Press Release: Harrah's Entertainment, Inc. Today's News On The Net - Business Wire's full file on the Internet
February 7, 2002
LAS VEGAS, NV -- Harrah's Entertainment, Inc. (NYSE:HET) yesterday reported Adjusted Earnings Per Share of $2.04
for the year ended December 31, 2001, up 36.9 percent from the Adjusted EPS of $1.49 reported for 2000.
Including all items, net income per diluted share was a record $1.81 in 2001, compared with a net loss per share
of 10 cents in 2000. The loss in 2000 was due primarily to restructuring charges related to two nonconsolidated
affiliates.
The company posted record full-year revenues of $3.71 billion in 2001, up 11.4 percent from revenues of $3.33 billion
in 2000. Full-year Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose
10.9 percent to a record $982.8 million, compared with $886.5 million in 2000.
``Our record performance is due to same-store sales growth fueled by sophisticated marketing techniques, targeted
capital investments and incremental results from the July 31, 2001, acquisition of Harveys Casino Resorts,'' said
Harrah's Entertainment Chairman and Chief Executive Officer Phil Satre. ``Better weather in the fourth quarter
of 2001 than in the year-earlier quarter also contributed to our improvements.''
Harrah's Entertainment posted fourth-quarter Adjusted EPS of 46 cents, within the range forecast in a pre-earnings
announcement on January 15, 2002. In the 2000 fourth quarter, the company reported Adjusted EPS of 20 cents. Including
all items, diluted earnings per share for the 2001 fourth quarter were 49 cents. In the 2000 fourth quarter, the
company reported a loss of $1.41 per share due primarily to the aforementioned restructuring charges.
The company's 2001 fourth-quarter revenues rose 16.9 percent to a record $960.6 million, compared with $822.0 million
in the 2000 fourth quarter. Fourth-quarter Property EBITDA was a record $243.6 million, up 25.0 percent from fourth-quarter
2000 Property EBITDA of $194.9 million.
``Despite its challenges, 2001 was a breakthrough year for our company,'' Satre said. ``Our financial results clearly
demonstrate the competitive advantages provided by our technology-based consumer-marketing strategies and confirm
the value of our geographic-diversification strategy.
``In addition to the recession and the effects of the September 11 terrorist attacks, we experienced a significant
year-over-year increase in employee health-care costs in 2001,'' Satre said. ``In spite of those issues, we were
able to post record results due to strong increases in same-store gaming revenues and earnings associated with
recent capital investments. The acquisition of Harveys Casino Resorts also added to earnings.''
Same-store gaming revenues nationwide rose 5.7 percent in 2001 from a year earlier. For the fourth quarter, same-store
gaming revenues were up 8.6 percent from the 2000 fourth quarter, aided by strong performances by Eastern and Central
Region properties.
``When we saw recession-related declines in visitation and spending by retail customers beginning last March, we
embarked on a program to bolster that segment of our business,'' Satre said. ``The result was an improvement in
retail business in many of our markets that complemented continued strong growth among avid experienced players
and VIP customers during the second half of the year.
``In addition, Total Rewards -- the premier nationwide customer-loyalty program for casino players -- enabled us
to make rapid, direct and effective high-value incentive offers to our customers, stimulating our core business
after September 11,'' Satre said.
``The Harveys acquisition was accretive to income for the year. In addition, we completed the integration of three
Harveys properties and 674,000 new customers into the Total Rewards system in record time,'' Satre said. ``And
expansion projects generated strong customer demand and higher cash flow at properties such as Harrah's Joliet
and Harrah's Shreveport, proving the value of prudent capital spending.''
Among 2001 highlights:
``We plan to continue to develop and introduce new capabilities in 2002 that we believe will enhance future
results,'' Satre said. ``We expect to introduce new tools that should allow us to analyze slot and customer data
more effectively, improve the design of our casino floors, facilitate our hiring and buying decisions and enhance
our customer marketing.
