Harrah's Entertainment Reports Record Q2 Results

4 Aug 2005

LAS VEGAS -- (PRESS RELEASE) -- Harrah's Entertainment, Inc. (NYSE:HET) today reported record second-quarter revenues of $1.47 billion, up 41.5 percent from revenues of $1.04 billion in the 2004 second quarter.

Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 41.5 percent in the second quarter to a record $402.5 million from Property EBITDA of $284.4 million in the year-earlier period. Second-quarter Adjusted Earnings Per Share increased to 90 cents, up 13.9 percent from the 79 cents achieved in 2004'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 18.1 percent to a record $226.8 million from $192.0 million in the year-earlier quarter. Second-quarter net income was a record $105.8 million, up 17.3 percent from $90.2 million in the 2004 second quarter. Diluted earnings per share for the 2005 second quarter was 84 cents, 6.3 percent higher than the 79 cents achieved in the 2004 second quarter.

Second-quarter results included 17 days of contributions from Caesars Entertainment, Inc., which was acquired by Harrah's Entertainment on June 13, 2005.

Operating Momentum, Organic Growth Continue

"We achieved our sixth consecutive quarter of record results and posted the highest same-store sales growth in nearly five years, both while completing the largest acquisition in gaming history," said Gary Loveman, Harrah's Entertainment's chairman, chief executive officer and president. "Our ability to continue generating such positive operating momentum is a tribute not only to Harrah's technological and marketing capabilities, but also to the skill and dedication of a management team and employees who deliver the great service that builds lasting customer loyalty."

Second-quarter 2005 same-store revenues increased 8.9 percent over the year-ago period. Cross-market play -- gaming by customers at Harrah's properties other than their "home" casino -- rose 17.7 percent from the second quarter of 2004. Tracked play -- gaming by customers using the company's Total Rewards player card -- increased 12.9 percent from the year-ago second quarter.

"Total Rewards continued to drive organic growth across the company, as we posted quarterly same-store sales gains for the 25th time in 26 quarters," Loveman said. "This track record of consistent growth illustrates the tremendous potential of putting Total Rewards to work in our newly acquired network of properties."

For the 2005 first half, revenues rose 32.9 percent to $2.72 billion from $2.05 billion in the year-ago period. Property EBITDA increased to $754.5 million, up 36.2 percent from $553.9 million in the 2004 first half. Adjusted EPS was $1.86, 20.0 percent higher than the $1.55 achieved in the first six months of 2004.

First-half income from operations was $459.7 million, up 24.8 percent from $368.3 million in the 2004 first half. Net income rose 21.9 percent to $209.6 million from $172.0 million in the first six months of 2004. First-half diluted earnings per share was $1.74, up 14.5 percent from $1.52 in the 2004 first half.

Among the second-quarter highlights:

-Harrah's Entertainment completed its $9 billion acquisition of Caesars Entertainment, Inc. on June 13, creating the world's largest provider of branded casino entertainment. The acquisition added 18 casino properties in four states and two foreign countries to Harrah's portfolio, giving the company a total of 43 properties in the United States, Canada and Uruguay.

- Harrah's completed the sale of Harrah's East Chicago and Harrah's Tunica to an affiliate of Colony Capital, LLC. Colony paid Harrah's and Caesars -- which sold Bally's Tunica and the Atlantic City Hilton -- a total of $1.24 billion for the four properties. Harrah's used its share of the net proceeds to pay down debt.

- Harrah's Entertainment's properties received 728 awards, including 313 first-place finishes, in Casino Player magazine's Best of Gaming Awards, the magazine's annual poll of gaming customers across the country. Separately, the Caesars properties received 62 first-place honors and 141 total awards. Excluding the Caesars awards, Harrah's led the competition for the sixth straight year, posting a 24 percent increase in total awards and a 23 percent improvement in first-place finishes.

- Harrah's Operating Company, Inc., a wholly-owned subsidiary of Harrah's Entertainment, completed a private offering of $750 million of 5 5/8% senior notes due 2015. Proceeds were used to refinance and extend the maturity of outstanding indebtedness.

- The Rio hosted the 36th annual World Series of Poker from June 2 to July 15. The event was the largest poker tournament in history, with more than 32,000 paid tournament registrations and a prize pool of more than $106 million -- more than double the size of the 2004 World Series of Poker. Joseph Hachem of Melbourne, Australia, won the World Series of Poker Championship event on July 16, besting 5,618 other players to claim a record cash prize of $7.5 million.

