OPTIONS
SOURCE: Harrah's Entertainment
Harrah's Entertainment Reports Results for 2009 Third Quarter, First Nine Months
-- Revenues decline 13.7 percent from 2008 third quarter
-- Third-Quarter Property EBITDA declines 12.2 percent
-- Impairment charge on intangible assets impacts results
LAS VEGAS, NV--(Marketwire - October 27, 2009) - Harrah's Entertainment, Inc. today reported the following financial results for the 2009 third quarter and first nine months:
HARRAH'S ENTERTAINMENT, INC.
Company-wide Results
Successor
Three Months Ended Sept 30, Percent
------------------------ Increase/
(In millions) 2009 2008 (Decrease)
----------- ----------- ----------
Net revenues $ 2,282.2 $ 2,645.9 (13.7)%
(Loss)/income from operations (1,050.2) 349.6 N/M©
Loss from continuing operations, net
of tax (a) (1,621.0) (123.2) N/M
Property EBITDA 563.7 641.7 (12.2)%
Adjusted EBITDA (b) 539.2 633.9 (14.9)%
(a) Due to the January 1, 2009, adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
(b) Does not include the pro forma effect of yet-to-be-realized cost
savings from our profitability program.
(c) "N/M" is used to reference a variance compared to a prior period that
is Not Meaningful. This reference is used in several tables throughout
this document.
Successor Predecessor
Jan. 28, Jan. 1, Combined
Nine Months 2008 2008 Nine Months
Ended Through Through Ended
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- --------- --------- --------- --------
Net revenues $ 6,808.3 $ 7,088.5 $ 760.1 $ 7,848.6 (13.3)%
(Loss)/income from
operations (758.5) 1,110.5 (36.8) 1,073.7 N/M
Income/(loss) from
continuing
operations, net of
tax (a) 548.4 (396.4) (99.4) (495.8) N/M
Property EBITDA 1,710.5 1,766.9 171.2 1,938.1 (11.7)%
Adjusted EBITDA (b) 1,652.1 1,722.2 172.0 1,894.2 (12.8)%
(a) Due to the January 1, 2009, adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
(b) Does not include the pro forma effect of yet-to-be-realized cost
savings from our profitability program.
On January 28, 2008, Harrah's Entertainment was acquired by affiliates of Apollo Global Management, LLC and TPG Capital, LP. Accordingly, we have separated our 2008 historical financial results in the presentations included herein between the Successor period from January 28, 2008 through September 30, 2008, and the Predecessor period from January 1, 2008 through January 27, 2008. However, we have also combined the Successor and Predecessor periods' results for the nine months ended September 30, 2008 because company management believes doing so provides a meaningful presentation and a more appropriate comparison to 2009 results.
Property earnings before interest, taxes, depreciation and amortization (Property EBITDA) and Adjusted EBITDA are measurements not in accordance with Generally Accepted Accounting Principles (GAAP) but are commonly used in the gaming industry as measures of performance and as bases for valuation of gaming companies and, in the case of Adjusted EBITDA, as a measure of compliance with certain debt covenants. Reconciliations of Property EBITDA to Income/(loss) from operations and Income/(loss) from continuing operations to Last Twelve Months (LTM) Adjusted EBITDA are attached to this release.
The company's 2009 third-quarter results declined due primarily to the impact of the recession on customers' discretionary spending. Revenues fell to $2.28 billion from $2.65 billion in the 2008 third quarter. The loss from operations was $1.05 billion, compared with income from operations of $349.6 million in the 2008 third quarter. Included in the third quarter 2009 loss from operations was a charge of $1.33 billion for impairments of goodwill and non-amortizing intangible assets. Excluding the impairment charges, income from operations would have been $278.4 million, compared with income from operations of $349.6 million in the 2008 third quarter. The loss from continuing operations, net of tax, for the 2009 third quarter was $1.62 billion, compared with a loss of $123.2 million in the year-ago quarter.
