- Revenues decline 3.7 percent from 2007 second quarter - Property EBITDA declines 9.5 percent
LAS VEGAS, Aug. 8 /PRNewswire/ -- Harrah's Entertainment, Inc. today
reported the following financial results for the 2008 second quarter and first
half:
HARRAH'S ENTERTAINMENT, INC.
Company-wide Results
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $2,602.1$2,701.7(3.7)%
Property EBITDA 646.0 713.9(9.5)%
Adjusted EBITDA (1) 634.3 713.4 (11.1)%
(1) Does not include the pro forma effect of yet-to-be realized cost
savings.
In accordance with Generally Accepted Accounting Principles, we have
separated our historical financial results for the Successor period from
January 28, 2008 to June 30, 2008 and the Predecessor period from January 1,
2008 to January 27, 2008; however, we have also combined the Successor and
Predecessor periods' results for the six months ended June 30, 2008, in the
presentations included herein because Company management believes that it
enables a meaningful presentation and comparison of results.
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $4,442.6 $760.1 $5,202.7$5,357.4 (2.9)%
Property EBITDA 1,125.2 171.2 1,296.4 1,412.4 (8.2)%
Adjusted
EBITDA (1) 1,088.3 172.0 1,260.3 1,408.0(10.5)%
(1) Does not include the pro forma effect of yet-to-be realized cost
savings.
Property Earnings Before Interest, Taxes, Depreciation and Amortization
(Property EBITDA) and Adjusted EBITDA are not Generally Accepted Accounting
Principles (GAAP) measurements but are commonly used in the gaming industry as
measures of performance and as bases for valuation of gaming companies and, in
the case of Adjusted EBITDA, as a measure of compliance with certain debt
covenants. Reconciliations of Property EBITDA to income from operations and
Adjusted EBITDA to income from continuing operations are attached to this
release.
On January 28, 2008, Harrah's Entertainment was acquired by affiliates of
Apollo Global Management, LLC and TPG Capital, LP in a transaction valued at
$30.7 billion, including assumption of $12.4 billion of debt and approximately
$1.0 billion of acquisition costs. Harrah's stockholders received $90 cash for
each share of common stock, or a total of $17.3 billion.
The company's second-quarter income from operations was $323.1 million,
compared with $477.9 million in the 2007 second quarter. The net loss for the
2008 second quarter was $97.6 million, compared with net income of
$237.5 million in the year-ago quarter.
First-half revenues declined 2.9 percent to $5.2 billion from $5.4 billion
in the first six months of 2007. Income from operations totaled
$724.1 million in the 2008 first half, compared with $929.1 million in the
prior-year period. The net loss for the first six months of 2008 was
$285.4 million, compared with net income of $422.8 million in the first half
of 2007.
"The first half of the year presented us with the most turbulent economic
conditions the casino-entertainment industry has faced in years," said Gary
Loveman, Harrah's chairman, president and chief executive officer. "Customer
visitation fell in the second quarter as consumers coped with higher fuel
costs, declining asset values, the impact of widespread flooding in the
Midwest and other financial challenges.
"During the second quarter, we reduced certain costs in response to
reduced demand, but continued to fund for the future," Loveman said. "We
completed the re-branding of Caesars Indiana to Horseshoe Southern Indiana and
Grand Tunica to Harrah's Casino Tunica.
"Today we celebrate the grand opening of the $485 million expansion at
Horseshoe Hammond in Northern Indiana, and we remain on track with the
expansion of the hotel tower and convention center areas at Caesars Palace in
Las Vegas," Loveman said. "Further, we have completed the $565 million
expansion of Harrah's Atlantic City."
A substantial portion of the debt of Harrah's Entertainment's consolidated
group is issued by Harrah's Operating Company, Inc., (HOC) a wholly owned
subsidiary of Harrah's Entertainment, Inc. Therefore, the company believes it
is meaningful to also provide information pertaining solely to the results of
operations of HOC. The information for HOC assumes that a post-closing swap of
certain properties between HOC and Harrah's Entertainment that was consummated
during the second quarter actually occurred on January 1, 2007.
HARRAH'S OPERATING COMPANY
Overall
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $1,783.4 $2,023.0 (11.8)%
Property EBITDA 436.7526.6 (17.1)%
Adjusted EBITDA (1) 424.2534.2 (20.6)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $3,072.7$577.5 $3,650.2$4,010.7 (9.0)%
Property EBITDA 779.9 109.6889.5 1,012.9 (12.2)%
Adjusted
EBITDA (1) 725.5 143.0868.5 1,020.5 (14.9)%
(1)Does not include the pro forma effect of yet-to-be realized cost
savings.
