The sour economy and a massive impairment charge caused casino giant Harrah’s Entertainment to report a net loss of more than $1 billion in the third quarter, the company said Tuesday.
Las Vegas-based Harrah’s, which was taken private last year by private-equity firms TPG Inc. and Apollo Management LP, said its net loss from operations was $1.05 billion for the quarter that ended Sept. 30, compared to net income of $349.6 in the same quarter a year ago.
The company posted a $1.33 billion charge against earnings to write down the value of certain assets around the country. The overall third-quarter net loss from continuing operations after taxes was $1.62 billion.
Harrah’s reported earnings early Tuesday and company executives did not hold a conference call to discuss the results with analysts.
“The third quarter was challenging from an operations standpoint, as lower spending by consumers affected by the global recession continued to impact revenues,” Harrah’s Chairman and Chief Executive Officer Gary Loveman said in a statement. “During the third quarter, we continued our focus on aligning expenses with revenues and addressing our capital structure to cope with the protracted economic slump.”
Harrah’s companywide revenues were $2.28 billion, a decline of 13.7 percent compared with $2.64 billion in the same quarter a year ago.
Deutsche Bank gaming analyst Andrew Zarnett said Harrah’s also experienced a nearly 15 percent decline in cash flow during the quarter, regardless of the impairment charge.
“The decline in (cash flow) during the latest quarter was primarily due to continued (midweek) rate disintegration in Las Vegas and competitive pressure at Harrah’s Atlantic City properties,” Zarnett told investors. “On the flip side, results somewhat benefited from management’s efficiency initiatives and relatively strong performances at Harrah’s Iowa and Missouri regional properties.”
On the Strip, where Harrah’s operates eight properties including Caesars Palace, Rio, Bally’s and Harrah’s Las Vegas, the company reported a net loss of $778.8 million in the quarter, compared with net income of $155.4 million in the same quarter a year ago.
Revenues in Las Vegas were $657.2 million, a decline of 17.5 percent compared with $796.8 million in the 2008 third quarter.
Harrah’s said the net loss was due to lower spending by visitors and impairment charges of $875.8 million in the third quarter surrounding several of the company’s Strip properties.
Harrah’s raised $1.7 billion in capital during the quarter with much of the proceeds being used to pay down the company’s multibillion-dollar debt load.
Harrah’s has nearly $501.8 million in debt maturing next year and $168.9 million due in 2011, an August filing with the Securities and Exchange Commission showed. Harrah’s has $6.3 billion in term loans maturing by 2015 and a $1.1 billion credit facility that matures a year earlier, SEC filings show.
“We conducted another round of financing activities to shore up our balance sheet and enhance our financial flexibility, which has enabled us to take advantage of some exciting growth opportunities,” Loveman said.
Zarnett thought any cash that was left after the debt repurchase would bolster the company’s balance sheet.
“We believe that a portion of cash on the balance sheet will be used to acquire distressed assets, such as the recent purchase agreement signed to acquire Thistledown racetrack in Cleveland,” Zarnett said.
In September, Harrah’s announced an $89 million agreement to buy the Thistledown horse-racetrack. The acquisition is in anticipation of the legalization of video lottery terminals for certain racetracks in Ohio.
The Review-Journal on Sept. 14 reported that Harrah’s purchased 16 percent of Planet Hollywood Resort’s $860 million debt in a possible bid to acquire the Strip hotel-casino. Neither Harrah’s nor Planet Hollywood Resort officials would comment on the reports. Multiple sources have said executives from Harrah’s Entertainment toured Planet Hollywood Resort.
Contact reporter Howard Stutz at email@example.com or 702-477-3871.