Harrah's Entertainment Reports Results

22 Feb 2006

LAS VEGAS -- (PRESS RELEASE) -- Harrah's Entertainment, Inc. (NYSE:HET) today reported record fourth-quarter revenues of $2.1 billion, up 76.2 percent from revenues of $1.2 billion in the 2004 fourth quarter.

Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 85.1 percent in the 2005 fourth quarter to a record $534.5 million from Property EBITDA of $288.7 million in the year-earlier period. Fourth-quarter Adjusted Earnings Per Share (EPS) from continuing operations were 66 cents in the fourth quarter, up 11.9 percent from 59 cents in the 2004 fourth 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 from continuing operations.

Reconciliations of Adjusted EPS to GAAP EPS and Property EBITDA to income from operations are attached to this release.

In addition to its strong operating results, Harrah's also wrote off certain intangible assets at certain South Central Region casinos:

-Harrah's wrote off $88.7 million of intangible assets at its Biloxi, Mississippi, property, since that property was damaged extensively by Hurricane Katrina. This pre-tax write-off is included in "Write-downs, reserves and recoveries."

-Harrah's wrote off $56.1 million (pre-tax) of goodwill and recorded a $19.2 million recovery due to the termination of a contractual liability at its Lake Charles, Louisiana, property, also reported in "Write-downs, reserves and recoveries."

-Harrah's wrote off $49.9 million of goodwill related to its Louisiana Downs property. This pre-tax write-off is reported in "Writedowns, reserves and recoveries."

-Harrah's wrote off $78.6 million, after tax, of intangible assets related to its Gulfport, Mississippi, property. Harrah's has agreed to sell its Gulfport property; consequently, this charge is included in "Discontinued operations."

The recognition of these fourth-quarter impairment charges was determined after consideration of the appropriate accounting guidance and a review of the status of the impacted properties. The company continues to work closely with its insurance carriers and claims adjusters to ascertain the full amount of the insurance proceeds due to Harrah's as a result of the damages to fixed assets and covered losses it suffered. To the extent that such proceeds received in future periods ultimately exceed the net book value of the damaged assets and deferred costs, the company will report a gain for those recoveries.

As a result of these charges, 2005 fourth-quarter income from operations was $111.5 million, compared with $165.0 million in the year-earlier period. The fourth-quarter net loss was $142.2 million, compared with net income of $76.9 million in the 2004 fourth quarter. The loss per share for the 2005 fourth quarter was 78 cents, compared with diluted earnings per share of 68 cents in the year-ago quarter.

In two important gauges of customer loyalty -- same-store sales growth and cross-market play -- Harrah's posted strong gains. Fourth-quarter same-store sales at legacy Harrah's properties rose 12.3 percent from the year-ago quarter, while cross-market play increased 23.3 percent; the comparisons exclude properties closed in the period due to hurricane damages.

"Our ability to deliver such dynamic increases in these key performance metrics is a testament not only to the efficacy of a strategy focused on offering unparalleled geographic diversification and superior customer service, but also on the dedication and professionalism of the thousands of employees responsible for executing that strategy," said Gary Loveman, chairman, president and chief executive officer of Harrah's Entertainment. "Thanks to their efforts, we achieved solid revenue growth in most operating markets and record fourth-quarter revenues in many of them.

"Effective marketing stimulated increased customer loyalty at the Harrah's and Horseshoe brands, resulting in both trip growth and higher spending per trip across our portfolio of legacy properties," Loveman said. "From a market perspective, our Las Vegas and Atlantic City operations performed well throughout the quarter. We also saw positive momentum building at our Northern Nevada and Horseshoe properties.

"We began systems integration in the fourth quarter and expect to complete integration of Harrah's customer-relationship capabilities -- our Total Rewards player-loyalty program and revenue- and yield-management systems -- into the Caesars properties in April 2006," Loveman said. "Based upon our experience with other acquired properties, we anticipate these capabilities will enable the Caesars facilities to benefit from increased market share and visitation."

For the full year, revenues rose 56.3 percent to $7.1 billion from $4.5 billion in 2004. Property EBITDA increased to $1.9 billion, up 59.7 percent from $1.2 billion in 2004. Adjusted EPS from Continuing Operations were $3.44, compared with $3.04 in 2004.

Full-year income from operations was $979.7 million, up 23.8 percent from $791.1 million in 2004. Net income in 2005 was $236.4 million, compared with $367.7 million in 2004, while 2005 diluted earnings per share were $1.57, compared with $3.26 a year earlier. Results for 2005 include the contribution of the Caesars business since the acquisition date of June 13, 2005. Data for 2004 include results of the Horseshoe properties subsequent to their July 1, 2004, acquisition.