Summaries of results by region follow:
Las Vegas Region
Second-quarter results for the company's Las Vegas Region were lower than
in the year-ago quarter due to reduced visitation and lower spend per trip.
First-half declines were driven by lower spend per trip and fewer hotel rooms
available due to room remodeling and remediation projects at three Harrah's
properties.
HARRAH'S ENTERTAINMENT, INC.
Las Vegas Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $873.1 $922.5(5.4)%
Income from operations199.0 238.8 (16.7)%
Property EBITDA 286.4 306.5(6.6)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $1,482.5$253.6 $1,736.1$1,821.1 (4.7)%
Income from
operations 341.9 51.9393.8 474.5 (17.0)%
Property EBITDA 485.8 76.0561.8 604.1 (7.0)%
Las Vegas Region properties include Harrah's Las Vegas, Rio, Bally's Las
Vegas, Paris, Flamingo Las Vegas, Caesars Palace, Imperial Palace and
Bill's Gamblin' Hall & Saloon since its acquisition on February 27, 2007.
HARRAH'S OPERATING COMPANY
Las Vegas Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $380.9 $412.2(7.6)%
Income from operations 83.8 109.8 (23.7)%
Property EBITDA 114.9 142.3 (19.3)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $641.4 $118.5 $759.9 $805.8 (5.7)%
Income from
operations 140.329.7170.0 210.8 (19.4)%
Property EBITDA 192.038.1230.1 272.1 (15.4)%
Las Vegas Region properties include Bally's Las Vegas, Caesars Palace,
Imperial Palace and Bill's Gamblin' Hall & Saloon since its acquisition on
February 27, 2007.
Atlantic City Region
Second-quarter revenue gains were attributable to strong results at
Harrah's Chester and the phased opening of the expansion at Harrah's Atlantic
City; those properties' performances partially offset the impact of reduced
visitation, smoking restrictions and new competition in key feeder markets.
Income from operations declined due to reduced visitor volume and higher
advertising spending.
First-half results also benefited from strong performances at Harrah's
Chester and from Harrah's Atlantic City, which opened in phases during the
first half of the year. Income from operations was affected by the Atlantic
City smoking restrictions and competition from slot parlors in feeder markets.
HARRAH'S ENTERTAINMENT, INC.
Atlantic City Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $599.8 $592.6 1.2 %
Income from operations 71.377.2(7.6)%
Property EBITDA 133.1 143.4(7.2)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through throughSix Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $1,008.0$160.8 $1,168.8$1,138.7 2.6 %
Income from
operations 130.5 18.7 149.2 149.3 (0.1)%
Property EBITDA 232.8 36.4 269.2 276.2 (2.5)%
Atlantic City Region properties include Harrah's Atlantic City, Showboat
Atlantic City, Caesars Atlantic City, Bally's Atlantic City and Harrah's
Chester.
HARRAH'S OPERATING COMPANY
Atlantic City Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $460.4 $471.0(2.3)%
Income from operations 51.363.5 (19.2)%
Property EBITDA95.0 111.8 (15.0)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues$780.9 $125.8 $906.7 $900.3 0.7 %
Income from
operations 96.48.0104.4 115.4 (9.5)%
Property EBITDA169.1 21.9191.0 211.1 (9.5)%
Atlantic City Region properties include Showboat Atlantic City, Caesars
Atlantic City, Bally's Atlantic City and Harrah's Chester.
Louisiana/Mississippi Region
Combined second-quarter revenues declined for the Louisiana/Mississippi
Region as a result of lower visitor volume due in part to disruptions during
the renovation in preparation for the re-branding of Grand Casino Tunica,
which became Harrah's Casino Tunica in mid-May. Income from operations was
lower than in the year-earlier second quarter, when $37.0 million of insurance
proceeds were included in the results.
Combined first-half revenues decreased due to a decline in visitation in
the Tunica market and the impact of disruptions during the renovations at the
former Grand Tunica. Income from operations in the first half of 2008 includes
$185.4 million of insurance proceeds in excess of the net book value of
impacted assets, costs and expenses related to 2005 hurricanes, while the 2007
first-half income from operations includes $55.7 million of such insurance
proceeds.
HARRAH'S ENTERTAINMENT, INC.