Revenues for the first nine months of 2009 declined 13.3 percent to $6.81 billion from $7.85 billion in the first nine months of 2008. The loss from operations was $758.5 million in the 2009 first nine months, compared with income from operations of $1.07 billion in the prior-year period. Income from continuing operations, net of tax, for the first nine months of 2009 was $548.4 million, compared with a net loss of $495.8 million in the first nine months of 2008. Income from continuing operations, net of tax, for the nine months ended September 30, 2009, includes i) an impairment charge for goodwill and non-amortizing intangible assets totaling $1.63 billion ($1.56 billion net of taxes); and ii) a pre-tax gain of $4.28 billion ($2.59 billion net of taxes) related to the early extinguishment of debt, primarily in the 2009 second quarter.
During the 2009 third quarter, Harrah's wholly owned subsidiary Harrah's Operating Company, Inc. (HOC) issued $720 million aggregate principal amount of senior-secured notes due 2017, with net proceeds used to repay a portion of Harrah's existing term-loan and revolving-credit indebtedness under HOC's senior-secured credit facilities.
During the 2009 third quarter, HOC also announced both a cash tender offer for up to $160 million of its outstanding senior notes maturing in 2010 and 2011 and the placement of a new $1.0 billion term loan tranche for its credit facilities. The tender offer expired on October 21, 2009, and approximately $45 million of notes were tendered. The term loan was drawn on October 15, 2009, with the proceeds used to repay most of Harrah's revolving-credit indebtedness under HOC's senior-secured credit facilities and to provide additional liquidity.
"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," said Gary Loveman, Harrah's chairman, president and chief executive officer.
"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. "We increased our ownership of Harrah's Chester to approximately 95 percent and announced an agreement to purchase the Thistledown racetrack in Cleveland.
"In addition, we agreed to a seven-year contract extension with ESPN to televise the World Series of Poker," Loveman said. "We're looking forward to ESPN's telecast of the November 9, 2009 WSOP Main Event finale, when nine players will split more than $27 million in prize money, including a first-place prize of $8.5 million.
"The third quarter was challenging from an operations standpoint, as lower spending by consumers affected by the global recession continued to impact revenues," Loveman said.
"After 38 years of great accomplishment, Eastern Division President Carlos Tolosa will retire from Harrah's Entertainment at the end of the year, concluding one of the longest and most distinguished careers in the history of our company," Loveman said. "Carlos' retirement will complete an 11-year professional collaboration with me during which he earned my admiration, gratitude and unyielding respect for him as a friend and colleague. On behalf of all of the Harrah's employees, I thank him sincerely and wish him well."
A substantial portion of the debt of Harrah's Entertainment's consolidated group is issued by HOC. Therefore, the company believes it is meaningful to also provide information pertaining to the results of operations of HOC. The information for HOC assumes that a post-January 2008 swap of certain properties between HOC and Harrah's Entertainment that was consummated during the 2008 second quarter actually occurred on January 1, 2008.
HARRAH'S OPERATING COMPANY
Successor
Three Months Ended Sept 30, Percent
------------------------ Increase/
(In millions) 2009 2008 (Decrease)
----------- ----------- ----------
Net revenues $ 1,759.5 $ 2,025.5 (13.1)%
(Loss)/income from operations (909.7) 258.8 N/M
Loss from continuing operations, net
of tax (a) (1,453.1) (114.7) N/M
Property EBITDA 418.3 464.4 (9.9)%
Adjusted EBITDA (b) 404.2 454.4 (11.0)%
(a) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
(b) Does not include the pro forma effect of yet-to-be-realized cost
savings from our profitability program.
