Strong Operations, Acquisition Drive Record Revenues, EBITDA, EPS
Harrah's Entertainment, Inc. (NYSE:HET) today reported first-quarter revenues of $1.26 billion, up 24.2 percent from revenues of $1.01 billion in the 2004 first quarter.
Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 30.6 percent in the first quarter to $352.0 million from Property EBITDA of $269.5 million in the year-earlier period. First-quarter Adjusted Earnings Per Share increased to 97 cents, within the range provided in a pre-earnings announcement on April 6, 2005, and up 27.6 percent from the 76 cents achieved in 2004's first quarter. First-quarter Adjusted EPS from Continuing Operations was 87 cents per share, an increase of 26.1 percent from the year-ago quarter.
Property EBITDA and Adjusted EPS, including 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 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.
First-quarter income from operations rose 32.0 percent to $232.8 million from $176.3 million in the year-earlier quarter. First-quarter net income was $103.8 million, up 27.1 percent from $81.7 million in the 2004 first quarter. Diluted earnings per share for the 2005 first quarter was 90 cents, 23.3 percent higher than the 73 cents achieved in the 2004 first quarter.
First-quarter results included contributions from the three Horseshoe casinos, acquired by Harrah's on July 1, 2004. Results for Harrah's East Chicago and Harrah's Tunica, which are contracted for sale to an affiliate of Colony Capital, LLC, are reported as discontinued operations and are excluded from Adjusted EPS from Continuing Operations. Harrah's anticipates closing the sale transaction by the end of April.
"Industry-leading capabilities, the accretive acquisition of Horseshoe Gaming and strong operating performances by many properties all contributed to a solid quarter," said Gary Loveman, chairman, chief executive officer and president of Harrah's Entertainment. "Our strategy of building customer loyalty through sophisticated marketing and outstanding customer service continues to build momentum, producing our fifth consecutive quarter of record results. As we prepare for our historic merger with Caesars Entertainment, we believe the outlook for our company has never been stronger."
First-quarter 2005 same-store revenues increased 6.0 percent over the year-ago period. Cross-market play -- gaming by customers at properties other than their "home" casino -- rose 15.6 percent from the first quarter of 2004. Tracked play -- gaming by customers using the company's Total Rewards player cards -- increased 9.9 percent from the year-ago first quarter, and represented 79.1 percent of the company's total gaming revenues during the quarter.
"We have delivered same-store sales growth in 24 of the last 25 quarters," Loveman said. "This track record of remarkably consistent organic growth foreshadows the enormous potential of putting our capabilities and our strategy to work in the Caesars network.
"The progress of the Horseshoe integration is further grounds for optimism," Loveman said. "The three Horseshoe properties added approximately 8 cents to earnings per share during the first quarter, bringing total accretion to about 21 cents per share in the nine months since the transaction's close. We plan to apply the lessons learned during this successful process to the pending integration of Caesars."
Among the first-quarter highlights:
-- Stockholders of Harrah's and Caesars Entertainment, Inc. separately voted to approve an agreement to merge Caesars Entertainment into Harrah's Operating Company, a wholly owned subsidiary of Harrah's Entertainment. Harrah's stockholders also approved an increase in the number of authorized shares of Harrah's common stock from 360 million to 720 million.
-- Gaming regulators in Louisiana and Mississippi approved Harrah's proposed acquisition of Caesars. The transaction is awaiting clearance from the Federal Trade Commission, and must also be approved by state gaming regulators in Nevada, New Jersey and Indiana.
-- Harrah's announced that Gary Loveman will be chairman, chief executive officer and president of the company following the Caesars merger. Charles Atwood will be senior vice president and chief financial officer; Tim Wilmott will be chief operating officer; and Tom Jenkin, Anthony Sanfilippo and Carlos Tolosa will be presidents of Harrah's Western, Central and Eastern divisions, respectively. Harrah's also announced plans to appoint William Barron Hilton, co-chairman of Hilton Hotels Corp., and Stephen F. Bollenbach, chairman of Caesars Entertainment and co-chairman and CEO of Hilton Hotels, to the Harrah's board of directors following the merger.