``Our capital-spending program, while expected to be more modest in 2002 than in 2001, should drive continued growth
with increased high-quality hotel rooms, more casino positions and new restaurants,'' Satre said. ``Our financial
capabilities, including a strong balance sheet and the highest debt rating in the casino industry, position us
well to take advantage of growth opportunities that may arise in new jurisdictions. We are optimistic about the
future.''
Western Region Reports Record Revenues For Year
Western Region Results
(in millions)
2001 2000 Percent 2001 2000 Percent
Fourth Fourth Increase Full Full Increase
Quarter Quarter (Decrease) Year Year (De-
crease)
------- ------- -------- ----- ------ -------
Rio Hotel & Casino
Revenues $92.7 $100.1 -7.4% $391.6 $393.5 -0.5%
Operating Profit(/) 6.5 -- N/M 1.5 (11.4) N/M
Property EBITDA(/) 18.0 11.3 59.3% 45.6 29.2 56.2%
Harrah's Southern Nevada
Revenues $100.4 $103.5 -3.0% $422.5 $403.6 4.7%
Operating Profit 16.3 21.2 -23.1% 77.4 78.5 -1.4%
Property EBITDA 25.6 29.8 -14.1% 113.0 113.6 -0.5%
Harrah's Northern Nevada
and Harveys Lake Tahoe
and Colorado properties
Revenues $111.4 $78.6 41.7% $389.4 $332.5 17.1%
Operating Profit 7.8 9.1 -14.3% 51.9 60.8 -14.6%
Property EBITDA 16.9 14.8 14.2% 81.9 83.3 -1.7%
Total Western Region
Revenues $304.5 $282.2 7.9% $1,203.5 $1,129.6 6.5%
Operating Profit 30.6 30.3 1.0% 130.8 127.9 2.3%
Property EBITDA 60.5 55.9 8.2% 240.5 226.1 6.4%
(/) Rio's Operating Profit and Property EBITDA for 2001 Full Year include $13.0 million in nonrecurring charges.
Combined, Harrah's Western Region properties produced record full-year and fourth-quarter revenues and record fourth-quarter
Property EBITDA. Results from the Harveys casinos in Nevada and Colorado helped mitigate the impact on our Northern
Nevada properties of the weak economy in the area's major California feeder market.
Harrah's Las Vegas full-year revenues rose 6.6 percent to a record level and Property EBITDA was up 2.0 percent
from 2000. The facility's fourth-quarter revenues were down 3.4 percent and Property EBITDA was off 10.4 percent
from the 2000 fourth quarter due primarily to the impact of the September 11 attacks on air travel.
The Rio's full-year revenues declined less than 1.0 percent but Property EBITDA was up 56.2 percent from 2000 due
to a de-emphasis on international high-end table-game play, which generated losses in 2000. For the 2001 fourth
quarter, Rio's revenues declined 7.4 percent, but Property EBITDA rose 59.3 percent from the year-ago quarter and
was the highest fourth-quarter Property EBITDA posted by the Rio since 1997.
``In the third quarter, we focused the Rio's marketing efforts away from high-end international play and toward
its traditional customer base, and the fourth-quarter's results showed marked improvements despite the lingering
effects of September 11,'' said Gary Loveman, Harrah's President and Chief Operating Officer.
At Harrah's Laughlin, full-year revenues were about even with last year's record results, while Property EBITDA
was down 12.5 percent from 2000. Fourth-quarter revenues were also about even with the record results from the
year-ago quarter, while Property EBITDA was down 34.4 percent. The results were impacted by a decline in business
after September 11, particularly related to the property's air-charter program.
Harrah's Reno reported a 4.0 percent decrease in full-year revenues and a 24.4 percent decline in Property EBITDA
from 2000. Reno's fourth-quarter revenues were down 4.9 percent and Property EBITDA was 37.6 percent below that
of the year-ago quarter. Weak economic conditions in the key Northern California feeder market hurt results in
both the year and fourth quarter.
Harrah's Tahoe also posted revenue and Property EBITDA declines for the full year and fourth quarter due to the
depressed Northern California economy. Full-year revenues were off 8.3 percent from 2000, while Property EBITDA
was down 26.7 percent year over year. Fourth-quarter revenues at Harrah's Tahoe declined 18.1 percent, while Property
EBITDA was 56.8 percent below that of the year-ago quarter.