Successor Predecessor
Jan. 28, Jan. 1, Combined
Nine Months 2008 2008 Nine Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- --------- --------- --------- --------
Net revenues $ 5,241.7 $ 5,364.9 $ 577.5 $ 5,942.4 (11.8)%
(Loss)/Income from
operations (494.1) 795.6 (43.2) 752.4 N/M
Income/(loss) from
continuing
operations, net of
tax (a) 733.9 (414.3) (106.2) (520.5) N/M
Property EBITDA 1,264.5 1,244.3 109.6 1,353.9 (6.6)%
Adjusted EBITDA (b) 1,233.4 1,179.9 143.0 1,322.9 (6.8)%
(a) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
(b) Does not include the pro forma effect of yet-to-be-realized cost
savings from our profitability program.
Summaries of results by region follow:
Las Vegas Region
While hotel occupancy remained strong at more than 90 percent, third-quarter and year-to-date revenues declined in the Las Vegas Region from the 2008 periods due to lower spend per visitor and weakness in the group-travel business, which led to lower average daily room rates. The 2009 third-quarter and year-to-date income from operations declined compared with respective 2008 results due to lower visitor spend, as well as impairment charges of $875.8 million and $255.1 million recorded in the third quarter and second quarter 2009, respectively, related to impairment of goodwill for certain of the Las Vegas strip properties.
HARRAH'S ENTERTAINMENT, INC.
Las Vegas Region
Successor
Three Months Ended
Sept 30, Percent
------------------------- Increase/
(In millions) 2009 2008 (Decrease)
----------- ------------ ----------
Net revenues $ 657.2 $ 796.8 (17.5)%
Loss/(income) from operations (778.8) 155.4 N/M
Property EBITDA 173.0 230.0 (24.8)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- ---------- ------------ ---------- ----------
Net revenues $ 2,048.8 $ 2,279.2 $ 253.6 $ 2,532.8 (19.1)%
(Loss)/income
from operations (778.3) 497.3 51.9 549.2 N/M
Property EBITDA 582.2 715.7 76.0 791.7 (26.5)%
Las Vegas Region properties include Harrah's Las Vegas, Rio, Bally's Las
Vegas, Paris, Flamingo Las Vegas, Caesars Palace, Imperial Palace and
Bill's Gamblin' Hall & Saloon.
HARRAH'S OPERATING COMPANY
Las Vegas Region
Successor
Three Months Ended
Sept 30, Percent
------------------------- Increase/
(In millions) 2009 2008 (Decrease)
----------- ------------ ----------
Net revenues $ 295.8 $ 355.1 (16.7)%
(Loss)/income from operations (630.4) 66.8 N/M
Property EBITDA 74.1 96.5 (23.2)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months Percent
Ended Through Through Ended Increase/
Sept. 30, Sept. 30, Jan. 27, Sept. 30,
(In millions) 2009 2008 2008 2008 (Decrease)
--------- ---------- ------------ --------- ----------
Net revenues $ 907.6 $ 996.5 $ 118.5 $ 1,115.0 (18.6)%
(Loss)/income
from operations (530.2) 207.1 29.7 236.8 N/M
Property EBITDA 234.9 288.5 38.1 326.6 (28.1)%
Las Vegas Region properties include Bally's Las Vegas, Caesars Palace,
Imperial Palace and Bill's Gamblin' Hall & Saloon.
Atlantic City Region
Competition from gaming operations in Pennsylvania and the weak economy led to reduced visitation and customer spend per trip that unfavorably impacted Atlantic City Region results during both the three and nine months ended September 30, 2009. Included in third-quarter 2009 income from operations was a $178.7 million charge for impairment of goodwill of certain Atlantic City properties.
HARRAH'S ENTERTAINMENT, INC.
Atlantic City Region
Successor
Three Months Ended
Sept 30, Percent
------------------------- Increase/
(In millions) 2009 2008 (Decrease)
----------- ------------ ----------
Net revenues $ 558.4 $ 655.1 (14.8)%
(Loss)/income from operations (98.5) 123.5 N/M
Property EBITDA 132.5 164.5 (19.5)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- --------- ------------ --------- ----------
Total revenues $ 1,558.5 $ 1,663.2 $ 160.8 $ 1,824.0 (14.6)%
Income from
operations 6.0 254.0 18.7 272.7 (97.8)%
Property EBITDA 333.2 397.3 36.4 433.7 (23.2)%
Atlantic City Region properties include Harrah's Atlantic City, Showboat
Atlantic City, Caesars Atlantic City, Bally's Atlantic City and Harrah's
Chester.
