EX-99.1 2 a2054555zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99(1) Harrah's Entertainment, Inc. Reports Second-Quarter Results Adjusted Earnings Per Share Rise 22.5 Percent Record Revenues, Property EBITDA Achieved LAS VEGAS, July 18, 2001 - Harrah's Entertainment, Inc. (NYSE:HET) today reported second-quarter Adjusted Earnings Per Share of 49 cents, up 22.5 percent from 40 cents per share reported for the second quarter of 2000. Diluted earnings per share were 40 cents, matching the 40 cents before extraordinary items reported in the year-ago quarter. The company posted record second-quarter revenues of $914.0 million, up 4.3 percent from revenues of $876.2 million in the 2000 second quarter. Second-quarter Property Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was a record $234.7 million, up 1.3 percent from the year-ago quarter. Same-store gaming revenues at Harrah's brand properties rose 6.3 percent in the 2001 second quarter from the year-earlier quarter. Tracked and cross-market play increased 16.6 percent and 20.8 percent, respectively. "While many companies would be pleased with a 22.5 percent increase in earnings per share - especially in today's economy - we were disappointed that our second-quarter gains were lower than anticipated when the quarter began," said Phil Satre, Harrah's Entertainment Chairman and Chief Executive Officer. "As discussed in our July 6 pre-announcement, the lower than expected second-quarter results were due primarily to a low table-games hold percentage at the Rio, which reduced earnings approximately four to five cents per share, and to an economy-related decline in retail play in certain markets," Satre said. "The good news is that our earnings continued to grow at a double-digit pace, proving that our strategy is driving results in a challenging economic environment," Satre said. Among the second quarter's highlights: o Harrah's Entertainment named Chief Operating Officer Gary Loveman to the new position of President and promoted Treasurer Charles Atwood to the additional positions of Senior Vice President and Chief Financial Officer. o The company announced an agreement to acquire Harveys Casino Resorts, which operates casinos in Lake Tahoe, Nev., Council Bluffs, Iowa, and Central City, Colo., for $625 million, plus assumption of certain contingent liabilities totaling $50 million. 2 o Harrah's Entertainment's Nevada casinos became the first in the nation to offer The Price Is Right(TM) video slots to players. The company has an exclusive 30-day right to introduce this and subsequent versions of the highly popular game into each of the 17 markets where Harrah's operates a casino. o The company raised $500 million through the private placement of 7.125 percent Senior Notes due 2007. The net proceeds were used to pay down its bank credit facility. o Harrah's entered into a programming and marketing relationship with ShopNBC, a new shopping network reaching 46 million households, to develop and telecast a one-hour special featuring the Harrah's Total Rewards Treasure Hunt finale in November 2001. One lucky Harrah's customer will receive a treasure map leading to a chest containing $1 million. o Computerworld named Harrah's one of the Top Five of America's "100 Best Places to Work in Information Technology." Harrah's is the only company in any industry to receive a Top Five rating for each of the past three years. o Readers of Casino Player magazine selected Harrah's for 144 first-place awards and 251 total honors in the publication's "Best of Gaming" awards. Harrah's Total Rewards, the gaming industry's only 3 nationwide player-card program, was honored as the "Best Slot Club" in every jurisdiction where the company operates a casino. "We believe these achievements bode well for the future of Harrah's," Satre said. "Subject to regulatory approvals, we plan to close on the Harvey's acquisition during the third quarter, expanding our reach to 25 casinos in 