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Oct. 28, 2009
Copyright © Las Vegas Review-Journal

Arrows point down at casino companies

Big charge figures in $1.05 billion quarterly loss for Harrah's

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL

Visitors cross Las Vegas Boulevard on Tuesday in front of Harrah's. Harrah's Entertainment, the hotel-casino's parent, said it lost $1.05 billion in the quarter ended Sept. 30, hurt by a $1.33 billion charge against earnings to write down the value of certain assets around the country.
Photo by John Gurzinski.

The sour economy and a massive impairment charge caused casino giant Harrah's Entertainment to report a net loss of more than $1 billion in the third quarter, the company said Tuesday.

Las Vegas-based Harrah's, which was taken private last year by private-equity firms TPG Inc. and Apollo Management LP, said its net loss from operations was $1.05 billion for the quarter ended Sept. 30, compared with net income of $349.6 in the same quarter a year ago.

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    • The company posted a $1.33 billion charge against earnings to write down the value of certain assets around the country. Without the impairment charge, Harrah's would have reported net income of $278.4 million from operations.

    The overall third-quarter net loss from continuing operations after taxes was $1.62 billion.

    Harrah's reported earnings early Tuesday, but company executives did not hold a conference call to discuss the results with analysts.

    "The third quarter was challenging from an operations standpoint, as lower spending by consumers affected by the global recession continued to impact revenues," Harrah's Chairman and Chief Executive Officer Gary Loveman said in a statement. "During the third quarter, we continued our focus on aligning expenses with revenues and addressing our capital structure to cope with the protracted economic slump."

    Harrah's companywide revenues were $2.28 billion, a decline of 13.7 percent compared with $2.64 billion in the same quarter a year ago.

    Deutsche Bank gaming analyst Andrew Zarnett said Harrah's also experienced a nearly 15 percent decline in cash flow during the quarter regardless of the impairment charge.

    "The decline in (cash flow) during the latest quarter was primarily due to continued (midweek) rate disintegration in Las Vegas and competitive pressure at Harrah's Atlantic City properties," Zarnett told investors. "On the flip side, results somewhat benefited from management's efficiency initiatives and relatively strong performances at Harrah's Iowa and Missouri regional properties."

    On the Strip, where Harrah's operates eight properties including Caesars Palace, Rio, Bally's and Harrah's Las Vegas, the company reported a net loss of $778.8 million in the quarter, compared with net income of $155.4 million in the same quarter a year ago.

    Revenues in Las Vegas were $657.2 million, a decline of 17.5 percent compared with $796.8 million in the 2008 third quarter.

    Harrah's said the net loss was due to lower spending by visitors and impairment charges of $875.8 million in the third quarter surrounding several of the company's Strip properties.

    Harrah's raised $1.7 billion in capital during the quarter with much of the proceeds being used to pay down the company's multibillion-dollar debt load.

    Harrah's has nearly $501.8 million in debt maturing next year and $168.9 million due in 2011, an August filing with the Securities and Exchange Commission showed. Harrah's has $6.3 billion in term loans maturing by 2015 and all of a $1.1 billion credit agreement that is due in 2014, SEC filings show.

    "We conducted another round of financing activities to shore up our balance sheet and enhance our financial flexibility, which has enabled us to take advantage of some exciting growth opportunities," Loveman said.

    Zarnett thought any cash that was left after the debt repurchase would bolster the company's balance sheet.

    "We believe that a portion of cash on the balance sheet will be used to acquire distressed assets, such as the recent purchase agreement signed to acquire Thistledown racetrack in Cleveland," Zarnett said.

    In September, Harrah's announced an $89 million agreement to buy the Thistledown horse-racetrack. The acquisition is in anticipation of the legalization of video lottery terminals for certain racetracks in Ohio.

    The Review-Journal on Sept. 14 reported that Harrah's purchased 16 percent of Planet Hollywood Resort's $860 million debt in a possible bid to acquire the Strip hotel-casino. Neither Harrah's nor Planet Hollywood Resort officials would comment on the reports. Multiple sources have said executives from Harrah's Entertainment toured Planet Hollywood Resort.

    Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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    Harrah's Dealer wrote on October 28, 2009 03:48 PM: I would be willing to bet my hard earned money that all the people bad mouthing Harrah's here are the fleas we don't want anyway. Please do me and the other dealers that are trying to make a living a favor and stick to your word and find another casino to gamble at in the future. Noone wants to hear your crying at the table or pool anymore then we want to read your put downs here. Good riddance to bad rubbish. Now stay away!