Fourth-quarter highlights:

-Pursuing an aggressive international growth strategy, Harrah's Entertainment signed agreements in November to develop three gaming resorts in the Caribbean and Europe:

-In Spain, Harrah's signed an agreement with El Reino de Don Quijoite de La Mancha, S.A., to develop a Caesars-branded casino resort in a master-planned community at Ciudad Real, 118 miles south of Madrid. Preliminary plans for the resort include an 850-room luxury hotel, a 50,000-square-foot casino and a 3,000-seat Colosseum theater. The resort will be owned 60 percent by Harrah's and 40 percent by El Reino.

-Subject to completion of definitive documentation, Harrah's plans to operate a Caesars-branded resort hotel and casino as part of Baha Mar, a 1,000-acre mixed-use project with Baha Mar Resorts and Starwood Hotels & Resorts Worldwide, Inc., in Nassau, The Bahamas.

-In Nova Gorica, Slovenia, Harrah's signed a memorandum of understanding to develop a luxury hotel and casino as part of a proposed 50-50 joint venture with HIT Group, Slovenia's premier casino operator. Located on the border with Italy, the resort would be Slovenia's first full-amenity casino resort. This project is subject to completion of definitive documentation.

-In November, Harrah's announced plans for a $550 million upgrade and expansion of Harrah's Atlantic City. The project encompasses a 964-room hotel tower and a 172,000-square-foot retail and entertainment complex, which will include a Red Door spa, an ultra-lounge nightclub, an indoor pool, a new Diamond Lounge, new retail stores, a 650-seat buffet and a 500-seat coffee shop. The existing buffet will be converted into new gaming space, adding 400 slot machines and 20 table games. The entertainment and retail center is expected to open by the end of 2006, while the new hotel tower is scheduled to open in the second quarter of 2008.

-Harrah's closed on its $370 million acquisition of the Imperial Palace Hotel & Casino in December, strategically positioning the company for future growth on the Las Vegas Strip. The Imperial Palace occupies an 18.5-acre parcel directly between Harrah's Las Vegas and the Flamingo.

-Harrah's signed a definitive agreement in December to sell the remaining assets of Grand Casino Gulfport. The transaction is expected to close by the end of the first quarter of 2006, subject to receipt of regulatory approvals. Harrah's intends to pursue the development of a resort casino at the former location of the Grand Casino Biloxi.

-In November, Harrah's signed a definitive agreement to sell the Flamingo Laughlin hotel-casino and an undeveloped land parcel in Atlantic City for $170 million in cash. Assuming regulatory approvals are received, Harrah's expects the transaction to close in mid-2006.

"Our international development strategy is to extend the Caesars brand -- widely viewed globally as the most recognized gaming-entertainment brand -- to high-growth-potential markets around the world that offer stable political and regulatory environments," Loveman said. "Our international plans are an extension of our domestic development strategy, which also focuses on expansion in stable jurisdictions."

2005 highlights:

-Harrah's Entertainment completed its $9.3 billion acquisition of Caesars Entertainment, Inc. in June, cementing the company's position as the largest provider of casino entertainment in the world.

-Harrah's sold Harrah's Tunica and Harrah's East Chicago to an affiliate of Colony Capital, LLC, in April 2005. The properties were sold in connection with the Harrah's-Caesars merger agreement. Colony also acquired the Atlantic City Hilton and Bally's Tunica from Caesars as part of the transaction.

-Harrah's named three new members -- William Barron Hilton, Stephen F. Bollenbach and Charles L. Atwood -- to its Board of Directors. Hilton, co-chairman of Hilton Hotels Corp., and Bollenbach, co-chairman and chief executive officer of Hilton Hotels, joined the Harrah's board in June following the completion of Harrah's merger with Caesars Entertainment. Both had previously been members of the Caesars board. Atwood, Harrah's chief financial officer, was appointed to the Harrah's board in July.

-Harrah's Entertainment led Casino Player's Best of Gaming Awards for the sixth consecutive year, capturing a record 869 awards, including 375 first-place finishes, in the magazine's annual poll of gaming customers from across the country. The company's 2005 performance was boosted by the addition of 18 Caesars Entertainment casinos, which received a total of 141 awards, including 62 first-place honors.

-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 gross prize pool of more than $106 million -- more than double the size of the 2004 World Series of Poker.

-The company was forced to close three Gulf Coast casinos on August 30 due to the approach of Hurricane Katrina. Grand Casino Gulfport and Grand Casino Biloxi were destroyed by the storm; Harrah's New Orleans, which also sustained damage, could not reopen until February 2006. In September 2005, Harrah's Lake Charles suffered extensive damage from Hurricane Rita. The property's 263-room hotel re-opened in February 2006, but the gaming facilities, which were severely damaged, are not expected to re-open in the foreseeable future. The company is exploring alternatives that include a possible exit from the Lake Charles market.