HARRAH'S OPERATING COMPANY
Atlantic City Region
Successor
Three Months Ended
Sept 30, Percent
-------------------------- Increase/
(In millions) 2009 2008 (Decrease)
----------- ------------ ----------
Net revenues $ 415.4 $ 495.1 (16.1)%
(Loss)/income from operations (125.3) 88.1 N/M
Property EBITDA 90.1 118.0 (23.6)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- ---------- ------------ ---------- ----------
Net revenues $ 1,176.0 $ 1,276.0 $ 125.8 $ 1,401.8 (16.1)%
(Loss)/income
from operations (51.3) 184.5 8.0 192.5 N/M
Property EBITDA 231.2 287.1 21.9 309.0 (25.2)%
Atlantic City Region properties include Showboat Atlantic City, Caesars
Atlantic City, Bally's Atlantic City and Harrah's Chester.
Louisiana/Mississippi Region
Reduced visitation led to lower 2009 third-quarter and nine-month results despite improved margins. Included in third-quarter 2009 income from operations was a $6.0 million charge for impairment of goodwill of certain of the Louisiana/Mississippi properties. The 2008 first nine months were also impacted by construction disruptions related to the re-branding and remodeling of Harrah's Tunica. Also included in income from operations for the nine months ended September 30, 2008 were insurance proceeds of $185.4 million representing final settlement of claims related to 2005 hurricane damages.
HARRAH'S ENTERTAINMENT, INC.
Louisiana/Mississippi Region
Successor
Three Months Ended
Sept 30, Percent
-------------------------- Increase/
(In millions) 2009 2008 (Decrease)
------------ ------------ ----------
Net revenues $ 310.4 $ 368.2 (15.7)%
Income from operations 39.4 49.2 (19.9)%
Property EBITDA 71.4 73.8 (3.3)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
In millions) 2009 2008 2008 2008 (Decrease)
---------- ---------- ------------ ---------- ----------
Net revenues $ 959.8 $ 1,010.8 $ 106.1 $ 1,116.9 (14.1)%
Income from
operations 150.8 327.9 10.1 338.0 (55.4)%
Property EBITDA 236.7 217.9 18.6 236.5 0.1%
Louisiana/Mississippi Region properties include Harrah's New Orleans,
Horseshoe Bossier City, Louisiana Downs, Horseshoe Tunica, Harrah's Tunica,
Sheraton Tunica and Grand Casino Biloxi.
Iowa/Missouri Region
Cost-saving initiatives at all our properties in the Iowa/Missouri Region more than offset the 2009 third-quarter and year-to-date revenue declines, which were due to the weak economy that continued to impact guest visitation.
HARRAH'S ENTERTAINMENT, INC.
Iowa/Missouri Region
Successor
Three Months Ended
Sept 30, Percent
-------------------------- Increase/
(In millions) 2009 2008 (Decrease)
------------ ------------ ----------
Net revenues $ 192.9 $ 198.0 (2.6)%
Income from operations 48.5 41.8 16.0%
Property EBITDA 61.1 53.5 14.2%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
---------- ---------- ------------ ---------- ----------
Net revenues $ 577.1 $ 537.3 $ 55.8 $ 593.1 (2.7)%
Income from
operations 146.1 112.8 7.7 120.5 21.2%
Property EBITDA 184.1 148.0 13.0 161.0 14.3%
Iowa/Missouri/Kansas Region properties include Harrah's St. Louis, Harrah's
Council Bluffs, Horseshoe Council Bluffs and Harrah's North Kansas City.
