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$76.7 million in the Year Earlier 2nd Qtr |
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LAS VEGAS, July 21, 2004 - Harrah's Entertainment, Inc. (NYSE: HET)
today reported record second-quarter revenues of $1.13 billion, up 4.5
percent from revenues of $1.08 billion in the 2003 second quarter.
Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 6.2 percent to a second-quarter record of $301.1 million from Property EBITDA of $283.6 million in the year-earlier period. Second-quarter Adjusted Earnings Per Share increased to a record 79 cents, up 6.8 percent from the 74 cents achieved in 2003's second-quarter. Property EBITDA and Adjusted EPS are not Generally Accepted Accounting Principles (GAAP) measurements but are commonly used in the gaming industry as measures of performance and as a basis for valuation of gaming companies. In addition, analysts' per-share earnings estimates for gaming companies are comparable to Adjusted EPS. Reconciliations of Adjusted EPS to GAAP EPS and Property EBITDA to income from operations are attached to this release. Second-quarter income from operations rose 10.4 percent to a record $202.4 million from $183.3 million in the year-earlier quarter. Second-quarter net income was a record $90.2 million, up 17.6 percent from $76.7 million in the 2003 second quarter. Diluted earnings per share from continuing operations for the 2004 second quarter was 79 cents, 14.5 percent higher than the 69 cents achieved in the 2003 second quarter. Strong Demand, Diversification Drive Growth "The second quarter proved the effectiveness of our unique loyalty strategy, which is focused on the delivery of superior service and recognition to more customers in more markets than any other casino operator," said Gary Loveman, Harrah's Entertainment's president and chief executive officer. "The marketing and technological capabilities we use to promote customer loyalty helped boost cross-market play that benefited our Southern Nevada operations in particular, leading to another quarter of same-store sales growth. We plan to apply these same capabilities to the properties we will add to our portfolio when we close on the Caesars transaction." On July 15, Harrah's signed a definitive agreement to acquire Caesars Entertainment, Inc., which operates 28 casinos, including 17 in the United States. Caesars has a significant presence in Las Vegas, Atlantic City and Mississippi. The transaction is expected to take about a year to complete. Second-quarter 2004 same-store revenues increased 4.6 percent over the year-ago period. Cross-market play -- gaming by customers at Harrah's properties other than their "home" casino -- rose 11.9 percent from the second quarter of 2003. Tracked play -- gaming by customers using the company's Total Rewards player cards -- increased 8.5 percent from the year-ago second quarter. For the 2004 first half, revenues rose 4.6 percent to $2.24 billion from $2.14 billion in the year-ago period. Property EBITDA increased to $588.6 million, up 3.8 percent from $567.3 million in the 2003 first half. Adjusted EPS was $1.55, 4.0 percent higher than the $1.49 achieved in the first six months of 2003. First-half income from operations was $390.4 million, up 4.5 percent from $373.7 million in the 2003 first half. Net income rose 9.0 percent to $172.0 million from $157.8 million in the first six months of 2003. First-half diluted earnings per share was $1.52, up 6.3 percent from $1.43 in the 2003 first half. Among second-quarter highlights:
"Our second-quarter operating results were highlighted by stellar performances at several properties and a continuation of the positive same-store momentum that has gained steam since late last year," Loveman said. "Those gains were driven by the successful execution of the customer-loyalty strategy that distinguishes Harrah's from other operators. "In particular, continued refinements to our Total Rewards player-card program contributed to the increases in cross-market and tracked play," Loveman said. "And by the end of the second quarter, we'd completed conversions on almost 90 percent of the slot machines we plan to change to Fast Cash, the coinless slot system that has proven so popular with our players. "There were also several recent developments that position us better than ever to deliver sustainable long-term earnings growth through a variety of means," Loveman said. "The Horseshoe Gaming acquisition enhances our position as the leading distributor of casino entertainment in the United States -- a position that will benefit the customers of both enterprises. "We were delighted to welcome the more than 7,300 Horseshoe employees to the Harrah's family," Loveman said. "They've done a terrific job of delivering on the promises the Horseshoe brand makes to its customers, and we look forward to working with and learning from them. "During the second quarter, our industry-leading financial strength and investment-grade credit rating enabled us to sell $750 million of senior notes and increase our bank borrowing capacity," Loveman said. "We are continuing to grow our existing properties," he said. "During the second quarter, for example, we opened our permanent casino at Louisiana Downs and began construction on a 450-room luxury hotel at Harrah's New Orleans. And we are scheduled to open a 200-room hotel at Harrah's St. Louis later this quarter, adding to the substantially expanded food and beverage facilities that opened in the second quarter. Finally, Harrah's North Kansas City is developing a 206-room hotel tower and casino expansion that will include four new restaurants and a second parking garage. "We're extremely excited about the Caesars transaction, which will solidify our position as the preeminent distributor of casino entertainment," Loveman said. "We will gain first-class assets in three major markets -- Las Vegas, Atlantic City and Mississippi -- that have stable tax environments and casino-entertainment clusters that draw customers from other areas. "We will combine into one company three of the most storied brands in gaming -- Caesars, Horseshoe and Harrah's, all with a great tradition of success," Loveman said. "And we'll strengthen our reputation for customer-service excellence by uniting the best management and employee teams in the gaming industry. "We believe there is a big opportunity for us to apply our capabilities to enhance the value of the Caesars assets, deliver long-term gains to shareholders and provide rewarding careers to employees," Loveman said. "Our employees have enjoyed great successes using those tools, and we believe the Caesars team will be equally successful. "We admire what Caesars' management and employees have accomplished without having access to the industry-leading marketing and technological capabilities that have driven strong same-store sales gains at Harrah's over the past three years," Loveman said. "We're confident they'll find our capabilities will help them achieve similar results. "In the past three months, we have recorded continued same-store revenue growth, increased earnings, seen a number of potential development projects enter the pipeline, added three premier casinos to our portfolio and announced an acquisition that would double our size and provide superior growth opportunities," Loveman said. "I believe our future has never looked brighter." West Region Again Posts Record Results (in millions) 2004 2003 Percent First First Percent Second Second Increase Six Six Increase Quarter Quarter (Decrease) Months Months (Decrease) Northern Nevada Total revenues $111.8 $106.3 5.2% $217.3 $210.6 3.2% Income from operations 14.9 12.6 18.3% 23.6 24.5 -3.7% Property EBITDA 25.7 22.4 14.7% 44.2 43.7 1.1% Southern Nevada Total revenues 272.7 221.4 23.2% 531.3 449.5 18.2% Income from operations 66.0 42.7 54.6% 131.4 87.6 50.0% Property EBITDA 82.7 61.0 35.6% 164.9 124.7 32.2% Total West Total revenues 384.5 327.7 17.3% 748.6 660.1 13.4% Income from operations 80.9 55.3 46.3% 155.0 112.1 38.3% Property EBITDA 108.4 83.4 30.0% 209.1 168.4 24.2% Continued strong cross-market play at Harrah's Las Vegas and the Rio and new entertainment attractions in Lake Tahoe propelled Harrah's West Region to record results. Southern Nevada