Posted by The Pokerkeep on February 28, 2008 at 10:49pm
Harrah's Entertainment on Wednesday reported a fourth-quarter loss because of some pretax write-offs and told analysts the company has seen some growing softness in nongaming spending in Las Vegas in the first few weeks of this year.In his first conference call since the company was taken private in January, company Chairman and Chief Executive Officer Gary Loveman said that although gaming business has held up well, the gaming company is noticing a drop in spending on conventions, food and beverage purchases, and room rates are down at its local properties."There is definitely some softness in the (Las Vegas) market at this time," he said. "It's a little too early to tell how that looks perspectively."Loveman said local Harrah's properties are seeing "more (convention) cancellations and a smaller number of participants for any given group of people that would normally attend a large show.""Other markets, the results have been more modest. In Las Vegas, the gaming business has held up well, but room rates are off a little bit," Loveman said.He added that occupancy numbers remain strong but room rates are down "a few dollars on average."The company owns and operates Caesars Palace, Rio, Paris Las Vegas, Bally's, Bill's, Flamingo, Imperial Palace and Harrah's on the Strip.Wachovia Capital Markets bond analyst Dennis Farrell Jr. said the company has increased promotional activity to lure customers to the Strip properties to soften the effect of the slowing economy."It will likely continue for the near term, which could impact profitability margins in the first quarter in the Vegas market and throughout their domestic operations," Farrell said.Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said in a note to investors that Loveman's comments echo recent statements made by other large Strip operators.Harrah's reported a fourth-quarter loss despite strong revenue increases due to pretax write-offs tied, in part, to the company's London Clubs International unit.The $169.6 million pretax write-off led to a fourth-quarter loss of $47.8 million, or 26 cents per share, in the three months ended Dec. 31, according to a federal filing.The company reported net income of $47.6 million, or 25 cents per share, in the fourth quarter of 2006.Harrah's, which was acquired by private equity firms Apollo Management and TPG Capital in a $17.7 billion buyout, is no longer publicly traded but still must file quarterly earnings reports with the federal Securities and Exchange Commission to guide bondholders.Loveman said the company is also committed to holding regularly scheduled conference calls to discuss financial results and will "continue to operate with transparency as a private company."The write-down came a year after Harrah's paid $590 million for London Clubs International, which had six casinos in England, two in Egypt and one in South Africa in December 2006.Casinos in Britain are struggling with a July law that banned smoking in casinos and a change in regulations that limit jackpot payouts.Despite the write-down, net income for 2007 increased 15 percent to $619.4 million, or $3.25 per share, from $535.8 million last year.Revenues for the quarter increased 8.3 percent, to $2.6 billion from $2.4 billion last year. Revenues for 2007 increased 12.5 percent, to $10.8 billion from $9.6 billion in 2006.Company cash flow, defined as earnings before interest, taxes, depreciation and amortization, increased 10.7 percent, to $622.8 million from $562.8 million for the quarter.Cash flow for the year increased 7.7 percent to $2.8 billion from $2.6 billion last year.Harrah's eight Las Vegas properties continue to account for approximately a third of the company's revenues and approximately 45 percent of the company's cash flow.Loveman said the company's "multistop strategy ... encouraging our guests to see us in multiple locations helps us out perform competitors in this market by a wide margin."The area's cash flow increased 15.5 percent to $284.6 million on revenues of $905.2 million for the quarter and 11.7 percent to $1.2 billion on revenues of $3.6 billion for 2007.Loveman said construction continues on the $1 billion Caesars Palace expansion, which is scheduled for completion in 2009.The company's Atlantic City region posted a double-digit increase in revenues for the quarter even though cash flow remained flat because of increased promotional costs and casino smoking restrictions.The five area properties' cash flow, which includes a racino in Chester, Pa., decreased by $600,000 to $123.3 million on a 12.4 percent revenue increase to $561.8 million in the quarter.Cash flow for the year decreased 3 percent, to $602.1 million from $620.9 million. Revenue increased 14.3 percent, to $2.4 billion from $2.1 billion in 2006.Revenues should improve in the upcoming quarters with the opening in mid-2008 of a 960-room hotel tower at Harrah's Atlantic City.Harrah's five other Nevada properties, four in Northern Nevada and one in Laughlin, posted flat earnings in revenues and cash flow for the quarter with slight decreases for the year.Harrah's Entertainment owns and operates 50 casinos in the United States and overseas.
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