Louisiana/Mississippi Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $368.2 $389.0(5.3)%
Income from operations 46.193.6 (50.7)%
Property EBITDA77.288.8 (13.1)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues$642.6 $106.1 $748.7 $779.5 (4.0)%
Income from
operations278.8 10.1288.9 169.2 70.7 %
Property EBITDA144.1 18.6162.7 172.9 (5.9)%
Louisiana/Mississippi Region properties include Harrah's New Orleans,
Horseshoe Bossier City, Louisiana Downs, Horseshoe Tunica, Harrah's
Tunica, Sheraton Tunica and Grand Casino Biloxi.
Iowa/Missouri Region
Combined second-quarter and first-half revenues were lower than in the
year-ago periods due primarily to competition from a new facility that opened
in the St. Louis market. Income from operations was higher in the 2008 second
quarter as a result of cost savings, especially at our Iowa operations.
HARRAH'S ENTERTAINMENT, INC.
Iowa/Missouri Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $196.3 $205.3 (4.4)%
Income from operations 40.337.2 8.3%
Property EBITDA53.856.9 (5.4)%
SuccessorPredecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues$339.3 $55.8 $395.1 $407.0 (2.9)%
Income from
operations 71.07.7 78.770.3 11.9 %
Property EBITDA 94.5 13.0107.5 109.8 (2.1)%
Iowa/Missouri Region properties include Harrah's St. Louis, Harrah's
Council Bluffs, Horseshoe Council Bluffs and Harrah's North Kansas City.
Illinois/Indiana Region
A smoking ban in Illinois led to lower 2008 second-quarter and first-half
results in the Illinois/Indiana Region. The first-half numbers were also
impacted by heavy rains and flooding that lead to closure of our Southern
Indiana property, now known as Horseshoe Southern Indiana, for four days in
March 2008.
Construction has been completed on a $485 million renovation of Horseshoe
Hammond that celebrates its grand opening today.
HARRAH'S ENTERTAINMENT, INC.
Illinois/Indiana Region
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $294.5 $321.8(8.5)%
Income from operations 42.750.1 (14.8)%
Property EBITDA59.966.3(9.7)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues$502.6 $85.5 $588.1 $646.2 (9.0)%
Income from
operations 69.88.7 78.5 101.2 (22.4)%
Property EBITDA 96.4 13.6110.0 134.4 (18.2)%
Illinois/Indiana properties include Horseshoe Hammond, Harrah's Joliet,
Harrah's Metropolis and Horseshoe Southern Indiana.
Other Nevada Region
Second-quarter and first-half results for the Other Nevada Region declined
due to lower spend per trip in the Reno and Laughlin markets, increased
competition in Reno and higher promotional costs.
HARRAH'S ENTERTAINMENT, INC.
Other Nevada
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $140.8 $154.2(8.7)%
Income from operations 11.822.3 (47.1)%
Property EBITDA24.534.7 (29.4)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues$248.6 $38.9 $287.5 $307.9 (6.6)%
Income from
operations 25.90.5 26.442.7 (38.2)%
Property EBITDA 47.64.5 52.167.5 (22.8)%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harveys Lake Tahoe, Bill's Casino and Harrah's Laughlin.
HARRAH'S OPERATING COMPANY
Other Nevada
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues$96.6 $108.0 (10.6)%
Income from operations 4.910.6 (53.8)%
Property EBITDA12.520.3 (38.4)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $172.3 $26.8 $199.1 $216.3 (8.0)%
Income from
operations13.1(1.9)11.218.8 (40.4)%
Property EBITDA26.2 1.2 27.438.2 (28.3)%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harveys Lake Tahoe and Bill's Casino.
Managed/International/Other
Second-quarter revenues increased due to the inclusion of three new London
Clubs International properties that opened in 2007. Income from operations was
impacted by a smoking ban, lower table-games hold percentage and higher gaming
taxes, all of which affected LCI results.
Second-quarter and first-half results from managed properties were lower
due to termination of a Native American management contract in June 2007 and
lower operating results from other managed properties.
HARRAH'S ENTERTAINMENT, INC.
Managed/International/Other
Successor Predecessor Percent
Second Quarter Increase/
(In millions) 20082007 (Decrease)
Total revenues $129.4 $116.3 11.3%
Income from operations(46.4) (11.2) N/M
Property EBITDA11.117.3(35.8)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 CombinedPredecessor
through through Six Months Ended Percent
June 30,Jan. 27, June 30, Increase/
(In millions) 2008200820082007 (Decrease)
Total revenues $219.0 $59.4 $278.4 $257.08.3%
Income from
operations (73.6) (0.3) (73.9) (10.4)N/M
Property EBITDA24.0 9.1 33.147.5 (30.3)%
Managed/International/Other results include income from our managed
properties, results of our international properties and certain marketing
and administrative expenses, including development costs, and income from
our non-consolidated subsidiaries.
