Atlantic City market weighs on Harrah’s

Harrah’s Entertainment posted a slight increase in first-quarter earnings due to higher operation costs tied to the Atlantic City market. The results misses analysts’ forecasts.

First-quarter earnings ending March 31 rose 1.6 percent to $185.3 million, or 98 cents per share, from $182.4 million, or 98 cents per share, a year earlier.

Analysts surveyed by Thomson Financial had forecast first-quarter earnings of 99 cents per share.

There was no conference call with analysts and investors because company stockholders agreed in early April to the $90 per share buyout offer by private-equity firms Texas Pacific Group and Apollo Management.

The company must continue to publicly report its earnings to the Securities and Exchange Commission until the deal closes and the company is taken private.

Company cash flow, defined as earnings before interest, taxes, depreciation and amortization, increased a mere 1.2 percent to $698.4 million, while total revenue for the first quarter increased 12.7 percent to $2.6 billion from $2.4 billion.

Robert LaFleur, a gaming analyst for Susquehanna Financial Group, pointed out in a note to investors that Harrah’s suffered from a two-front marketing battle for customers in Atlantic City: the opening of the Pennsylvania gaming market in January and increased competition from other properties in the Boardwalk area.

"Results were pretty weak across the board, particularly in some of the regional markets," he said in a report.

Operational income plummeted 24.8 percent in Atlantic City while cash flow decreased 5.5 percent to $132.7 million from $140.4 million in 2006.

The Las Vegas market was the only region in the United States to post a positive cash flow for Harrah’s.

The company posted an increase of 3.3 percent to $297.6 million on an 8.8 percent increase of revenues to $898.6 million from $825.7 percent.

The earnings report, which was issued Tuesday without comment, comes as the gaming company is in the regulatory process for approval of a $17.1 billion buyout. The deal is expected to close by year’s end.

Harrah’s Entertainment owns and operates Rio, Bally’s, Paris, Flamingo, Caesars Palace, Imperial Palace, Harrah’s and Bill’s locally and 39 across the country.

It also owns and operates casinos in England, Canada, Uruguay, South Africa and Egypt.

Harrah’s Entertainment shares climbed 24 cents, or 0.28 percent, Tuesday to close at $85.45 on the New York Stock Exchange.

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