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	Harrah's Entertainment Reports Results 22 Feb 2006 <a href='https://ad.casinocity.com/adclick.php?n=a21efcd1'><img src='https://ad.casinocity.com/adview.php?what=-site:vendors/width:250/RON&n=a21efcd1' border='0' alt='' /></a> LAS VEGAS -- (PRESS RELEASE) -- Harrah's Entertainment, Inc. (NYSE:HET) today reported record fourth-quarter revenues of $2.1 billion, up 76.2 percent from revenues of $1.2 billion in the 2004 fourth quarter. Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 85.1 percent in the 2005 fourth quarter to a record $534.5 million from Property EBITDA of $288.7 million in the year-earlier period. Fourth-quarter Adjusted Earnings Per Share (EPS) from continuing operations were 66 cents in the fourth quarter, up 11.9 percent from 59 cents in the 2004 fourth 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 from continuing operations. Reconciliations of Adjusted EPS to GAAP EPS and Property EBITDA to income from operations are attached to this release. In addition to its strong operating results, Harrah's also wrote off certain intangible assets at certain South Central Region casinos: -Harrah's wrote off $88.7 million of intangible assets at its Biloxi, Mississippi, property, since that property was damaged extensively by Hurricane Katrina. This pre-tax write-off is included in "Write-downs, reserves and recoveries." -Harrah's wrote off $56.1 million (pre-tax) of goodwill and recorded a $19.2 million recovery due to the termination of a contractual liability at its Lake Charles, Louisiana, property, also reported in "Write-downs, reserves and recoveries." -Harrah's wrote off $49.9 million of goodwill related to its Louisiana Downs property. This pre-tax write-off is reported in "Writedowns, reserves and recoveries." -Harrah's wrote off $78.6 million, after tax, of intangible assets related to its Gulfport, Mississippi, property. Harrah's has agreed to sell its Gulfport property; consequently, this charge is included in "Discontinued operations." The recognition of these fourth-quarter impairment charges was determined after consideration of the appropriate accounting guidance and a review of the status of the impacted properties. The company continues to work closely with its insurance carriers and claims adjusters to ascertain the full amount of the insurance proceeds due to Harrah's as a result of the damages to fixed assets and covered losses it suffered. To the extent that such proceeds received in future periods ultimately exceed the net book value of the damaged assets and deferred costs, the company will report a gain for those recoveries. As a result of these charges, 2005 fourth-quarter income from operations was $111.5 million, compared with $165.0 million in the year-earlier period. The fourth-quarter net loss was $142.2 million, compared with net income of $76.9 million in the 2004 fourth quarter. The loss per share for the 2005 fourth quarter was 78 cents, compared with diluted earnings per share of 68 cents in the year-ago quarter. In two important gauges of customer loyalty -- same-store sales growth and cross-market play -- Harrah's posted strong gains. Fourth-quarter same-store sales at legacy Harrah's properties rose 12.3 percent from the year-ago quarter, while cross-market play increased 23.3 percent; the comparisons exclude properties closed in the period due to hurricane damages. "Our ability to deliver such dynamic increases in these key performance metrics is a testament not only to the efficacy of a strategy focused on offering unparalleled geographic diversification and superior customer service, but also on the dedication and professionalism of the thousands of employees responsible for executing that strategy," said Gary Loveman, chairman, president and chief executive officer of Harrah's Entertainment. "Thanks to their efforts, we achieved solid revenue growth in most operating markets and record fourth-quarter revenues in many of them. "Effective marketing stimulated increased customer loyalty at the Harrah's and Horseshoe brands, resulting in both trip growth and higher spending per trip across our portfolio of legacy properties," Loveman said. "From a market perspective, our Las Vegas and Atlantic City operations performed well throughout the quarter. We also saw positive momentum building at our Northern Nevada and Horseshoe properties. "We began systems integration in the fourth quarter and expect to complete integration of Harrah's customer-relationship capabilities -- our Total Rewards player-loyalty program and revenue- and yield-management systems -- into the Caesars properties in April 2006," Loveman said. "Based upon our experience with other acquired properties, we anticipate these capabilities will enable the Caesars facilities to benefit from increased market share and visitation." For the full year, revenues rose 56.3 percent to $7.1 billion from $4.5 billion in 2004. Property EBITDA increased to $1.9 billion, up 59.7 percent from $1.2 billion in 2004. Adjusted EPS from Continuing Operations were $3.44, compared with $3.04 in 2004. Full-year income from operations was $979.7 million, up 23.8 percent from $791.1 million in 2004. Net income in 2005 was $236.4 million, compared with $367.7 million in 2004, while 2005 diluted earnings per share were $1.57, compared with $3.26 a year earlier. Results for 2005 include the contribution of the Caesars business since the acquisition date of June 13, 