    452degrees wrote on October 28, 2009 03:47 PM: "Harrah's said the net loss was due to lower spending by visitors and impairment charges of $875.8 million in the third quarter surrounding several of the company's Strip properties."

    HARRAH'S DICTIONARY
    Impairment charges = the place to hide the cost to repair illegal and hazardous remodels and pay offs to inspection officials. Cover-up money to cover the cost of exposing employees, contractors, vendors and valved guests to ASBESTOS!
    There is certainly no GOODWILL in that intangible asset!!!!!!!!

    No money for employees but are buying race tracks and the Planet Hollywood debt. Must be in bed with the unions too! Spend your money elsewhere!


    BILL MIRON wrote on October 28, 2009 01:21 PM: THIS HARRAH'S ORGANIZATION IS SOMETHING ELSE...DISCUSSED BANKRUPCY EARLIER THIS YEAR AND ARE INTERESTED IN PURCHASING PLANET HOLLYWOOD...NO WONDER THE USA HAS PROBLEMS WITH THE FINANCIAL MESS....THIS COMPANY IN MY UMBLE EXPERIENCE HAS RUINED THE OLD HILTON CHAIN....WILL NEVER STAY AT A HARRAH'S OWNED PROPERTY AGAIN...STILL ENJOY VEGAS BUT NO LONGER ANY HARRAH'S


    And like what wrote on October 28, 2009 12:19 PM: And like what am I as a Las Vegan supposed to care about Harrah's?


    Lou wrote on October 28, 2009 12:06 PM: Harrah's is too big to fail, taxpayers be ready to "save" another company. They'll drop a few bucks into the politicians pockets in Washington, Carson City and Clark County and we will all "save" this "great" company for the "good" of our city and our nation. Wait and you will see.


    Al Capone wrote on October 28, 2009 10:03 AM: One of the biggest problems that Vegas has is one company owning several casino's. It is simply a recipe for corruption and theft.I agree with many of the bloggers here that considering how much these casino's make.They charge way to much for the drinks.The same can be said about the food and the buffett with in reason."Keep It Simple" Should be the slogan.The "Wise Guys" back in the day did and everyone was happy and Vegas never saw hard times.Do away with the stupidly overpriced homes and Go back to the "Blue Collar" mentality that once governed Las Vegas and things will be good again and last forever. My my ! If my buddy Bugsy Siegel could see Las Vegas now.What a shell it has become ! Get back to the good ole days and let the party begin.Amen to that with a shot of your favorite whiskey !


    Fred Frazzetta wrote on October 28, 2009 09:42 AM: If we collectively BOYCOTT all of Harrah's Entertainment, Inc. properties nationwide, Harrah's idiot management team will get the message, and be forced into making positive changes. If their income stream is cut more through a concerted effort...they will be screwed! Couldn't happen to a more deserving company, or more deserving individuals such as: Gary Loveman, Don Marrandino, Tom Jenkin, Marilyn Winn, and one of my favorites "put both feet in my mouth" Jan Jones - ex mayor Jan Jones.

    Folks, please don't feel sorry for Texas Pacific Group or Apollo, the companies that paid way too much for Harrah's. I called both companies and made them aware of what Harrah's had done prior to them purchasing Harrah's, and they didn't care. Harrah's corporate foundation is built solidly on greed & unethical criminal behavior! Harrah's very own Bernie Madoff PONZI scheme!

    If you truly want to send a message to Harrah's, which they will hear loud & clear...simply spend your money elsewhere, and sit back and watch them sink first then implode. Couldn't happen to a nicer, more deserving company.


    Jay from Summerlin wrote on October 28, 2009 09:21 AM: @Ken - that is hilarious!!

    @FredF - You don't get the kudos you deserve for blowing the whistle on this disgustingly immoral company known as Harrah's. Kudos to you!

    I see a movie based on your incident happening soon.


    johnfromdowtown wrote on October 28, 2009 07:54 AM: I am glad to hear that Harrah's is hurting. They have dulled and cheapened this town. I am glad that people are finally waking up to them and MGMM, Stations, etc.


    Ken wrote on October 28, 2009 07:43 AM: I used to call Harrah's the Walmart of the gaming industry but now it is at the point that it is insulting to Walmart.


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