12 states and introducing the Harrah's brand to more than 600,000 Harveys customers in the Council Bluffs market alone." For the first half of 2001, Adjusted Earnings Per Share rose 40.0 percent to 91 cents from 65 cents. Diluted earnings per share rose 21.9 percent to 78 cents from 64 cents in the 2000 first half. The company posted record first-half revenues of $1.81 billion, up 9.0 percent from revenues of $1.66 billion in the year-ago period. First-half Property EBITDA rose to $470.1 million from $423.8 million in the first half of 2000. WESTERN REGION REPORTS REVENUE, PROPERTY EBITDA GAINS Western Region Results (in millions)
2001 2000 Percent 2001 2000 Percent Second Second Increase First Six First Six Increase Quarter Quarter (Decrease) Months Months (Decrease) ------- ------- ---------- ------ ------ ---------- Rio Hotel & Casino Revenues $ 95.9 $ 91.2 5.2% $ 208.0 $ 196.4 5.9% Operating Profit (1.4) (9.7) N/M 10.2 (11.0) N/M EBITDA 9.7 0.8 N/M 32.4 7.9 N/M Harrah's Southern Nevada Revenues $ 109.3 $ 98.5 11.0% $ 217.5 $ 196.6 10.6% Operating Profit 22.1 19.2 15.1% 45.0 37.3 20.6% EBITDA 30.9 28.0 10.4% 62.6 54.9 14.0% Harrah's Northern Nevada Revenues $ 78.1 $ 80.9 -3.5% $ 143.4 $ 149.6 -4.1% Operating Profit 11.7 15.5 -24.5% 13.5 22.4 -39.7% EBITDA 17.8 21.7 -18.0% 25.8 33.3 -22.5% 4 Total Western Region Revenues $ 283.3 $ 270.6 4.7% $ 568.9 $ 542.6 4.8% Operating Profit 32.4 25.0 29.6% 68.7 48.7 41.1% EBITDA 58.4 50.5 15.6% 120.8 96.1 25.7%
Western Region results were marked by overall gains in revenues despite the sharp drop in retail business in Northern Nevada and the low table-games hold percentage at the Rio. Harrah's Las Vegas posted record Property EBITDA and Harrah's Laughlin recorded its second-highest Property EBITDA ever and the highest since 1993. Harrah's Northern Nevada casinos saw significant Property EBITDA declines as a result of lower retail play. Tracked play in Northern Nevada was up 4.6 percent. "The gains in tracked play clearly indicate the benefits of our strategy," Satre said. "To boost retail play, we have introduced carefully crafted marketing programs aimed at increasing our appeal to that segment on a profitable basis." The Rio posted 5.2 percent higher revenues and its Property EBITDA rose substantially. The Rio's second-quarter table-games hold percentage of 11.2 percent, though well below that of the first quarter, was above the 8.4 percent hold of the 2000 second quarter. Table-game volume rose 12.5 percent from a year ago, slot win per unit was up 12.8 percent and Revenue Per Available Room rose 8.8 percent. Food and beverage and entertainment profits also improved from the year-ago quarter. Revenues at Harrah's Las Vegas rose 13.9 percent and Property EBITDA was up 10.7 percent from the second quarter of 2000. In Laughlin, second- 5 quarter revenues were up 4.3 percent from the 2000 second quarter and Property EBITDA rose 4.9 percent. In Northern Nevada, Harrah's Reno reported 3.8 percent lower revenues and a 15.5 percent decline in Property EBITDA. The company's Lake Tahoe properties posted revenues approximately 3.0 percent below last year's second quarter, while Property EBITDA declined 21.7 percent. Declines in the facilities' Property EBITDA were due primarily to increased energy costs and lower levels of play from non-tracked customers. For the first half, Western Region revenues were up 4.8 percent and Property EBITDA rose 25.7 percent from the 2000 first half due primarily to the favorable year-over-year first-quarter hold percentages at the Rio and the continued strong performance of Harrah's Southern Nevada properties. EASTERN REGION POSTS RECORD REVENUES, PROPERTY EBITDA Eastern Region Results (in millions)
