Casino company earnings: Revenue jumps for Harrah's

LAS VEGAS, Nevada -- Harrah's Entertainment experienced 85 percent income growth in the second quarter, pushed by strong visitor numbers in the Las Vegas market.

However, Atlantic City continues to drag down the company's bottom line. Properties there posted double-digit decreases in operational income and cash flow.

"Harrah's second-quarter results confirm continued strength in the Las Vegas market and a competitive environment in Atlantic City," said CIBC World Markets gaming analyst David Katz in a note to investors.

The earnings were issued in a statement Tuesday.

The gaming company, which is being bought for $17.1 billion by a joint-venture partnership between private equity firms Texas Pacific Group and Apollo Management, did not hold a conference call with investors.

Harrah's reported a net income of $237.5 million, or $1.25 per share, in the three months ended June 30. A year ago, the company reported $128.6 million, or 69 cents per share.

Revenue rose 13.8 percent to $2.7 billion from $2.4 billion.

Analysts polled by Thomson Financial expected earnings of 98 cents per share on revenue of $2.59 billion.

Company cash flow, defined as earnings before interest, taxes, depreciation and amortization, increased 6.1 percent to $713.9 million for the quarter.

Cash flow for the Las Vegas properties increased 15.5 percent to $306.5 million for the quarter and increased 9.1 percent to $604.1 million for the year.

Harrah's owns and operates Caesars Palace, Rio, Paris Las Vegas, Bally's, Bill's, Flamingo, Imperial Palace and Harrah's.

The strong local cash flow is in stark contrast to the growing woes of the Atlantic City region.

The five area properties' cash flow decreased 15.6 percent to $143.4 for the quarter and decreased 11 percent to $276.2 million for the year.

Atlantic City revenues increased 13.7 percent to $592.6 million for the quarter and increased 12.6 percent to $1.1 billion for the year.

The company blamed the decrease on increased slot competition in New York and Pennsylvania, a new smoking ban implemented in April and increased marketing and promotional program costs.

The decline surprised analyst Joseph Greff of Bear Stearns, who had expected cash flow closer to $167 million.

Harrah's also struggled in Nevada outside the Las Vegas market due to a weak ski season and northern wildfires.

Revenues for properties in Reno, Lake Tahoe and Laughlin decreased 2.7 percent to $154.2 million for the quarter. Cash flow decreased 11.5 percent to $34.7 million for the quarter and had a $10.6 percent decrease to $67.5 million for the year.

Weak cash flow outside Las Vegas held the company to a 3.6 percent increase to $1.4 billion for 2007.

Harrah's has two large projects under construction: the $704 million Margaritaville Casino and Resort in Biloxi, Miss., and the $1 billion expansion at Caesars Palace.

The buyout is scheduled to close in late 2007 or early 2008 pending approval from state and federal regulators, including gaming officials in various jurisdictions.

Shareholders approved the deal in April.

The stock price will continue to be tied to the buyout offer of $90 per share, not earnings reports and other market factors.

Harrah's Entertainment shares rose 14 cents, or 0.17 percent, Tuesday to close at $84.14 on the New York Stock Exchange.