"Since completing the Caesars acquisition just six weeks ago, we've gained a greater appreciation of the cultural similarity between our two companies," Loveman said. "Since we announced the agreement to acquire Caesars a year ago, we've also seen very positive momentum developing at Caesars properties where capital improvements have begun generating strong operating results. We are more confident than ever that we will realize tremendous value by providing Caesars' management and employees with the tools and capabilities that have enabled Harrah's to deliver sustainable long-term growth.

"Our optimism regarding Caesars is heightened by the contributions realized from our previous acquisition of Horseshoe Gaming," Loveman said. "Under our ownership, each of the three Horseshoe properties has increased its market share in the last year. The Horseshoe acquisition added 6 cents per share to earnings during the second quarter, bringing total accretion to 27 cents since that acquisition closed one year ago. We expect efficiencies of an even larger scale from the Caesars transaction, and remain confident we will be able to realize $80 million in synergies in the first 12 months.

"The Caesars acquisition further strengthens our brand portfolio, giving us ownership of the world's premier luxury gaming brand," Loveman said. "The Caesars brand will be at the forefront of our expansion efforts around the world, including our proposal to build a world-class integrated resort in the Republic of Singapore. The power of the Caesars brand lies in the opulence of the Caesars Palace experience, and we are absolutely committed to maintaining and strengthening its reputation.

"With Caesars, we have acquired more than physical assets, a great brand and a strong management and employee team: We have acquired relationships with millions of new customers," Loveman said. "Once we merge the Caesars loyalty program into Total Rewards in the first half of 2006, our customer database will increase from 25 million names to 40 million names.

"Through Total Rewards, we will be able to offer these 40 million customers a selection of gaming and entertainment offerings unrivaled in our industry," Loveman said. "This opportunity will position us well for continued improvement in customer loyalty, and significant organic growth, for years to come.

"Our recent refinancing once again demonstrated the benefits of having the strongest balance sheet in gaming," Loveman said. "Our debt offerings command the lowest interest rates of any casino operator, resulting in significant savings for our stockholders. We remain the only investment-grade U.S. casino operator, giving us the financial firepower to aggressively pursue numerous growth opportunities across the country and around the world.

"The just completed 2005 World Series of Poker showed that the WSOP has become one of the world's premier sporting events, drawing more than 600 journalists and 32,000 registrants from around the globe," Loveman said. "The event generated invaluable worldwide publicity for our company and introduced our brands to millions of potential new customers. It also had notable financial benefits, as casino play rose markedly at the Rio during the tournament's six-week run. We will continue expanding this powerful brand into new markets and in new directions in the months and years ahead."

Strong market conditions, robust cross-market play at Harrah's Las Vegas, the Rio and Harrah's Laughlin, along with increased customer traffic at the Rio from the World Series of Poker, contributed to record second-quarter results for Harrah's West Region. Unseasonably cool weather contributed to lower results at the company's Northern Nevada properties.

"Harrah's Las Vegas and the Rio have benefited enormously from cross-market business generated by Total Rewards," said Tim Wilmott, Harrah's chief operating officer. "However, these two properties were not enough to host all of our customers who wanted to visit Las Vegas. We now have six resorts centered around Las Vegas Boulevard and Flamingo Road, giving us both increased capacity and greater breadth of offerings. The opening of the 949-room Augustus Tower at Caesars Palace this month will further expand our ability to host Harrah's and Caesars customers. This intersection will become the centerpiece of the Total Rewards program, creating the potential for tremendous long-term growth in the West Region."

Increased visitation, effective marketing promotions and greater operational efficiencies contributed to gains at Harrah's Atlantic City and the Showboat.

"Our competitive position in Atlantic City continues to strengthen," Wilmott said. "The July opening of the $68.5 million House of Blues Club gives the Showboat an entertainment amenity with few rivals in the Northeast, and initial customer feedback has been very encouraging.

"The addition of Caesars Atlantic City and Bally's further augments the selection of Atlantic City experiences we can offer Total Rewards members," Wilmott said. "We are optimistic about the future of Atlantic City, and believe we are well-positioned to grow this market."

The addition of Horseshoe Hammond and increased business from last year's expansion of Harrah's St. Louis contributed to a record quarter for the North Central Region. Gains were partially offset by disruption from expansion projects underway at Harrah's North Kansas City and Bluffs Run.

Income from operations at our Iowa properties in the second quarter of 2004 included adjustments of prior period gaming tax accruals.