The Harveys Lake Tahoe and Colorado casinos, acquired last July 31, contributed $78.0 million of revenues and $18.7
million in Property EBITDA to the Western Region's full-year results. Fourth-quarter revenues from the Harveys
Western Region casinos totaled $42.0 million, while Property EBITDA was $8.9 million.
Eastern Region Posts Record Full-Year Revenues, Property EBITDA
Eastern Region Results
(in millions)
2001 2000 Percent 2001 2000 Percent
Fourth Fourth Increase Full Full Increase
Quarter Quarter (Decrease) Year Year (De-
crease)
------- ------- -------- ----- ------ -------
Harrah's Atlantic City
Revenues $93.7 $89.6 4.6% $397.3 $394.3 0.8%
Operating Profit 26.7 22.2 20.3% 121.3 113.0 7.3%
Property EBITDA 33.5 28.0 19.6% 147.8 137.2 7.7%
Showboat Atlantic City
Revenues $78.0 $73.7 5.8% $326.7 $329.2 -0.8%
Operating Profit 12.3 9.9 24.2% 61.6 69.3 -11.1%
Property EBITDA 19.7 16.2 21.6% 89.7 93.7 -4.3%
Total Eastern Region
Revenues $171.7 $163.3 5.1% $724.0 $723.5 0.1%
Operating Profit 39.0 32.1 21.5% 182.9 182.3 0.3%
Property EBITDA 53.2 44.2 20.4% 237.5 230.9 2.9%
Propelling the Eastern Region to record results, Harrah's Atlantic City posted record revenues and Property EBITDA
for the full year and the fourth quarter. The record operating results were due primarily to effective cost management.
The Showboat's full-year revenues decreased slightly, and Property EBITDA was lower than in 2000 due primarily
to costs associated with refocusing the property's marketing and adding new amenities that boosted results in the
fourth quarter but hurt them earlier in the year. The Showboat's revenues rose 5.8 percent in the fourth quarter,
while Property EBITDA increased 21.6 percent from the year-ago quarter due primarily to the opening of new restaurants
that generated increased slot play.
Central Region Sets Full-Year, Fourth-Quarter Records
Central Region Results
(in millions)
2001 2000 Percent 2001 2000 Percent
Fourth Fourth Increase Full Full Increase
Quarter Quarter (Decrease) Year Year (De-
crease)
------- ------- -------- ------ ------- -------
Central Region
Revenues $467.2 $357.4 30.7% $1,707.6 $1,392.8 22.6%
Operating Profit 94.1 69.6 35.2% 361.5 304.8 18.6%
Property EBITDA 122.1 90.3 35.2% 470.9 383.3 22.9%
Record results at Harrah's Chicagoland and Missouri casinos, as well as five months of results from Harveys Council
Bluffs and Bluffs Run casinos, both in Council Bluffs, Iowa, helped the Central Region to set full-year revenue
and Property EBITDA records. The Harveys Council Bluffs property began operating under the Harrah's brand name
late in the 2001 fourth quarter.
Full-year Central Region revenues rose 22.6 percent, aided by $103.6 million of revenues from the Harveys casinos
in Iowa since July 31. Full-year Property EBITDA rose 22.9 percent, with the Iowa casinos contributing $26.6 million
of the total. Harveys contributed $61.2 million of revenues in the fourth quarter and $14.2 million of Property
EBITDA in the fourth quarter. For the region as a whole, fourth-quarter revenues rose 30.7 percent from the year-ago
quarter, while Property EBITDA was up 35.2 percent.
Harrah's Chicagoland casinos posted record combined revenues and Property EBITDA for the full year and fourth quarter.
Harrah's Joliet's record performance was due in part to the conversion to barges from riverboats that was completed
in late September. Combined revenues of the Chicagoland casinos and Harrah's Metropolis rose 11.1 percent for the
full-year 2001 from the year-ago period, while Property EBITDA was up 7.6 percent. The combined year-earlier results
included slightly more than nine months of operations at the Metropolis casino, which was acquired in March 2000.