2005. Data for 2004 include results of the Horseshoe properties subsequent to their July 1, 2004, acquisition. Fourth-quarter highlights: -Pursuing an aggressive international growth strategy, Harrah's Entertainment signed agreements in November to develop three gaming resorts in the Caribbean and Europe: -In Spain, Harrah's signed an agreement with El Reino de Don Quijoite de La Mancha, S.A., to develop a Caesars-branded casino resort in a master-planned community at Ciudad Real, 118 miles south of Madrid. Preliminary plans for the resort include an 850-room luxury hotel, a 50,000-square-foot casino and a 3,000-seat Colosseum theater. The resort will be owned 60 percent by Harrah's and 40 percent by El Reino. -Subject to completion of definitive documentation, Harrah's plans to operate a Caesars-branded resort hotel and casino as part of Baha Mar, a 1,000-acre mixed-use project with Baha Mar Resorts and Starwood Hotels & Resorts Worldwide, Inc., in Nassau, The Bahamas. -In Nova Gorica, Slovenia, Harrah's signed a memorandum of understanding to develop a luxury hotel and casino as part of a proposed 50-50 joint venture with HIT Group, Slovenia's premier casino operator. Located on the border with Italy, the resort would be Slovenia's first full-amenity casino resort. This project is subject to completion of definitive documentation. -In November, Harrah's announced plans for a $550 million upgrade and expansion of Harrah's Atlantic City. The project encompasses a 964-room hotel tower and a 172,000-square-foot retail and entertainment complex, which will include a Red Door spa, an ultra-lounge nightclub, an indoor pool, a new Diamond Lounge, new retail stores, a 650-seat buffet and a 500-seat coffee shop. The existing buffet will be converted into new gaming space, adding 400 slot machines and 20 table games. The entertainment and retail center is expected to open by the end of 2006, while the new hotel tower is scheduled to open in the second quarter of 2008. -Harrah's closed on its $370 million acquisition of the Imperial Palace Hotel & Casino in December, strategically positioning the company for future growth on the Las Vegas Strip. The Imperial Palace occupies an 18.5-acre parcel directly between Harrah's Las Vegas and the Flamingo. -Harrah's signed a definitive agreement in December to sell the remaining assets of Grand Casino Gulfport. The transaction is expected to close by the end of the first quarter of 2006, subject to receipt of regulatory approvals. Harrah's intends to pursue the development of a resort casino at the former location of the Grand Casino Biloxi. -In November, Harrah's signed a definitive agreement to sell the Flamingo Laughlin hotel-casino and an undeveloped land parcel in Atlantic City for $170 million in cash. Assuming regulatory approvals are received, Harrah's expects the transaction to close in mid-2006. "Our international development strategy is to extend the Caesars brand -- widely viewed globally as the most recognized gaming-entertainment brand -- to high-growth-potential markets around the world that offer stable political and regulatory environments," Loveman said. "Our international plans are an extension of our domestic development strategy, which also focuses on expansion in stable jurisdictions." 2005 highlights: -Harrah's Entertainment completed its $9.3 billion acquisition of Caesars Entertainment, Inc. in June, cementing the company's position as the largest provider of casino entertainment in the world. -Harrah's sold Harrah's Tunica and Harrah's East Chicago to an affiliate of Colony Capital, LLC, in April 2005. The properties were sold in connection with the Harrah's-Caesars merger agreement. Colony also acquired the Atlantic City Hilton and Bally's Tunica from Caesars as part of the transaction. -Harrah's named three new members -- William Barron Hilton, Stephen F. Bollenbach and Charles L. Atwood -- to its Board of Directors. Hilton, co-chairman of Hilton Hotels Corp., and Bollenbach, co-chairman and chief executive officer of Hilton Hotels, joined the Harrah's board in June following the completion of Harrah's merger with Caesars Entertainment. Both had previously been members of the Caesars board. Atwood, Harrah's chief financial officer, was appointed to the Harrah's board in July. -Harrah's Entertainment led Casino Player's Best of Gaming Awards for the sixth consecutive year, capturing a record 869 awards, including 375 first-place finishes, in the magazine's annual poll of gaming customers from across the country. The company's 2005 performance was boosted by the addition of 18 Caesars Entertainment casinos, which received a total of 141 awards, including 62 first-place honors. -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 gross prize pool of more than $106 million -- more than double the size of the 2004 World Series of Poker. -The company was forced to close three Gulf Coast casinos on August 30 due to the approach of Hurricane Katrina. Grand Casino Gulfport and Grand Casino Biloxi were destroyed by the storm; Harrah's New Orleans, which also sustained damage, could not reopen until February 2006. In September 2005, Harrah's Lake Charles suffered extensive damage from Hurricane Rita. The property's 263-room hotel re-opened in February 2006, but the gaming facilities, which were severely damaged, are not expected to re-open in the foreseeable future. The company is exploring alternatives that include a possible exit from the Lake Charles market.