-- Harrah's Entertainment's board of directors was ranked second out of 41 publicly traded companies in a survey of the top-performing boards in gaming conducted by HVS International, a human resources consulting firm.
-- Harrah's Operating Company agreed to amend the terms and increase the borrowing capacity of its bank credit facilities, effective upon the closing of the Caesars acquisition. The company's previous $2.5 billion revolving credit facility will be converted to a $4 billion revolving credit facility, with provisions for a further increase in the total borrowing capacity to $5 billion, if mutually acceptable to Harrah's and its lenders. The interest rate on the facility will be lowered from LIBOR plus 110 basis points to LIBOR plus 87.5 basis points -- the lowest interest rate paid by any casino company.
-- Gary Loveman was named "Best CEO" in the gaming and lodging industry by Institutional Investor magazine for the second straight year. Selections were based on the votes of analysts and investment portfolio managers.
-- Harrah's hosted the inaugural World Series of Poker Circuit Tournaments at Harrah's Atlantic City in January, Harrah's Rincon in February and the Rio in March. Circuit Tournaments will be held at Harrah's Lake Tahoe and Harrah's New Orleans later this spring.
"We are gratified to receive the approvals of Harrah's and Caesars stockholders, and committed to rewarding their votes of confidence by delivering on the potential of this merger," Loveman said. "We are making steady progress toward completion of this transaction. We believe we will be able to secure all remaining regulatory approvals in the near future and close in the second quarter.
"Messrs. Hilton and Bollenbach will be outstanding additions to our board of directors," Loveman said. "They are business leaders of tremendous experience and reputation, and will further strengthen what is independently recognized as one of the gaming industry's elite boards.
"That we were able to raise our borrowing capacity by $1.5 billion while lowering our interest rate demonstrates the benefits of maintaining an investment-grade credit rating," Loveman said. "In addition to facilitating the Caesars acquisition, this increased credit line will allow us to continue making prudent investments in high-return growth opportunities.
"The World Series of Poker is the best-known poker tournament in the world, and we are just beginning to tap the potential of this renowned brand," Loveman said. "The first Circuit Tournaments have been a financial success, generating incremental gains in gaming and food and beverage revenues at each of the three host properties. We are aggressively exploring additional ways to capitalize on the World Series of Poker."
April 20, 2005 07:00 AM US Eastern Timezone
Harrah's Entertainment Reports 2005 First-Quarter Results; Strong Operations, Acquisition Drive Record Revenues, EBITDA, EPS
LAS VEGAS--(BUSINESS WIRE)--April 20, 2005--Harrah's Entertainment, Inc. (NYSE:HET) today reported first-quarter revenues of $1.26 billion, up 24.2 percent from revenues of $1.01 billion in the 2004 first quarter.
Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 30.6 percent in the first quarter to $352.0 million from Property EBITDA of $269.5 million in the year-earlier period. First-quarter Adjusted Earnings Per Share increased to 97 cents, within the range provided in a pre-earnings announcement on April 6, 2005, and up 27.6 percent from the 76 cents achieved in 2004's first quarter. First-quarter Adjusted EPS from Continuing Operations was 87 cents per share, an increase of 26.1 percent from the year-ago quarter.
Property EBITDA and Adjusted EPS, including 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 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.
First-quarter income from operations rose 32.0 percent to $232.8 million from $176.3 million in the year-earlier quarter. First-quarter net income was $103.8 million, up 27.1 percent from $81.7 million in the 2004 first quarter. Diluted earnings per share for the 2005 first quarter was 90 cents, 23.3 percent higher than the 73 cents achieved in the 2004 first quarter.
First-quarter results included contributions from the three Horseshoe casinos, acquired by Harrah's on July 1, 2004. Results for Harrah's East Chicago and Harrah's Tunica, which are contracted for sale to an affiliate of Colony Capital, LLC, are reported as discontinued operations and are excluded from Adjusted EPS from Continuing Operations. Harrah's anticipates closing the sale transaction by the end of April.