revenues rose 23.2 percent, income from operations gained 54.6 percent and Property EBITDA increased 35.6 percent from the 2003 second quarter. Northern Nevada revenues rose 5.2 percent to a record level from the second quarter last year, while income from operations gained 18.3 percent and Property EBITDA was 14.7 percent higher. "With each Southern Nevada property posting record results and Lake Tahoe performing well, we continue to be enthusiastic about the West Region outlook," said Tim Wilmott, Harrah's chief operating officer. For the 2004 first half, West Region revenues were up 13.4 percent, income from operations rose 38.3 percent and Property EBITDA gained 24.2 percent from the first half of 2003. East Region Results Decline (in millions) 2004 2003 Percent First First Percent Second Second Increase Six Six Increase Quarter Quarter (Decrease) Months Months (Decrease) Harrah's Atlantic City Total revenues $104.5 $112.9 -7.4% $204.9 $215.1 -4.7% Income from operations 28.0 37.7 -25.7% 54.1 67.6 -20.0% Property EBITDA 37.4 46.3 -19.2% 72.4 84.7 -14.5% Showboat Atlantic City Total revenues 89.4 93.1 -4.0% 170.8 169.3 0.9% Income from operations 24.1 25.3 -4.7% 42.6 39.0 9.2% Property EBITDA 32.3 32.4 -0.3% 58.5 52.4 11.6% Total East Total revenues 193.9 206.0 -5.9% 375.7 384.4 -2.3% Income from operations 52.1 63.0 -17.3% 96.7 106.6 -9.3% Property EBITDA 69.7 78.7 -11.4% 130.9 137.1 -4.5% Results for Harrah's two Atlantic City properties fell due to competition from the city's first new hotel-casino in more than a decade. Second-quarter revenues declined 5.9 percent, income from operations fell 17.3 percent and Property EBITDA decreased 11.4 percent from the year-earlier period. "As the economy continues to improve and we reach the anniversary of the opening of the new competitor facility, we look forward to a return to growth in Atlantic City," Wilmott said. For the first half, East Region revenues declined 2.3 percent, income from operations fell 9.3 percent and Property EBITDA was 4.5 percent lower than in the year-earlier period. North Central Region Results Improve (in millions) 2004 2003 Percent First First Percent Second Second Increase Six Six Increase Quarter Quarter (Decrease) Months Months (Decrease) Illinois/Indiana Total revenues $171.1 $174.8 -2.1% $345.7 $353.3 -2.2% Income from operations 22.4 20.5 9.3% 46.5 55.6 -16.4% Property EBITDA 31.5 29.0 8.6% 64.3 73.3 -12.3% Iowa Total revenues 64.0 59.9 6.8% 124.7 118.6 5.1% Income from operations 33.1 9.1 N/M 41.0 17.5 N/M Property EBITDA 22.8 13.7 66.4% 36.4 26.6 36.8% Missouri Total revenues 109.7 108.7 0.9% 218.1 218.2 0.0% Income from operations 18.0 22.8 -21.1% 36.6 44.5 -17.8% Property EBITDA 28.6 31.8 -10.1% 56.4 62.0 -9.0% Total North Central Total revenues 344.8 343.4 0.4% 688.5 690.1 -0.2% Income from operations 73.5 52.4 40.3% 124.1 117.6 5.5% Property EBITDA 82.9 74.5 11.3% 157.1 161.9 -3.0% N/M = Not Meaningful The North Central Region's second-quarter results benefited from legislation lowering the gaming-tax rate affecting the Bluffs Run racetrack casino in Iowa. The company had been accruing gaming taxes at a higher rate as it awaited the resolution of the rate issue, and recorded a $3.7 million adjustment of the first-quarter accrual due to the reduction in the tax rate. The company also adjusted its tax accrual for prior periods by $16.6 million, and recorded this component of the adjustment to the write-downs, reserves and recoveries account. The prior-periods component is excluded from Adjusted EPS. Second-quarter North Central Region revenues were flat, while income from operations rose 40.3 percent and Property EBITDA increased 11.3 percent. Strong gains at Harrah's East Chicago and Metropolis facilities offset lower results stemming from the revised operations model implemented at Harrah's Joliet following last year's Illinois tax increase. As a result, combined Illinois and Indiana second-quarter revenues fell 2.1 percent, but income from operations rose 9.3 percent, and Property EBITDA was 8.6 percent higher. The company's two Iowa properties posted record second-quarter results, with revenues 6.8 percent