2001 2000 Percent 2001 2000 Percent Second Second Increase First Six First Six Increase Quarter Quarter (Decrease) Months Months (Decrease) ------- ------- ---------- ------ ------ ---------- Harrah's Atlantic City Revenues $ 108.5 $ 108.4 0.1% $ 208.4 $ 208.2 0.1% Operating Profit 31.1 29.7 4.7% 56.6 53.3 6.2% EBITDA 37.9 35.7 6.2% 70.1 65.1 7.7% Showboat Atlantic City Revenues $ 95.3 $ 94.0 1.4% $ 176.4 $ 179.6 -1.8% Operating Profit 17.5 19.6 -10.7% 29.3 34.2 -14.3% EBITDA 24.5 25.5 -3.9% 42.8 45.9 -6.8% Total Eastern Region Revenues $ 203.8 $ 202.4 0.7% $ 384.8 $ 387.8 -0.8% Operating Profit 48.6 49.3 -1.4% 85.9 87.5 -1.8% EBITDA 62.4 61.2 2.0% 112.9 111.0 1.7%
6 Harrah's Atlantic City posted moderate gains in revenues, and Property EBITDA rose 6.2 percent. Showboat Atlantic City gained market share for each month of the second quarter, and its Property EBITDA rate of decline was about half that of the first quarter. For the first six months of 2001, Eastern Region revenues declined 0.8 percent but Property EBITDA was up 1.7 percent. CENTRAL REGION RESULTS BOLSTERED BY MISSOURI, SHREVEPORT PERFORMANCES Central Region Results (in millions)
2001 2000 Percent 2001 2000 Percent Second Second Increase First Six First Six Increase Quarter Quarter (Decrease) Months Months (Decrease) ------- ------- ---------- ------ ------ ---------- Central Region Revenues $ 409.0 $ 382.0 7.1% $ 824.0 $ 683.5 20.6% Operating Profit 81.9 83.1 -1.4% 170.2 151.9 12.0% EBITDA 107.8 103.7 4.0% 220.6 187.1 17.9%
Harrah's Chicagoland casinos posted record second-quarter revenues, but Property EBITDA was down 5.6 percent due primarily to increased expenses associated with building revenues in that highly competitive market. In Missouri, combined revenues from Harrah's North Kansas City and St. Louis properties rose 8.6 percent and Property EBITDA was up 18.9 percent from the year-ago second quarter. St. Louis posted an 11.7 percent gain in revenues and a 35.3 increase in Property EBITDA due primarily to consolidation of the Player's Maryland Heights facility with the company's adjacent Harrah's casino in St. Louis and to related operational synergies. 7 Construction was completed in late June on the new casino space in North Kansas City that replaced the riverboat the company has used in that market since 1994. Aided by its new hotel and restaurants, Harrah's Shreveport achieved a 27.7 percent gain in revenues. Property EBITDA was up 13.5 percent. Harrah's Lake Charles posted higher revenues and nearly matched the 2000 second-quarter Property EBITDA even though 40 percent of the property's rooms were out of service for refurbishment during the quarter, Tropical Storm Alison severely restricted access to the market for several days in June and gaming taxes were three percentage points higher than in the year-ago quarter. For the first half of 2001, Central Region revenues were up 20.6 percent. Property EBITDA rose 17.9 percent. MANAGED PROPERTIES: The company earned higher management fees at its Indian casinos due to improved performances at the properties. But it earned lower fees in New Orleans and from Star City in Sydney, Australia, as terms of those fee agreements were changed from the prior year's quarter. 8 OTHER ITEMS: Corporate expense decreased 6.5 percent from the second quarter of 2000. For the first half of 2001, corporate expense was up slightly, but comprised the same percentage of revenue as in the year-ago six-month period. Losses from affiliates were significantly lower in the 2001 second quarter than in the year-ago quarter as the company incurred significantly lower losses at Harrah's New Orleans casino. Interest expense increased in the second quarter due to a $2.7 million pre-tax charge arising from an initiative to reduce the income-statement volatility of a deferred compensation program and a higher level of debt. No shares were repurchased under the company's stock-repurchase program during the second quarter of 2001. The company can repurchase up to 1.2 million shares under its current Board-approved authorization, as it acquired approximately 3.3 million shares at an average price of $29.71 after the close of the second quarter. The company recorded a