Harrah's reports Q3 results
COMPANY WIDE RESULTS
(in millions, except per share)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $2,840.3 $2,512.5 13.0%
Property EBITDA* 790.4 684.7 15.4%
Adjusted EPS from Continuing
operations 1.00 0.94 6.4%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $8,197.7 $7,243.3 13.2%
Property EBITDA* 2,202.7 2,047.5 7.6%
Adjusted EPS from Continuing
operations 2.84 2.90 -2.1%
* Property EBITDA excludes certain non-recurring items, including
insurance proceeds arising from the 2005 hurricane claims.
See Page 14 for details.
Property EBITDA and Adjusted EPS from Continuing Operations 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. In addition, analysts' per-share earnings estimates for gaming companies are comparable to Adjusted EPS from Continuing Operations. Reconciliations of Adjusted EPS from Continuing Operations to GAAP EPS and Property EBITDA to income from operations are attached to this release.
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On a GAAP basis, third-quarter income from operations was $577.2 million, compared with $441.9 million in the year-ago quarter. Net income was $244.4 million, up 37.9 percent from $177.2 million in the 2006 third quarter. Diluted earnings per share from continuing operations were $1.16, an increase of 20.8 percent from the 96 cents achieved in the year-ago quarter.
Third-quarter highlights
* Harrah's Entertainment announced a $1 billion expansion and renovation
of Caesars Palace in Las Vegas that will include construction of a
665-room hotel tower and a 263,000-square-foot meeting and convention
center, as well as enhancements to the resort's 512-room Forum Tower.
The project will increase the room and suite offering at Caesars Palace
to 4,013 from 3,348 when completed in 2009.
* Harrah's and AEG, developer of entertainment venues such as STAPLES
Center in Los Angeles, unveiled plans for a privately financed,
20,000-seat, state-of-the-art sports and entertainment arena on acreage
currently owned by Harrah's near the center of the Las Vegas Strip. The
arena is expected to open in 2010.
* Harrah's has acquired Macau Orient Golf, an 18-hole golf course on
175 acres on Cotai directly adjacent to the Lotus Bridge, one of two
border crossings into Macau from China. Harrah's plans improvements
that will make Macau Orient Golf one of the most authentic links-style
courses in the Pearl River Delta.
* Poker players from 33 countries competed in the first annual World
Series of Poker Europe Presented by Betfair.com, which ended
September 16 with Norway's Annette Obrestad collecting a Main Event
first prize of more than $2 million. The WSOP Europe ended at the
Company's Casino at the Empire in London just two months after the
completion of the 38th annual World Series of Poker in Las Vegas, which
attracted more than 54,000 entrants.
Shortly after the end of the third quarter, Grand Casino Resort Tunica announced a strategic alliance with Food Network star Paula Deen and a $45 million renovation of the property, which will be rebranded Harrah's Casino Tunica once the upgrades are completed next year.
Summaries of results by region follow:
LAS VEGAS REGION
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $900.4 $812.4 10.8%
Income from operations 212.8 192.1 10.8%
Property EBITDA 275.8 243.0 13.5%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $2,721.5 $2,441.4 11.5%
Income from operations 687.3 635.9 8.1%
Property EBITDA 879.9 796.5 10.5%
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.
The Company's multi-property visitation strategy, coupled with robust visitor volume, high occupancy rates and improved yields, led to record results for the 2007 third quarter and nine months, continuing the strong momentum established during the first half of the year. The region also benefited from the addition of results from Bill's Gamblin' Hall & Saloon, which was acquired in the first quarter of 2007.
ATLANTIC CITY REGION
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $671.5 $560.2 19.9%
Income from operations 141.0 136.2 3.5%
Property EBITDA 202.7 186.6 8.6%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $1,810.2 $1,571.4 15.2%
Income from operations 290.3 356.3 -18.5%
Property EBITDA 478.8 496.9 -3.6%
Atlantic City Region properties include Harrah's Atlantic City, Showboat
Atlantic City, Caesars Atlantic City, Bally's Atlantic City and Harrah's
Chester.
Effective marketing led to margin improvements and more stable results at Harrah's properties in Atlantic City, a market that has struggled with competition from new slot operations in neighboring states, new smoking restrictions and high marketing costs. Construction continued on the new 960- room hotel tower that is expected to open in the 2008 second quarter as part of a $550 million upgrade and expansion of Harrah's Atlantic City. A strong third-quarter performance at Harrah's Chester Casino and Racetrack, which opened its slot operations in early first quarter 2007, helped the region's results.
LOUISIANA/MISSISSIPPI REGION
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $391.6 $376.1 4.1%
Income from operations 123.7 73.7 67.8%
Property EBITDA 92.8 96.0 -3.3%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $1,171.1 $1,019.4 14.9%
Income from operations 292.9 201.7 45.2%
Property EBITDA 265.8 265.1 0.3%
Louisiana/Mississippi Region properties include Harrah's New Orleans,
Horseshoe Bossier City, Louisiana Downs, Horseshoe Tunica, Grand Casino
Tunica, Sheraton Tunica and Grand Casino Biloxi.