Combined fourth-quarter Chicagoland and Metropolis revenues rose 19.0 percent from the 2000 fourth quarter, while
Property EBITDA increased 23.1 percent.
In Missouri, combined revenues from Harrah's North Kansas City and St. Louis properties were full-year and fourth-quarter
records. For the year, combined revenues rose 13.5 percent and Property EBITDA was 18.7 percent higher than in
2000. The gains were due to synergies associated with consolidation of the former Players Maryland Heights facility
into the adjacent Harrah's casino in St. Louis and to consolidation of the North Kansas City operations into a
single barge facility late in the second quarter.
Fourth-quarter revenues from the combined Missouri operations were up 2.4 percent, while Property EBITDA was 2.6
percent lower due to increased spending on promotions.
Combined revenues at Harrah's Louisiana riverboats rose 32.8 percent to a record level in 2001 and Property EBITDA
was up 32.3 percent, aided by improved shore-side amenities at Shreveport and a new boat in Lake Charles. Combined
fourth-quarter revenues were up 20.8 percent and Property EBITDA rose 49.7 percent from the year-ago fourth quarter.
Harrah's Mississippi properties recorded a 2.8 percent increase in full-year revenues and a 5.1 percent gain in
Property EBITDA. Fourth-quarter revenues were up 13.4 percent and Property EBITDA was 49.7 percent higher than
in the year-ago quarter.
MANAGED PROPERTIES:
For the full year, Harrah's received higher management fees from the three Indian casinos it manages due to improved
results at those facilities. However, overall management fees declined due to the restructuring of JCC Holding
Company that resulted in lower recorded management fees from JCC.
OTHER ITEMS:
Equity in earnings from nonconsolidated affiliates improved to break-even for the full year and fourth quarter.
In 2000, significant losses were incurred from the New Orleans casino and National Airlines, Inc. Full-year corporate
expense was 4.5 percent higher than in 2000, but remained approximately the same percentage of revenues as in the
prior year.
The company is accounting for its acquisition of Harveys Casino Resorts under the provisions of the new standards
that govern the accounting for business combinations and intangible assets that were issued in mid-2001. The provisions
of the new standard for accounting for intangible assets must be adopted for prior acquisitions effective January
1, 2002. Early adoption is not permitted. The company is currently analyzing the impact of this adoption on its
financial statements. While this analysis has not yet been completed, it is likely that an impairment charge for
a portion of the goodwill recorded on the company's books related to prior acquisitions will be necessary. Such
a charge is expected to be reported in first quarter 2002 as a change in accounting principle.
Despite lower interest rates, interest expense increased 12.6 percent for the year and 9.1 percent for the fourth
quarter from the prior-year periods due to higher debt levels taken on for the Harveys acquisition and for share
repurchases. Approximately 6.6 million shares were repurchased under the company's stock-repurchase program during
2001 at an average price of $28.07 per share. The company can repurchase up to 3.9 million additional shares under
its current Board-approved authorization.
Other income for 2001 included gains from resolution of a contingency related to a former affiliate, the sale of
excess real estate in Las Vegas and the settlement of a land-condemnation dispute from 1998.
Harrah's Entertainment will host a conference call for interested parties today, Wednesday, February 6, 2002, at
9:00 a.m. Eastern Standard Time to review its full-year and fourth-quarter 2001 financial results. For those interested
in participating in the call, please dial 1-888-399-2695, or 1-706-679-7646 for international callers, approximately
10 minutes before the call start time. A taped replay of the conference call can be accessed at 1-800-642-1687,
or 1-706-645-9291 for international callers, beginning at 1 p.m. EST Wednesday, February 6. The replay will be
available through 11:59 p.m. EST on Wednesday, February 13. The passcode number for the replay is 3159654.
Interested parties wanting to listen to the live conference call on the Internet may do so on the company's web
site -- www.harrahs.com -- in the Investor Relations section behind the ``About Us'' tab.