"Our investments in Harrah's St. Louis have helped that property regain its leadership position in Missouri, and we expect to reap similar returns from our expansion of Harrah's North Kansas City and transformation of Bluffs Run into a Horseshoe property," Wilmott said. "The Caesars acquisition further enhances our presence in this region, as we entered the key gaming markets of Detroit and Louisville."

The addition of Horseshoe casinos in Bossier City and Tunica, as well as strong operating results across Harrah's properties in Louisiana and Mississippi, resulted in a record performance for the South Central Region. Results at Harrah's Lake Charles were negatively impacted by the opening of a competing property during the quarter.

"We are optimistic about our long-term prospects in the South Central Region," Wilmott said. "The acquisition of Caesars added four properties in Mississippi, which has historically offered a stable, pro-business environment. We are excited in particular to expand into the Mississippi Gulf Coast, and believe our two new resorts there will serve as an attractive complement to Harrah's New Orleans."

Managed Properties And Other Items

Second-quarter management-fee revenues were up 14.0 percent from the year-ago period due primarily to expansion-driven gains at Harrah's Rincon.

From June 13 to June 30, 2005, the Caesars properties contributed $181.8 million in revenues, $49.9 million in Property EBITDA and $33.6 million in income from operations.

Second-quarter development costs increased to $6.7 million from $6.1 million in the year-ago quarter.

Write-downs, reserves and recoveries for the second quarter of 2005 included 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. Write-downs, reserves and recoveries also included a $5.6 million charge related to the settlement of on-going litigation arising from a construction project, and a $3.0 million charge for the buyout of a lease contract at Showboat Atlantic City. Write-downs, reserves and recoveries in the second quarter of 2004 included a $10 million endowment to The Harrah's Foundation. The prior year second quarter write-downs, reserves and recoveries also included a $16.6 million adjustment of prior period gaming tax accruals for the Bluffs Run property resulting from the passage in April 2004 of legislation lowering the gaming-tax rate.

Corporate expense increased 38.6 percent over the year-ago quarter due to increased incentive compensation costs, increased cost for corporate aircraft and the addition of Caesars corporate operations. Interest expense was 52.0 percent higher than in the 2004 second quarter due to additional debt related to the Caesars and Horseshoe acquisitions. The company recorded $16.7 million in costs during the quarter related to preparing for and executing the initial integration steps following the Caesars acquisition.

