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LAS VEGAS – Try as they might, analysts couldn't get Harrah's Entertainment executives to comment on its proposed $15.5 billion buyout offer from two private equity firms when the casino operator announced its third-quarter earnings Wednesday morning.
Harrah's, the gaming industry's largest casino company, grew revenue to $2.5 billion in the three-month period that ended Sept. 30, an 11 percent increase from $2.3 billion a year ago. The increase was largely attributed to the company's seven Las Vegas casinos, which reported a 21 percent increase in overall revenue during the quarter.
At the outset of a conference call to discuss the quarterly results, Harrah's Chairman Gary Loveman said executives were precluded from talking about the estimated $83 to $84 per share offer from Texas Pacific Group of Fort Worth, Texas, and New York-based Apollo Management.
"Our special committee (of the company's nonmanagement directors) continues to review certain strategic matters in regards to the recent proposal," Loveman said during the conference call. "We will not address questions on that matter."
But that didn't stop analysts from asking.
In the opening question of the call, Bear Stearns gaming analyst Joe Greff wanted to know if the private equity firms had increased their offer from the originally announced bid of $81 a share.
"As I indicated, I can't field questions in respect to activity surrounding the offer, but thanks for trying," Loveman said.
The final question of the hourlong call concerned a drop in the ratings of Harrah's bonds.Loveman said the decrease was attributed to the buyout offer and was not reflective of Harrah's operations.
"So that falls under items that we're not going to comment on," Loveman said.
Loveman and other Harrah's executives were not made available for media questions after the call.
Harrah's announced on Wed- nesday that the company's diluted earnings per share in the quarter was 96 cents, based on a net income of $177.2 million, compared with 92 cents per share and a net income of $169 million a year ago. When the results from casinos the company no longer operates were factored in, Harrah's adjusted earnings per share was 94 cents.
Analysts polled by Thomson First Call estimated Harrah's would earn 99 cents a share.
"The company's third-quarter results were generally good, with the notable exception in Atlantic City, where profit margins were a bit worse than expected due to higher promotional activity," Greff said in a note to investors. "The results in Las Vegas and the riverboat markets were solid and above our forecasts."
Las Vegas, particularly Caesars Palace and the Rio, drove the company's overall results, Harrah's executives said. Revenue from the Las Vegas casinos was $812.4 million, a 21 percent increase compared with $670.1 million last year.
The Rio benefited from the World Series of Poker, which brought thousands of spectators and poker players into the property for 48 days in July and August. While not breaking out the results of casinos individually for the first time, Harrah's officials said the Rio had a record performance in revenue during the quarter.
"Because of the World Series of Poker, the Rio benefited greatly by our ability to market the property, which resulted in exceptional results for that reason," Harrah's Chief Financial Officer Jonathan Halkyard said on the conference call.
In answer to a question about moving the event to Caesars Palace, Loveman said the World Series of Poker would remain at the Rio because the property has the room to manage the tournament.
"It works well at the Rio. Clearly, we don't want to drop it in the middle of Caesars Palace," Loveman said.
Halkyard said six of the seven Las Vegas properties operated by Harrah's -- Rio, Bally's, Paris Las Vegas, Imperial Palace, Flamingo and Caesars Palace -- reported double-digit growth in revenue.
Only Harrah's had results under that figure. The Las Vegas properties, he said, grew because of cross-market and cross-property gambling and a higher spending rate per visitor.
Loveman credited the company's Total Reward customer marketing program with growing attendance at Harrah's properties across all jurisdictions, including Las Vegas.
With this month's transaction to acquire the Barbary Coast, a deal expected to close by early next year, Harrah's now has 350 acres to develop on the Strip. Halkyard said the company spent nearly $1 billion to acquire all the land parcels.
Loveman said Harrah's is at least two or three months away from being able to describe its plans for the location.
Harrah's overall results were affected by an off quarter at the company's four Atlantic City casinos, where revenue was $560.2 million in the quarter, compared with $562.1 million a year ago.
"New Jersey's three-day shutdown of Atlantic City casinos due to a state budget impasse, competitive activities in the city and insufficient marketing initiatives on our part impacted our Atlantic City Region performance," Loveman said. "Most other regions saw improved operating earnings and higher margins."
Development costs also weighed down earnings. The company has expansion projects domestically and internationally.
Halkyard said Harrah's spent $28 million during the quarter on domestic and foreign development expenses, with a large chunk dedicated to promoting a ballot measure that would authorize an American Indian casino in Rhode Island.
Shares of Harrah's closed at $74.78 on the New York Stock Exchange, up 83 cents, or 1.12 percent.
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