Founded more than 60 years ago, Harrah's Entertainment, Inc. is the most recognized and respected name in the casino-entertainment
industry, operating 25 casinos in the United States, primarily under the Harrah's brand name. Harrah's Entertainment
is focused on building loyalty and value with its target customers through a unique combination of great service,
excellent products, unsurpassed distribution, operational excellence and technology leadership.
This release includes ``forward-looking statements'' intended to qualify for the safe harbor from liability established
by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they
do not relate strictly to historical or current facts. These statements contains words such as ``may,'' ``will,''
``project,'' ``might,'' ``expect,'' ``believe,'' ``anticipate,'' ``intend,'' ``could,'' ``would,'' ``estimate,''
``continue'' or ``pursue,'' or the negative or other variations thereof or comparable terminology. In particular,
they include statements relating to, among other things, future actions, new projects, strategies, future performance,
the outcome of contingencies such as legal proceedings and future financial results. We have based these forward-looking
statements on our current expectations and projections about future events.
We caution the reader that forward-looking statements involve risks and uncertainties that cannot be predicted
or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking
statements. Such risks and uncertainties include, but are not limited to, the following factors as well as other
factors described from time to time in our reports filed with the Securities and Exchange Commission:
Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and,
as such, speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise.
HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(UNAUDITED)
(In thousands, except per
share amounts)
Fourth Quarter Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
-------- --------- ---------- ----------
Revenues(//) $960,641 $822,020 $3,709,040 $3,329,796
Property operating
expenses (717,057) (627,141) (2,726,258) (2,443,282)
Depreciation
and amortization (75,696) (61,271) (285,773) (236,082)
Operating profit 167,888 133,608 697,009 650,432
Corporate expense (12,962) (12,589) (52,746) (50,472)
Headquarters relocation
and reorganization
expenses -- -- -- (2,983)
Equity in nonconsolidated
affiliates 745 (14,072) 148 (57,935)
Amortization of
intangible assets (7,730) (6,088) (25,288) (21,540)
Reserves for New Orleans
casino -- (220,000) (2,322) (220,000)
Project opening costs
and other
nonrecurring items (13,826) (10,662) (35,836) (14,764)
Income (loss)
from operations 134,115 (129,803) 580,965 282,738
Interest expense, net of
interest capitalized (64,701) (59,297) (255,801) (227,139)
Loss on equity interests in
subsidiaries:
National Airlines, Inc. -- (39,400) -- (39,400)
Other -- (2,226) (5,040) (2,226)
Other income (expense),
including
interest income 23,436 (3,815) 28,219 3,866
Income (loss) before income
taxes and minority
interests 92,850 (234,541) 348,343 17,839
Income tax (provision)
benefit (33,414) 75,514 (126,737) (15,415)
Minority interests (4,337) (2,259) (12,616) (13,768)
Income (loss) before
extraordinary losses 55,099 (161,286) 208,990 (11,344)
Extraordinary gain (losses),
net of tax 2 -- (23) (716)
Net income (loss) $55,101 $(161,286) $208,967 $(12,060)
Earnings (loss) per share -- basic
Before extraordinary
losses $0.50 $(1.41) $1.84 $(0.09)
Extraordinary losses,
net of tax -- -- -- (0.01)
Net income (loss) $0.50 $(1.41) $1.84 $(0.10)
Earnings (loss) per share -- diluted
Before extraordinary
losses $0.49 $(1.41) $1.81 $(0.09)
Extraordinary losses,
net of tax -- -- -- (0.01)
Net income (loss) $0.49 $(1.41) $1.81 $(0.10)
Weighted average common
shares outstanding 110,442 114,049 113,540 117,190
Weighted average common
and common equivalent
shares outstanding 112,747 114,049 115,708 117,190
(//) See note (a) on Supplemental Operating Information.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL OPERATING INFORMATION
(UNAUDITED)
(In thousands)
Fourth Quarter Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
