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Arnold M. Knightly

Harrah's earnings top Wall Street forecast

27 July 2009

LAS VEGAS, Nevada –- Harrah's Entertainment finished the second quarter ahead of analyst expectations, benefiting from cost-cutting and strong performances from the company's markets outside Las Vegas and Atlantic City.

The company was able to reduce its heavy debt load by nearly $3.86 billion and remove concerns surrounding near term and senior debt through two exchange offers and senior-debt pay downs completed in the quarter, Deutsche Bank gaming analyst Andrew Zarnett said Friday in an investors note.

"The second-quarter financing activities enabled us to extend our average debt maturity and improve our overall liquidity," Chairman and Chief Executive Officer Gary Loveman said in a statement. "The note sale, credit-facility amendment, exchange offers and open-market repurchases of (Harrah's) notes have strengthened our balance sheet and enhanced our financial flexibility."

The company reported $24.1 billion in long-term debt at the end of the first quarter, but has yet to adjust the figure for the second quarter.

Despite the financial maneuvering, the company still had its operating income fall because of the slumping Las Vegas economy, which generates 31 percent of its revenues.

Harrah's, which owns 53 casinos worldwide, reported income from operations of $6.3 million for the second quarter ended June 30, down from $323.1 million last year, the company announced Friday in a release.

The decline was driven by a $297.1 million noncash charge of goodwill and other intangible assets largely due to the continued impact of economic conditions on the company's Las Vegas properties.

Quarterly revenues dropped 12.7 percent, from $2.6 billion last year to $2.27 billion for the quarter. The company's adjusted cash flow for the quarter slipped 10.8 percent, to $565.6 million from $634.3 million last year.

For the first six months of 2009, income from operations dropped 59.7 percent, to $291.7 million from $724.1 million.

Revenues for the year declined 13 percent, to $4.53 billion from $5.2 billion, and adjusted cash flow declined 11.7 percent, from $1.26 billion to $1.11 billion through June.

In Las Vegas, Harrah's Entertainment posted a $123.3 million loss from operations for the second quarter, a swing from the $199 million income from operations posted last year.

Total revenues for the company's Strip operations dropped 19.2 percent, to $705.2 million from $873.1 million for the quarter, and dropped 20.1 percent the first six months, to $1.39 billion from $1.74 billion.

Local cash flow dropped 26.5 percent in the quarter, to $210.6 million from $286.4 million, and 27.2 percent the first six months, to $409.2 million from $561.8 million.

Hotel occupancy, however, for the market was 95 percent between April and June.

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

The Atlantic City region, which includes four properties in New Jersey and one in Pennsylvania, had income from operations in the quarter slip 5.5 percent, with revenues dropping 13.9 percent and property cash flow falling 14 percent.

"We still face challenges, particularly in Las Vegas and Atlantic City, though our cost-reduction efforts led to improved second-quarter (cash flow) margins in other markets we serve," Loveman said.

Other markets performed better in the second quarter. The company's four casinos in Illinois and Indiana showed 20 percent revenue and cash flow increases.

Cash flow also posted double-digit increases for casinos in Iowa and Missouri and internationally, while cash flow for the company's seven casinos in Louisiana and Mississippi climbed 3.6 percent.

Harrah's Entertainment's five property's in Lake Tahoe, Reno and Laughlin posted flat cash flow and an 18.7 percent decrease in revenues for the quarter.

Harrah's earnings top Wall Street forecast is republished from