"Industry-leading capabilities, the accretive acquisition of Horseshoe Gaming and strong operating performances by many properties all contributed to a solid quarter," said Gary Loveman, chairman, chief executive officer and president of Harrah's Entertainment. "Our strategy of building customer loyalty through sophisticated marketing and outstanding customer service continues to build momentum, producing our fifth consecutive quarter of record results. As we prepare for our historic merger with Caesars Entertainment, we believe the outlook for our company has never been stronger."
First-quarter 2005 same-store revenues increased 6.0 percent over the year-ago period. Cross-market play -- gaming by customers at properties other than their "home" casino -- rose 15.6 percent from the first quarter of 2004. Tracked play -- gaming by customers using the company's Total Rewards player cards -- increased 9.9 percent from the year-ago first quarter, and represented 79.1 percent of the company's total gaming revenues during the quarter.
"We have delivered same-store sales growth in 24 of the last 25 quarters," Loveman said. "This track record of remarkably consistent organic growth foreshadows the enormous potential of putting our capabilities and our strategy to work in the Caesars network.
"The progress of the Horseshoe integration is further grounds for optimism," Loveman said. "The three Horseshoe properties added approximately 8 cents to earnings per share during the first quarter, bringing total accretion to about 21 cents per share in the nine months since the transaction's close. We plan to apply the lessons learned during this successful process to the pending integration of Caesars."
Among the first-quarter highlights:
-- Stockholders of Harrah's and Caesars Entertainment, Inc. separately voted to approve an agreement to merge Caesars Entertainment into Harrah's Operating Company, a wholly owned subsidiary of Harrah's Entertainment. Harrah's stockholders also approved an increase in the number of authorized shares of Harrah's common stock from 360 million to 720 million.
-- Gaming regulators in Louisiana and Mississippi approved Harrah's proposed acquisition of Caesars. The transaction is awaiting clearance from the Federal Trade Commission, and must also be approved by state gaming regulators in Nevada, New Jersey and Indiana.
-- Harrah's announced that Gary Loveman will be chairman, chief executive officer and president of the company following the Caesars merger. Charles Atwood will be senior vice president and chief financial officer; Tim Wilmott will be chief operating officer; and Tom Jenkin, Anthony Sanfilippo and Carlos Tolosa will be presidents of Harrah's Western, Central and Eastern divisions, respectively. Harrah's also announced plans to appoint William Barron Hilton, co-chairman of Hilton Hotels Corp., and Stephen F. Bollenbach, chairman of Caesars Entertainment and co-chairman and CEO of Hilton Hotels, to the Harrah's board of directors following the merger.
-- Harrah's Entertainment's board of directors was ranked second out of 41 publicly traded companies in a survey of the top-performing boards in gaming conducted by HVS International, a human resources consulting firm.
-- Harrah's Operating Company agreed to amend the terms and increase the borrowing capacity of its bank credit facilities, effective upon the closing of the Caesars acquisition. The company's previous $2.5 billion revolving credit facility will be converted to a $4 billion revolving credit facility, with provisions for a further increase in the total borrowing capacity to $5 billion, if mutually acceptable to Harrah's and its lenders. The interest rate on the facility will be lowered from LIBOR plus 110 basis points to LIBOR plus 87.5 basis points -- the lowest interest rate paid by any casino company.
-- Gary Loveman was named "Best CEO" in the gaming and lodging industry by Institutional Investor magazine for the second straight year. Selections were based on the votes of analysts and investment portfolio managers.
-- Harrah's hosted the inaugural World Series of Poker Circuit Tournaments at Harrah's Atlantic City in January, Harrah's Rincon in February and the Rio in March. Circuit Tournaments will be held at Harrah's Lake Tahoe and Harrah's New Orleans later this spring.