-------- -------- ---------- ----------
Revenues (a)
Western Region $304,441 $282,286 $1,203,496 $1,129,660
Eastern Region 171,738 163,295 724,035 723,470
Central Region 467,212 357,398 1,707,605 1,392,834
Managed 16,390 16,877 67,143 75,607
Other 860 2,164 6,761 8,225
Total Revenues $960,641 $822,020 $3,709,040 $3,329,796
Operating Profit
Western Region $30,601 $30,297 $130,768 $127,940
Eastern Region 39,043 32,064 182,950 182,335
Central Region 94,081 69,636 361,448 304,757
Managed 14,319 13,545 55,665 64,861
Other (10,156) (11,934) (33,822) (29,461)
Total Operating
Profit $167,888 $133,608 $697,009 $650,432
Property EBITDA (b)
Western Region $60,521 $55,922 $240,545 $226,147
Eastern Region 53,144 44,215 237,486 230,872
Central Region 122,082 90,253 470,880 383,343
Managed 14,364 14,147 55,815 67,260
Other (6,527) (9,658) (21,944) (21,108)
Total Property
EBITDA $243,584 $194,879 $982,782 $886,514
Project opening and other
nonrecurring items
Project opening
costs $(4,945) $(3,867) $(13,136) $(8,258)
Writedowns, reserves and
recoveries (8,872) (6,395) (20,176) (6,106)
Venture restructuring
costs (9) (400) (2,524) (400)
Total $(13,826) $(10,662) $(35,836) $(14,764)
(a) New accounting guidance issued in and effective for first
quarter 2001 requires that the cost of the cash-back component of the
Company's Total Rewards program be treated as a reduction of revenues.
Previously, these costs had been treated as a casino expense. The new
guidance impacts only the income statement classification of these
costs. It does not impact operating profit or Property EBITDA. The
prior year's results have been restated to reflect the impact of
implementing this new guidance.
(b) Property EBITDA (earnings before interest, taxes, depreciation
and amortization) consists of Operating Profit before depreciation and
amortization expenses. Property EBITDA is a supplemental financial
measure used by management, as well as industry analysts, to evaluate
our operations. However, Property EBITDA should not be construed as an
alternative to Income from operations (as an indicator of our
operating performance) or to Cash flows from operations (as a measure
of liquidity) as determined in accordance with generally accepted
accounting principles. All companies do not calculate EBITDA in the
same manner. As a result, Property EBITDA as presented by our Company
may not be comparable to similarly titled measures presented by other
companies.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
(UNAUDITED)
Computation of diluted earnings per share
excluding items not typically included
in analyst estimates
(In thousands)
Fourth Quarter Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
--------- --------- --------- --------
Income (loss) before
taxes and
minority interests $92,850 $(234,541) $348,343 $17,839
Add/(deduct):
Reserves for New Orleans casino -- 220,000 2,322 220,000
Project opening costs and
other nonrecurring items 13,826 10,662 35,836 14,764
Gains on sales of
non-strategic land (19,337) -- (19,019) --
Charges to refocus the Rio
included in property
operating profit -- -- 13,033 --
Gain on settlement of a
contingency arising from
disposition of a former
affiliate -- -- (7,141) --
Deferred compensation plan
conversion incentive
interest expense -- -- 2,742 --
Incremental riverboat
depreciation -- 2,394 10,081 4,787
Loss on equity interests:
National Airlines, Inc. -- 39,400 -- 39,400
Other -- 2,226 5,040 2,226
Adjusted income before taxes
and minority interests 87,339 40,141 391,237 299,016
Provision for income taxes (31,333) (14,300) (142,929) (107,681)
Minority interests (4,337) (2,259) (12,616) (13,768)
Adjusted income before
extraordinary losses $51,669 $23,582 $235,692 $177,567
Diluted earnings per share
before extraordinary losses,
as adjusted $0.46 $0.20 $2.04 $1.49
Weighted average common and
common equivalent shares
outstanding(///) 112,747 116,536 115,708 119,079
(///)Reflects dilution for adjusted income
-----------------------------------------------------------
Contact:
Harrah's Entertainment, Inc.
Josh Hirsberg, 702/407-6376 (investors)
Gary Thompson, 702/407-6529 (media)