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	Harrah's Entertainment Reports Record Q2 Results 4 Aug 2005 LAS VEGAS -- (PRESS RELEASE) -- Harrah's Entertainment, Inc. (NYSE:HET) today reported record second-quarter revenues of $1.47 billion, up 41.5 percent from revenues of $1.04 billion in the 2004 second quarter. Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 41.5 percent in the second quarter to a record $402.5 million from Property EBITDA of $284.4 million in the year-earlier period. Second-quarter Adjusted Earnings Per Share increased to 90 cents, up 13.9 percent from the 79 cents achieved in 2004'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 18.1 percent to a record $226.8 million from $192.0 million in the year-earlier quarter. Second-quarter net income was a record $105.8 million, up 17.3 percent from $90.2 million in the 2004 second quarter. Diluted earnings per share for the 2005 second quarter was 84 cents, 6.3 percent higher than the 79 cents achieved in the 2004 second quarter. Second-quarter results included 17 days of contributions from Caesars Entertainment, Inc., which was acquired by Harrah's Entertainment on June 13, 2005. Operating Momentum, Organic Growth Continue "We achieved our sixth consecutive quarter of record results and posted the highest same-store sales growth in nearly five years, both while completing the largest acquisition in gaming history," said Gary Loveman, Harrah's Entertainment's chairman, chief executive officer and president. "Our ability to continue generating such positive operating momentum is a tribute not only to Harrah's technological and marketing capabilities, but also to the skill and dedication of a management team and employees who deliver the great service that builds lasting customer loyalty." Second-quarter 2005 same-store revenues increased 8.9 percent over the year-ago period. Cross-market play -- gaming by customers at Harrah's properties other than their "home" casino -- rose 17.7 percent from the second quarter of 2004. Tracked play -- gaming by customers using the company's Total Rewards player card -- increased 12.9 percent from the year-ago second quarter. "Total Rewards continued to drive organic growth across the company, as we posted quarterly same-store sales gains for the 25th time in 26 quarters," Loveman said. "This track record of consistent growth illustrates the tremendous potential of putting Total Rewards to work in our newly acquired network of properties." For the 2005 first half, revenues rose 32.9 percent to $2.72 billion from $2.05 billion in the year-ago period. Property EBITDA increased to $754.5 million, up 36.2 percent from $553.9 million in the 2004 first half. Adjusted EPS was $1.86, 20.0 percent higher than the $1.55 achieved in the first six months of 2004. First-half income from operations was $459.7 million, up 24.8 percent from $368.3 million in the 2004 first half. Net income rose 21.9 percent to $209.6 million from $172.0 million in the first six months of 2004. First-half diluted earnings per share was $1.74, up 14.5 percent from $1.52 in the 2004 first half. Among the second-quarter highlights: -Harrah's Entertainment completed its $9 billion acquisition of Caesars Entertainment, Inc. on June 13, creating the world's largest provider of branded casino entertainment. The acquisition added 18 casino properties in four states and two foreign countries to Harrah's portfolio, giving the company a total of 43 properties in the United States, Canada and Uruguay. - Harrah's completed the sale of Harrah's East Chicago and Harrah's Tunica to an affiliate of Colony Capital, LLC. Colony paid Harrah's and Caesars -- which sold Bally's Tunica and the Atlantic City Hilton -- a total of $1.24 billion for the four properties. Harrah's used its share of the net proceeds to pay down debt. - Harrah's Entertainment's properties received 728 awards, including 313 first-place finishes, in Casino Player magazine's Best of Gaming Awards, the magazine's annual poll of gaming customers across the country. Separately, the Caesars properties received 62 first-place honors and 141 total awards. Excluding the Caesars awards, Harrah's led the competition for the sixth straight year, posting a 24 percent increase in total awards and a 23 percent improvement in first-place finishes. - Harrah's Operating Company, Inc., a wholly-owned subsidiary of Harrah's Entertainment, completed a private offering of $750 million of 5 5/8% senior notes due 2015. Proceeds were used to refinance and extend the maturity of outstanding indebtedness. - The Rio hosted the 36th annual World Series of Poker from June 2 to July 15. The event was the largest poker tournament in history, with more than 32,000 paid tournament registrations and a prize pool of more than $106 million -- more than double the size of the 2004 World Series of Poker. Joseph Hachem of Melbourne, Australia, won the World Series of Poker Championship event on July 16, besting 5,618 other players to claim a record cash prize of $7.5 million. "Since completing the Caesars acquisition just six weeks ago, we've gained a greater appreciation of the cultural similarity between our two companies," Loveman said. "Since we announced the agreement to acquire Caesars a year ago, we've also seen very positive momentum developing at Caesars properties where capital improvements have begun generating strong operating results. We are more confident than ever that we will realize tremendous value by providing Caesars' management and employees with the tools and capabilities that have enabled Harrah's to deliver sustainable long-term growth. "Our optimism regarding Caesars is heightened by the contributions realized from our previous acquisition of Horseshoe Gaming," Loveman said. "Under our ownership, each of the three Horseshoe properties has increased its market share in the last year. The Horseshoe acquisition added 6 cents per share to earnings during the second quarter, bringing total accretion to 27 cents since that acquisition closed one year ago. We expect efficiencies of an even larger scale from the Caesars transaction, and remain confident we will be able to realize $80 million in synergies in the first 12 months. "The Caesars acquisition further strengthens our brand portfolio, giving us ownership of the world's premier luxury gaming brand," Loveman said. "The Caesars brand will be at the forefront of our expansion efforts around the world, including our proposal to build a world-class integrated resort in the Republic of Singapore. The power of the Caesars brand lies in the opulence of the Caesars Palace experience, and we are absolutely committed to maintaining and strengthening its reputation. "With Caesars, we