"We are gratified to receive the approvals of Harrah's and Caesars stockholders, and committed to rewarding their votes of confidence by delivering on the potential of this merger," Loveman said. "We are making steady progress toward completion of this transaction. We believe we will be able to secure all remaining regulatory approvals in the near future and close in the second quarter.
"Messrs. Hilton and Bollenbach will be outstanding additions to our board of directors," Loveman said. "They are business leaders of tremendous experience and reputation, and will further strengthen what is independently recognized as one of the gaming industry's elite boards.
"That we were able to raise our borrowing capacity by $1.5 billion while lowering our interest rate demonstrates the benefits of maintaining an investment-grade credit rating," Loveman said. "In addition to facilitating the Caesars acquisition, this increased credit line will allow us to continue making prudent investments in high-return growth opportunities.
"The World Series of Poker is the best-known poker tournament in the world, and we are just beginning to tap the potential of this renowned brand," Loveman said. "The first Circuit Tournaments have been a financial success, generating incremental gains in gaming and food and beverage revenues at each of the three host properties. We are aggressively exploring additional ways to capitalize on the World Series of Poker."
Southern Nevada Drives West Region To Record Results
West Results
(in millions)
2005 2004 Percent
First First Increase
Quarter Quarter (Decrease)
---------- --------- ----------
Northern Nevada
Total revenues $ 99.0 $ 105.5 -6.2%
Income from operations 5.0 8.7 -42.5%
Property EBITDA 15.7 18.5 -15.1%
Southern Nevada
Total revenues 288.5 258.6 11.6%
Income from operations 80.3 65.4 22.8%
Property EBITDA 98.2 82.2 19.5%
Total Western Region
Total revenues 387.5 364.1 6.4%
Income from operations 85.3 74.1 15.1%
Property EBITDA 113.9 100.7 13.1%
East Region Records Increase in Property EBITDA
East Results
(in millions)
2005 2004 Percent
First First Increase
Quarter Quarter (Decrease)
--------- --------- ----------
Harrah's Atlantic City
Total revenues $ 100.4 $ 100.4 0.0%
Income from operations 23.8 26.1 -8.8%
Property EBITDA 34.1 35.0 -2.6%
Showboat Atlantic City
Total revenues 82.8 81.4 1.7%
Income from operations 19.1 18.5 3.2%
Property EBITDA 28.9 26.2 10.3%
Total Eastern Region
Total revenues 183.2 181.8 0.8%
Income from operations 42.9 44.6 -3.8%
Property EBITDA 63.0 61.2 2.9%
North Central Region Posts Record Results
North Central Results
(in millions)
2005 2004 Percent
First First Increase
Quarter Quarter (Decrease)
--------- ---------- ----------
Illinois/Indiana
Total revenues $ 205.5 $ 99.0 107.6%
Income from operations 41.2 15.7 162.4%
Property EBITDA 49.1 19.8 148.0%
Iowa
Total revenues 63.4 60.6 4.6%
Income from operations 12.6 8.0 57.5%
Property EBITDA 18.6 13.6 36.8%
Missouri
Total revenues 119.8 108.4 10.5%
Income from operations 21.1 18.6 13.4%
Property EBITDA 32.8 27.8 18.0%
Total North Central
Total revenues 388.7 268.0 45.0%
Income from operations 74.9 42.3 77.1%
Property EBITDA 100.5 61.2 64.2%
Acquisitions, Harrah's New Orleans Drive Record South
Central Region Results
South Central Results
(in millions)
2005 2004 Percent
First First Increase
Quarter Quarter (Decrease)
--------- --------- ----------
Louisiana
Total revenues $ 214.7 $ 180.8 18.8%
Income from operations 32.4 27.2 19.1%
Property EBITDA 46.1 37.2 23.9%
Mississippi
Total revenues 61.1 - N/A
Income from operations 14.6 - N/A
Property EBITDA 18.8 - N/A
Total South Central
Total revenues 275.8 180.8 52.5%
Income from operations 47.0 27.2 72.8%
Property EBITDA 64.9 37.2 74.5%