second-quarter $5.4 million pre-tax charge to write off its investment in Zoho Corporation. Harrah's Entertainment will host a conference call for interested parties today, Wednesday, July 18, 2001, at 9 a.m. Eastern Daylight Time to review its second-quarter financial results. For those interested in participating in the call, please dial 1-877-817-7188, or 1-703-871-3097 forinternational callers, approximately 10 minutes before the call start time. A taped replay of the conference called can be accessed at 1-888-266-2081, or 1-703-925-2533 for 9 international callers, beginning at 1 p.m. EDT July 18. The replay will be available through midnight EDT on Wednesday, July 25. The passcode number for the replay is 5392057. 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 21 casinos in the United States under the Harrah's, Showboat, Rio and Players brand names. With a combined database of more than 23 million players, 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. These forward-looking statements generally can be identified by phrases such as the company "believes," "expects," "anticipates," "plans," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, such statements herein that describe the company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties 10 that could cause actual results to differ materially from those in forward-looking statements. Such risks and uncertainties include, but are not limited to, economic, bank, equity and debt-market condition, changes in laws or regulations, third-party relations and approvals, decisions of courts, regulators and governmental bodies, factors affecting leverage, including interest rates, abnormal gaming holds, construction disruptions and delays, ineffective marketing, effects of competition and other risks and uncertainties described from time to time in our reports filed with the U.S. Securities and Exchange Commission. -MORE- 11 HARRAH'S ENTERTAINMENT, INC. CONSOLIDATED SUMMARY OF OPERATIONS (UNAUDITED)
Second Quarter Ended Six Months Ended ---------------------------- ---------------------------- (In thousands, except per June 30, June 30, June 30, June 30, share amounts) 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Revenues $ 914,044 $ 876,173 $ 1,813,577 $ 1,656,433 Property operating expenses (679,300) (644,396) (1,343,477) (1,232,630) Depreciation and amortization (68,331) (61,934) (134,460) (112,505) ----------- ----------- ----------- ----------- Operating profit 166,413 169,843 335,640 311,298 Corporate expense (13,632) (14,572) (27,408) (25,593) Headquarters relocation and reorganization expenses -- (917) -- (2,713) Equity in (losses) of nonconsolidated affiliates (849) (10,600) (423) (34,296) Amortization of goodwill and trademarks (5,697) (5,337) (11,299) (9,874) Reserves for New Orleans casino -- -- (2,322) -- Project opening costs and nonrecurring items (4,503) (2,079) (7,930) (2,384) ----------- ----------- ----------- ----------- Income from operations 141,732 136,338 286,258 236,438 Interest expense, net of interest capitalized (63,189) (58,126) (127,415) (108,585) (Loss) gain on ownership interests in subsidiaries (5,410) -- (5,040) -- Other income (expenses), including interest income 6,173 1,178 (305) 4,794 ----------- ----------- ----------- ----------- Income before income taxes and minority interests 79,306 79,390 153,498 132,647 Provision for income taxes (29,026) (28,632) (55,837) (47,278) Minority interests (2,417) (3,544) (5,587) (7,407) ----------- ----------- ----------- ----------- Income before extraordinary losses 47,863 47,214 92,074 77,962 Extraordinary losses, net of tax -- (716) (131) (716) ----------- ----------- ----------- ----------- Net income $ 47,863 $ 46,498 $ 91,943 $ 77,246 =========== =========== =========== =========== Earnings per share - basic Before extraordinary losses $ 0.41 $ 0.40 $ 0.80 $ 0.65 Extraordinary losses, net of tax -- (0.01) -- (0.01) ----------- ----------- ----------- ----------- Net income $ 0.41 $ 0.39 $ 0.80 $ 0.64 =========== =========== =========== =========== Earnings per share - diluted Before extraordinary losses $ 0.40 $ 0.40 $ 0.78 $ 0.65 Extraordinary losses, net of tax -- (0.01) -- (0.01) ----------- ----------- ----------- ----------- Net income $ 0.40 $ 0.39 $ 0.78 $ 0.64 =========== =========== =========== =========== Weighted average common shares outstanding 116,124 118,625 115,382 119,947 =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding 119,026 119,993 117,892 121,429 =========== =========== =========== ===========