Illinois/Indiana Region
Despite a strong performance at the expanded Horseshoe Hammond, third-quarter revenues and Property EBITDA declined from the 2008 third quarter due to effects of the weak economy. Income from operations for the 2009 third-quarter was lower than in 2008 due to a $180.7 million charge for impairments of goodwill and non-amortizing intangible assets at certain of the region's properties. Year-to-date 2009 revenues and Property EBITDA improved from the 2008 results as a result of the expansion at Horseshoe Hammond and the benefits of cost reductions at other properties.
HARRAH'S ENTERTAINMENT, INC.
Illinois/Indiana Region
Successor
Three Months Ended Percent
Sept 30, Increase/
(In millions) 2009 2008 (Decrease)
----------- ------------ ----------
Net revenues $ 284.7 $ 301.9 (5.7)%
(Loss)/income from operations (153.3) 21.5 N/M
Property EBITDA 49.1 54.3 (9.6)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- ---------- ------------ ---------- -----------
Net revenues $ 901.1 $ 804.5 $ 85.5 $ 890.0 1.2%
(Loss)/income
from operations (65.3) 91.3 8.7 100.0 N/M
Property EBITDA 188.7 150.7 13.6 164.3 14.9%
Illinois/Indiana properties include Horseshoe Hammond, Harrah's Joliet,
Harrah's Metropolis and Horseshoe Southern Indiana.
Other Nevada Region
While hotel occupancy rates were about even with the 2008 third quarter, results for the Other Nevada Region declined in the 2009 third-quarter due to lower visitor spend per trip, although cost-saving initiatives partially offset the revenue declines.
HARRAH'S ENTERTAINMENT, INC.
Other Nevada
Successor
Three Months Ended
Sept 30, Percent
-------------------------- Increase/
(In millions) 2009 2008 (Decrease)
------------ ------------ ----------
Net revenues $ 141.5 $ 170.4 (17.0)%
Income from operations 29.4 33.7 (12.8)%
Property EBITDA 41.4 45.4 (8.8)%
Successor Combined
Nine Jan. 28, Predecessor Nine
Months 2008 Jan. 1, 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
---------- ---------- ------------ ---------- ----------
Net revenues $ 370.6 $ 419.0 $ 38.9 $ 457.9 (19.1)%
Income from
operations 48.5 59.7 0.5 60.2 (19.4)%
Property EBITDA 86.8 93.0 4.5 97.5 (11.0)%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harvey's Lake Tahoe, Bill's Casino and Harrah's Laughlin.
HARRAH'S OPERATING COMPANY
Other Nevada
Successor
Three Months Ended
Sept 30, Percent
-------------------------- Increase/
(In millions) 2009 2008 (Decrease)
------------ ------------ ----------
Net revenues $ 104.7 $ 127.5 (17.9)%
Income from operations 23.1 27.4 (15.7)%
Property EBITDA 30.3 34.1 (11.1)%
Successor Predecessor Combined
Nine Jan. 28, Jan. 1, Nine
Months 2008 2008 Months
Ended Through Through Ended Percent
Sept. 30, Sept. 30, Jan. 27, Sept. 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
---------- ---------- ----------- ---------- ----------
Net revenues $ 261.6 $ 299.8 $ 26.8 $ 326.6 (19.9)%
Income/(loss)
from operations 29.8 40.5 (1.9) 38.6 (22.8)%
Property EBITDA 53.1 60.3 1.2 61.5 (13.7)%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harvey's Lake Tahoe and Bill's Casino.
Managed/International/Other
Revenues declined in the 2009 third quarter and year-to-date, largely as result of adverse movements in exchange rates. Improved Property EBITDA for the 2009 third quarter and year to date was due largely to increased revenues at the company's London Clubs International properties and improved cost management at all of the company's international and managed properties. In the second and third quarters of 2009, the company recognized impairments of $42.0 million and $87.5 million, respectively, of certain non-amortizing intangible assets that contributed to the losses from operations.
