first year," Meczka said.

Hollywood Park Casino "is a profitable operation that is moving forward," Meczka said. "If anything went wrong, it was financial analysts making unreasonable projections on demand and capacity."