Other items
Interest expense increased significantly from the 2007 second quarter and
first half due to higher debt levels associated with the company's
acquisition, which was consummated in the 2008 first quarter. Second-quarter
results were favorably affected by a credit of $61.0 million due to an
increase in the fair value of the company's derivative instruments. For the
first six months of the year, the change in the fair value of the derivative
instruments increased interest expense by $80.8 million. The average interest
rate on the company's variable-rate debt, including the impact of the
derivative instruments, was 5.5 percent at June 30, 2008.
For the 2008 second quarter, tax benefits were generated by operating
losses at an effective rate of 20.5 percent, whereas in the second quarter of
2007, operating income resulted in tax expenses at an effective rate of 37.3
percent.
Harrah's will host a conference today at 8 a.m. Pacific Daylight Time to
discuss its 2008 second-quarter results. Persons from the United States
and Canada who are interested in participating in the call should dial
1-877-876-8924, or 1-706-758-4271 for international callers, approximately 10
minutes before the call start time. A taped replay of the conference call will
be available at 1-800-642-1687, or 1-706-645-9291 for international callers,
beginning at 9 a.m. PDT the day of the call. The replay will be available
through 8:59 p.m. PDT August 22. The pass code number for the conference call
and replay is 54273574.
Harrah's Entertainment, Inc. is the world's largest provider of branded
casino entertainment. Since its beginning in Reno, Nevada, more than 70 years
ago, Harrah's has grown through development of new properties, expansions and
acquisitions, and now operates casinos on four continents. The company's
properties operate primarily under the Harrah's(R), Caesars(R) and
Horseshoe(R) brand names; Harrah's also owns the London Clubs International
family of casinos and the World Series of Poker(R). Harrah's Entertainment is
focused on building loyalty and value with its customers through a unique
combination of great service, excellent products, unsurpassed distribution,
operational excellence and technology leadership. For more information, please
visit http://www.harrahs.com.
This release includes "forward-looking statements" intended to qualify for
the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. You can identify these statements by the fact
that they do not relate strictly to historical or current facts. These
statements contain words such as "may," "will," "project," "might," "expect,"
"believe," "anticipate," "intend," "could," "would," "estimate," "continue" or
"pursue," or the negative or other variations thereof or comparable
terminology. In particular, they include statements relating to, among other
things, future actions, new projects, strategies, future performance, the
outcomes of contingencies and future financial results of Harrah's. These
forward-looking statements are based on current expectations and projections
about future events.
Investors are cautioned that forward-looking statements are not guarantees
of future performance or results and involve risks and uncertainties that
cannot be predicted or quantified and, consequently, the actual performance of
Harrah's may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include, but are not
limited to, the following factors, as well as other factors described from
time to time in our reports filed with the Securities and Exchange Commission
(including the sections entitled "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained
therein): the outcome of any legal proceedings that have been, or will be,
instituted against the company related to the acquisition of the company by
affiliates of TPG Capital and Apollo Management; the impact of the company's
significant indebtedness; the effects of local and national economic, credit
and capital market conditions on the economy in general, and on the gaming and
hotel industries in particular; construction factors, including delays,
increased costs for labor and materials, availability of labor and materials,
zoning issues, environmental restrictions, soil and water conditions, weather
and other hazards, site access matters and building permit issues; the effects
of environmental and structural building conditions relating to our
properties; access to available and reasonable financing on a timely basis;
the ability to timely and cost-effectively integrate acquisition into our
operations; changes in laws, including increased tax rates, smoking bans,
regulations or accounting standards, third-party relations and approvals, and
decisions of courts, regulators and governmental bodies; litigation outcomes
and judicial actions, including gaming legislative action, referenda and
taxation; the ability of our customer-tracking, customer loyalty and yield-
management programs to continue to increase customer loyalty and same store
sales or hotel sales; our ability to recoup costs of capital investments
through higher revenues; acts of war or terrorist incidents or natural
disasters; abnormal gaming holds; the potential difficulties in employee
retention as a result of the sale of the company to affiliates of TPG Capital
and Apollo Management; and the effects of competition, including locations of
competitors and operating and market competition.
Any forward-looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
Harrah's disclaims any obligation to update the forward-looking statements.
You are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date stated, or if no date is stated, as
of the date of this press release.
SOURCE Harrah's Entertainment, Inc.