higher than in the year-ago period. Income from operations more than tripled and Property EBITDA increased 66.4 percent due in part to the tax-accrual adjustment. Combined second-quarter revenues at Harrah's two Missouri properties were about level with the 2003 second quarter's, but income from operations declined 21.1 percent and Property EBITDA decreased 10.1 percent. Improved results at St. Louis were more than offset by declines in Kansas City, which faced increased competition due to significant expansions by two of the three competitors in that market. For the 2004 first half, North Central Region revenues were flat, income from operations was 5.5 percent higher and Property EBITDA was down 3.0 percent from the 2003 first half. South Central Region Reports Higher Second-Quarter Results (in millions) 2004 2003 Percent First First Percent Second Second Increase Six Six Increase Quarter Quarter (Decrease) Months Months (Decrease) Louisiana Total revenues $167.0 $159.3 4.8% $347.8 $319.2 9.0% Income from operations 19.9 19.5 2.1% 47.2 46.7 1.1% Property EBITDA 32.6 32.6 0.0% 69.8 70.6 -1.1% Mississippi Total revenues 20.0 20.9 -4.3% 41.1 41.1 -0.0% Income from operations 3.5 3.4 2.9% 6.9 6.2 11.3% Property EBITDA 5.1 4.9 4.1% 10.1 9.4 7.4% Total South Central Total revenues 187.0 180.2 3.8% 388.9 360.3 7.9% Income from operations 23.4 22.9 2.2% 54.1 52.9 2.3% Property EBITDA 37.7 37.5 0.5% 79.9 80.0 -0.1% At Harrah's Louisiana and Mississippi properties, revenues rose 3.8 percent, income from operations increased 2.2 percent and Property EBITDA was 0.5 percent higher than in the year-ago second quarter. The 2004 second quarter included results from Harrah's Shreveport through May 19, when that property was sold to another operator, and from Louisiana Downs, where 900 slot machines were introduced in late May 2003; the total was increased to just over 1,400 in May 2004. "Combined, our New Orleans and Lake Charles, Louisiana, properties posted double-digit gains in revenues and income from operations," Wilmott said. First-half revenues for the South Central properties rose 7.9 percent, income from operations increased 2.3 percent and Property EBITDA was flat compared with the first half of 2003. Managed Properties And Other Items Second-quarter management-fee revenues were down 20.6 percent from the year-ago period due to lower fee schedules associated with contract extensions. Second-quarter development costs rose to $6.1 million from $3.6 million in the 2003 second quarter. Corporate expense was level with the 2003 second quarter. Interest expense was 1.2 percent higher than in the 2003 second quarter. During the second quarter, Harrah's Entertainment made a $10 million endowment to The Harrah's Foundation, a non-profit corporation that provides charitable contributions to qualifying organizations in communities served by Harrah's. The $10 million expense resulting from this action is recorded in write-downs, reserves and recoveries. Also included in write-downs, reserves and recoveries is the $16.6 million adjustment of the prior period gaming tax accruals for the Bluffs Run property resulting from the passage of legislation lowering the gaming-tax rate. The effective income tax rate after minority interest for the 2004 second quarter was 37.1 percent, similar to the full year 2003 and the first quarter of 2004. On July 1, the company's Horseshoe Gaming subsidiary called for redemption
of all $535 million of its outstanding 8 5/8 percent Senior Subordinated
Notes, due July 2009. Noteholders will receive a redemption price
equal to 104.313 percent of the principal amount of the notes, plus accrued
and unpaid interest through the redemption date of August 2, 2004.
Founded 66 years ago, Harrah's Entertainment, Inc. owns or manages through various subsidiaries 28 casinos in the United States, primarily under the Harrah's brand name. Harrah's Entertainment is focused on building loyalty and value with its valued customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. 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. |
Contact:
Harrah's Entertainment, Inc. http://www.harrahs.com |