have acquired more than physical assets, a great brand and a strong management and employee team: We have acquired relationships with millions of new customers," Loveman said. "Once we merge the Caesars loyalty program into Total Rewards in the first half of 2006, our customer database will increase from 25 million names to 40 million names. "Through Total Rewards, we will be able to offer these 40 million customers a selection of gaming and entertainment offerings unrivaled in our industry," Loveman said. "This opportunity will position us well for continued improvement in customer loyalty, and significant organic growth, for years to come. "Our recent refinancing once again demonstrated the benefits of having the strongest balance sheet in gaming," Loveman said. "Our debt offerings command the lowest interest rates of any casino operator, resulting in significant savings for our stockholders. We remain the only investment-grade U.S. casino operator, giving us the financial firepower to aggressively pursue numerous growth opportunities across the country and around the world. "The just completed 2005 World Series of Poker showed that the WSOP has become one of the world's premier sporting events, drawing more than 600 journalists and 32,000 registrants from around the globe," Loveman said. "The event generated invaluable worldwide publicity for our company and introduced our brands to millions of potential new customers. It also had notable financial benefits, as casino play rose markedly at the Rio during the tournament's six-week run. We will continue expanding this powerful brand into new markets and in new directions in the months and years ahead." Strong market conditions, robust cross-market play at Harrah's Las Vegas, the Rio and Harrah's Laughlin, along with increased customer traffic at the Rio from the World Series of Poker, contributed to record second-quarter results for Harrah's West Region. Unseasonably cool weather contributed to lower results at the company's Northern Nevada properties. "Harrah's Las Vegas and the Rio have benefited enormously from cross-market business generated by Total Rewards," said Tim Wilmott, Harrah's chief operating officer. "However, these two properties were not enough to host all of our customers who wanted to visit Las Vegas. We now have six resorts centered around Las Vegas Boulevard and Flamingo Road, giving us both increased capacity and greater breadth of offerings. The opening of the 949-room Augustus Tower at Caesars Palace this month will further expand our ability to host Harrah's and Caesars customers. This intersection will become the centerpiece of the Total Rewards program, creating the potential for tremendous long-term growth in the West Region." Increased visitation, effective marketing promotions and greater operational efficiencies contributed to gains at Harrah's Atlantic City and the Showboat. "Our competitive position in Atlantic City continues to strengthen," Wilmott said. "The July opening of the $68.5 million House of Blues Club gives the Showboat an entertainment amenity with few rivals in the Northeast, and initial customer feedback has been very encouraging. "The addition of Caesars Atlantic City and Bally's further augments the selection of Atlantic City experiences we can offer Total Rewards members," Wilmott said. "We are optimistic about the future of Atlantic City, and believe we are well-positioned to grow this market." The addition of Horseshoe Hammond and increased business from last year's expansion of Harrah's St. Louis contributed to a record quarter for the North Central Region. Gains were partially offset by disruption from expansion projects underway at Harrah's North Kansas City and Bluffs Run. Income from operations at our Iowa properties in the second quarter of 2004 included adjustments of prior period gaming tax accruals. "Our investments in Harrah's St. Louis have helped that property regain its leadership position in Missouri, and we expect to reap similar returns from our expansion of Harrah's North Kansas City and transformation of Bluffs Run into a Horseshoe property," Wilmott said. "The Caesars acquisition further enhances our presence in this region, as we entered the key gaming markets of Detroit and Louisville." The addition of Horseshoe casinos in Bossier City and Tunica, as well as strong operating results across Harrah's properties in Louisiana and Mississippi, resulted in a record performance for the South Central Region. Results at Harrah's Lake Charles were negatively impacted by the opening of a competing property during the quarter. "We are optimistic about our long-term prospects in the South Central Region," Wilmott said. "The acquisition of Caesars added four properties in Mississippi, which has historically offered a stable, pro-business environment. We are excited in particular to expand into the Mississippi Gulf Coast, and believe our two new resorts there will serve as an attractive complement to Harrah's New Orleans." Managed Properties And Other Items Second-quarter management-fee revenues were up 14.0 percent from the year-ago period due primarily to expansion-driven gains at Harrah's Rincon. From June 13 to June 30, 2005, the Caesars properties contributed $181.8 million in revenues, $49.9 million in Property EBITDA and $33.6 million in income from operations. Second-quarter development costs increased to $6.7 million from $6.1 million in the year-ago quarter. Write-downs, reserves and recoveries for the second quarter of 2005 included 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. Write-downs, reserves and recoveries also included a $5.6 million charge related to the settlement of on-going litigation arising from a construction project, and a $3.0 million charge for the buyout of a lease contract at Showboat Atlantic City. Write-downs, reserves and recoveries in the second quarter of 2004 included a $10 million endowment to The Harrah's Foundation. The prior year second quarter write-downs, reserves and recoveries also included a $16.6 million adjustment of prior period gaming tax accruals for the Bluffs Run property resulting from the passage in April 2004 of legislation lowering the gaming-tax rate. Corporate expense increased 38.6 percent over the year-ago quarter due to increased incentive compensation costs, increased cost for corporate aircraft and the addition of Caesars corporate operations. Interest expense was 52.0 percent higher than in the 2004 second quarter due to additional debt related to the Caesars and Horseshoe acquisitions. The company recorded $16.7 million in costs during the quarter related to preparing for and executing the initial integration steps following the Caesars acquisition.