Weak third-quarter revenues at Grand Casino Tunica, which will undergo an extensive renovation and re-branding over the next 12 months, impacted results from the Louisiana/Mississippi Region. Third-quarter income from operations included $61.1 million of income from insurance proceeds in excess of the net book value of impacted assets and reimbursable costs and expenses. Property EBITDA results exclude certain non-recurring items, including insurance proceeds related to 2005 hurricane claims.
Revenues were higher in the first nine months of 2007 due to contributions from Harrah's New Orleans as well as Grand Casino Biloxi, which was closed for much of the prior-year period due to storm damage. Nine-month income from operations for 2007 included $116.9 million of insurance proceeds in excess of the net book value of impacted assets and reimbursable costs and expenses.
IOWA/MISSOURI REGION
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $206.8 $206.4 0.2%
Income from operations 39.7 33.8 17.5%
Property EBITDA 59.7 53.7 11.2%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $613.8 $607.0 1.1%
Income from operations 110.0 99.2 10.9%
Property EBITDA 169.5 162.4 4.4%
Iowa/Missouri Region properties include Harrah's St. Louis, Harrah's
Council Bluffs, Horseshoe Council Bluffs and Harrah's North Kansas City.
Third-quarter and nine-month revenues were essentially even with those of the prior-year periods, while Property EBITDA rose 11.2 percent in the 2007 third quarter due primarily to cost reductions.
ILLINOIS/INDIANA REGION
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $328.5 $314.4 4.5%
Income from operations 57.7 56.3 2.5%
Property EBITDA 69.7 72.9 -4.4%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $974.7 $926.6 5.2%
Income from operations 158.9 172.7 -8.0%
Property EBITDA 204.1 216.3 -5.6%
Combined revenues increased in this region from the 2006 third-quarter, but Property EBITDA fell 4.4 percent due in part to a supplemental 3 percent tax assessed by Illinois since July 2006. The company's new, two-level vessel at Horseshoe Hammond is expected to open in the second half of 2008, pending all requisite regulatory approvals.
Revenues for the first nine months of 2007 rose, but income from
operations was lower than in the 2006 period due primarily to the 3 percent
tax assessed by Illinois against certain gaming operations. Earlier this year,
an Illinois court declared the tax unconstitutional, but the Company continues
to accrue and pay the tax in accordance with the court's instructions pending
final resolution of the case.
OTHER NEVADA
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $176.4 $183.4 -3.8%
Income from operations 36.7 41.3 -11.1%
Property EBITDA 50.0 54.5 -8.3%
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $484.2 $494.8 -2.1%
Income from operations 79.4 90.3 -12.1%
Property EBITDA 117.4 130.0 -9.7%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harvey's Lake Tahoe, Bill's Casino and Harrah's Laughlin.
Early summer wildfires in the Lake Tahoe area and continued weakness in visitor volumes led to a 3.8 percent decline in third-quarter revenues and an 8.3 percent drop in Property EBITDA for the Other Nevada Region. Poor ski conditions in the first half of 2007 also contributed to reduced nine-month results.
MANAGED/INTERNATIONAL/OTHER
(in millions)
2007 2006 Percent
Third Third Increase
Quarter Quarter (Decrease)
Total revenues $165.1 $59.6 177.0%
Income from operations 3.9 (39.6) 109.8%
Property EBITDA 39.7 (22.0) N/M
2007 2006 Percent
First Nine First Nine Increase
Months Months (Decrease)
Total revenues $422.2 $182.7 131.1%
Income from operations (6.5) (69.5) 90.6%
Property EBITDA 87.2 (19.7) N/M
Managed, international and 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.
The gains in this category were due primarily to addition of results from the London Clubs International properties acquired by the Company in the 2006 fourth quarter and lower master-planning and development costs.
Other items
Third-quarter and nine-month corporate expenses declined from the year-ago periods due to corporate cost reductions, the allocation of a portion of the Company's stock-based compensation expenses to individual property units and lower development costs.
Interest expense rose in the 2007 third quarter and first nine months due to higher debt levels associated with acquisitions, higher interest rates and declines of $25.2 million and $10.8 million for the third quarter and first nine months, respectively, in the aggregate fair value of the company's interest-rate swaps. Other income of $23 million was due primarily to a gain on the sale of a corporate aircraft.
The effective tax rate, which includes federal and state income taxes, for the third quarter was 38.4 percent, compared with 35.1 percent in the year-ago period.
Discontinued operations for the 2007 third quarter and first nine months reflect insurance proceeds of $22.5 million, after taxes, and $82.6 million, after taxes, respectively, that are in excess of the net book value of the impacted assets and accumulated costs and expenses expected to be reimbursed under the Company's insurance claims for Harrah's Lake Charles and Grand Casino Gulfport, both of which were sold in 2006. Pursuant to the terms of the sales agreements, Harrah's will retain all insurance proceeds related to these properties.
Weighted average common and common equivalent shares outstanding for the third quarter were 190.7 million shares, up from 186.3 million in the 2006 third quarter.
Harrah's Entertainment, Inc. is the world's largest provider of branded casino entertainment. Since its beginning in Reno, Nevada, nearly 70 years ago, Harrah's has grown through development of new properties, expansions and acquisitions, and now owns or manages casinos on four continents. The Company's properties operate primarily under the Harrah's, Caesars and Horseshoe brand names; Harrah's also owns the London Clubs International family of casinos. 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.