12 HARRAH'S ENTERTAINMENT, INC. SUPPLEMENTAL OPERATING INFORMATION (UNAUDITED)
SECOND QUARTER ENDED SIX MONTHS ENDED ---------------------------- ---------------------------- (In thousands) June 30, June 30, June 30, June 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- REVENUES* Western Region $ 283,341 $ 270,611 $ 568,870 $ 542,595 Eastern Region 203,832 202,401 384,855 387,792 Central Region 409,034 381,996 823,984 683,507 Managed 15,967 19,328 32,052 38,821 Other 1,870 1,837 3,816 3,718 ----------- ----------- ----------- ----------- Total Revenues $ 914,044 $ 876,173 $ 1,813,577 $ 1,656,433 =========== =========== =========== =========== OPERATING PROFIT Western Region $ 32,356 $ 25,024 $ 68,687 $ 48,724 Eastern Region 48,599 49,317 85,887 87,456 Central Region 81,934 83,054 170,213 151,915 Managed 12,431 16,722 26,004 33,717 Other (8,907) (4,274) (15,151) (10,514) ----------- ----------- ----------- ----------- Total Operating Profit $ 166,413 $ 169,843 $ 335,640 $ 311,298 =========== =========== =========== =========== PROPERTY EBITDA** Western Region $ 58,435 $ 50,467 $ 120,777 $ 96,099 Eastern Region 62,452 61,245 112,865 111,010 Central Region 107,786 103,703 220,645 187,110 Managed 12,463 17,495 26,069 34,915 Other (6,392) (1,133) (10,256) (5,331) ----------- ----------- ----------- ----------- Total Property EBITDA $ 234,744 $ 231,777 $ 470,100 $ 423,803 =========== =========== =========== =========== PROJECT OPENING AND OTHER NONRECURRING COSTS Project opening costs $ (2,108) $ (1,452) $ (4,267) $ (1,744) Writedowns, reserves and recoveries (1,163) (627) (931) (640) Venture restructuring costs (1,232) -- (2,732) -- ----------- ----------- ----------- ----------- Total $ (4,503) $ (2,079) $ (7,930) $ (2,384) =========== =========== =========== ===========
13 * 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. ** Property EBITDA (earnings before interest, income 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. 14 HARRAH'S ENTERTAINMENT, INC. SUPPLEMENTAL INFORMATION (UNAUDITED) Computation of diluted earnings per share excluding items not typically included in analyst estimates
SECOND QUARTER ENDED SIX MONTHS ENDED ------------------------ ------------------------ (In thousands) June 30, June 30, June 30, June 30, 2001 2000 2001 2000 --------- --------- --------- --------- Income before taxes and minority interests $ 79,306 $ 79,390 $ 153,498 $ 132,647 Add/(deduct): Reserve for New Orleans casino -- -- 2,322 -- Project opening costs and nonrecurring items 4,503 2,079 7,930 2,384 Incremental riverboat depreciation 3,844 -- 6,237 -- Deferred compensation plan conversion incentive interest expense 2,742 -- 2,742 -- Loss on ownership interest 5,410 -- 5,040 -- --------- --------- --------- --------- Adjusted income before taxes and minority interests 95,805 81,469 177,769 135,031 Provision for income taxes (35,254) (29,417) (64,999) (48,178) Minority interests (2,417) (3,544) (5,587) (7,407) --------- --------- --------- --------- Adjusted income before extraordinary losses $ 58,134 $ 48,508 $ 107,183 $ 79,446 ========= ========= ========= ========= Diluted earnings per share before extraordinary losses, as adjusted $ 0.49 $ 0.40 $ 0.91 $ 0.65 ========= ========= ========= ========= Weighted average common and common equivalent shares outstanding 119,026 119,993 117,892 121,429 ========= ========= ========= =========
15