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Harrah's Entertainment loses $274 million in second quarter
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JOHN LOCHER/LAS VEGAS REVIEW-JOURNAL
Sid Novella checks in guests Wednesday at Planet Hollywood Resort, one of nine resorts Harrah's owns in Las Vegas. » Buy this photo
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LAS VEGAS REVIEW-JOURNAL
Privately held Harrah's Entertainment lost $274 million in the second quarter, blaming weak customer spending for the poor performance.
The company's loss reversed a year-ago profit of $2.29 billion, which included a $4.3 billion pretax gain from debt extinguishment.
Harrah's revenues for the three months that ended June 30 were $2.22 billion, a decline of 2.2 percent from $2.27 billion in the same quarter a year ago. The company said Wednesday it posted a $300,000 loss from operations, compared with prior-year earnings of $6.3 million.
Harrah's Chairman and CEO Gary Loveman said the company selectively increased marketing investments and labor costs in anticipation of stronger demand, which lead to lower operating margins.
"After two years of the worst economic downturn since the Great Depression, it appears that year-over-year revenue declines are moderating in virtually all of our markets," Loveman said. "To ensure our margins are maintained, we will remain vigilant with respect to our expense structure."
In Las Vegas, Harrah's grew revenues 1.1 percent at its nine resorts to $712.7 million, compared with $705.2 million a year ago. Harrah's acquired Planet Hollywood Las Vegas in February, which helped boost revenues.
Without Planet Hollywood, Harrah's said, revenues would have declined 8.2 percent.
Barbara Cappaert, a bond analyst with KDP Asset Management, said Harrah's results on the Strip mirrored performances of the 10 Strip casinos operated by competitor MGM Resorts International.
The company said hotel room occupancy on the Strip was in the mid-90 percent range.
"Looking ahead, we're encouraged by the recovery of group business in Las Vegas during the second quarter and we expect group business to continue to outperform 2009 for the rest of this year," Loveman said. "We're also encouraged by the positive overall revenue trends in the second quarter and expect those to continue."
Harrah's said it has reduced expenses and debt over the past two years while increasing liquidity to about $3 billion. In addition to Planet Hollywood, the company acquired the Thistledown racetrack in Cleveland last month.
Loveman said Harrah's is well positioned for legalization of online gaming in the United States.
"(Harrah's) is more capable of capitalizing on additional growth opportunities than at any time in the past two years," Loveman said.
Cappaert said she would like Harrah's to invest in the stalled Foxwoods casino project in Philadelphia, but she was concerned the company does not have sufficient cash flow from existing casinos to both expand and stabilize its leverage.
Harrah's was taken private in 2008 by private-equity firms TPG Inc. and Apollo Management LP in a leveraged buyout. Its debt load was reduced with a cash infusion from the firms and hedge-fund manager Paulson & Co. in June.
"While the Paulson investment at the parent is encouraging, we still think more debt exchanges are needed to provide sufficient liquidity to sustain Harrah's through a choppy recovery," Cappaert told investors.
Deutsche Bank gaming analyst Andrew Zarnett thought the Paulson investment would be used for balance sheet debt reduction and funding new investments both domestically and in international markets.
"We view this event as a positive for the Harrah's credit, given that the transaction bolsters Harrah's liquidity over the near-term, reduces debt maturities and signals to the market that the sponsors are willing to sell equity at a price," Zarnett told investors.
Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
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Who wants to guess which property Harrah's sells first in order to pay their debt? I say Rio.
Harrah's got cheap with their offers so I stopped going there and began going elsewhere. You have to do something to stand out from the crowd. Harrah's decided not to anymore.
@Tom, You're not going to hear what you mentioned, becuase in this case it doesn't apply. You are right, it's bad (well, GREEDY at a minimum) management, and bad decisions. They over-expanded, over-reached, and took on too much debt. Plain and simple.
I can't wait to hear how this is all the fault of government interference and greedy unions. Sounds like bad management making bad decisions, plain and simple.
and they pay him how much for those gems of knowledge
@Jason... I agree. Plus, as much as I hate to admit it, Loveman is a helluva lot smarter than those clowns over at MGM.
I'd rather be Harrah's than MGM Resorts with the City Center hanging around its neck.
"(Harrah's) is more capable of capitalizing on additional growth opportunities than at any time in the past two years," Loveman said.
"Cappaert said.....she was concerned the company does not have sufficient cash flow from existing casinos to both expand and stabilize its leverage"
LOL...who's correct? My money is on the bond analyst. LOL LOL LOL
I'm sure that the execs for this hopeless company that pushed for all of those acquisitions at TOP DOLLAR and still getting their million dollar bonuses, while the company has been bled dry. I will never spend a dime ever again in a Harrah's owned casino.
"In Las Vegas, Harrah's grew revenues 1.1 percent at its nine resorts to $712.7 million"
"Without Planet Hollywood, Harrah's said, revenues would have declined 8.2 percent"
This is a typical smoke and mirrors move by management when PROFIT and ROE are in the toilet. Let's talk about REVENUES!!! Harrahs is OVERleveraged, period. They can't "buy" their way out of this mess. Soon they will be sellling properties to pay their debt down to manageable levels.