HARRAH'S ENTERTAINMENT, INC.
Managed/International/Other
Successor
Three Months Ended
Sept 30, Percent
------------------------- Increase/
(In millions) 2009 2008 (Decrease)
----------- ----------- ----------
Net revenues $ 137.1 $ 155.5 (11.8)%
Loss from operations (97.2) (39.8) N/M
Property EBITDA 35.2 20.2 74.3%
Successor Predecessor Combined
Nine Jan. 28, Jan. 1, Nine
Months 2008 2008 Months
Ended Through Through Ended Percent
Sept 30, Sept 30, Jan. 27, Sept 30, Increase/
(In millions) 2009 2008 2008 2008 (Decrease)
--------- --------- ----------- --------- ----------
Net revenues $ 392.4 $ 374.5 $ 59.4 $ 433.9 (9.6)%
Loss from
operations (154.3) (113.5) (0.3) (113.8) (35.6)%
Property EBITDA 98.8 44.3 9.1 53.4 85.0%
Managed/International/Other results include income from our managed
properties, results of our international properties and certain marketing
and administrative expenses, including development costs, and income from
our non-consolidated subsidiaries.
Other items
During the third quarter 2009, we recorded a total charge of $1.33 billion for the impairment of goodwill and other intangible assets, the majority of which related to properties in the Las Vegas, Atlantic City, and Illinois/Indiana regions. Total impairment charges for goodwill and other intangible assets were $1.63 billion for the nine months ended September 30, 2009.
Interest expense decreased in the 2009 third-quarter and year-to-date periods compared with 2008 due to lower debt levels resulting from HOC debt exchanges completed in December 2008 and April 2009 and repurchases of debt in open-market transactions.
As a result of exchange offers and open-market purchases during the second quarter, pre-tax gains of $4.3 billion on early extinguishment of debt were recognized and are included in the year-to-date results.
For the 2009 third quarter, the Company recorded a tax provision of $128.9 million on a pre-tax loss from continuing operations of $1.492 billion, compared to a tax benefit of $46.0 million on a pre-tax loss from continuing operations of $169.2 million in the comparable period of 2008. For the nine months ended September 30, 2009, the Company recognized a tax provision of $1.591 billion on pre-tax income from continuing operations of $2.139 billion, which equates to an effective tax rate of 74.4%. The primary difference between the Company's year-to date recorded provision and the provision that would have resulted from applying the U.S. statutory tax rate of 35% to the Company's pre-tax income from continuing operations is primarily attributable to non-deductible impairments of goodwill and adjustments to uncertain tax positions.
Harrah's Entertainment, Inc. is the world's largest provider of branded casino entertainment. Since its beginning in Reno, Nevada, more than 70 years ago, Harrah's has grown through development of new properties, expansions and acquisitions, and now operates casinos on four continents. The company's properties operate primarily under the Harrah's®, Caesars® and Horseshoe® brand names. Harrah's also owns the World Series of Poker® and a majority interest in the London Clubs International family of casinos. Harrah's Entertainment is focused on building loyalty and value with its customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. For more information, please visit www.harrahs.com.
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 contain 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 outcomes of contingencies and future financial results of Harrah's. These forward-looking statements are based on current expectations and projections about future events.
Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, the actual performance of Harrah's 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 (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein):
-- the impact of the company's significant indebtedness;
-- the effects of local and national economic, credit and capital market
conditions on the economy in general, and on the gaming and hotel
industries in particular;
-- construction factors, including delays, increased costs for labor and
materials, availability of labor and materials, zoning issues,
environmental restrictions, soil and water conditions, weather and other
hazards, site access matters and building permit issues;
-- the effects of environmental and structural building conditions
relating to our properties; access to available and reasonable financing on
a timely basis;
-- the ability to timely and cost-effectively integrate acquisitions into
our operations;
-- changes in laws, including increased tax rates, smoking bans,
regulations or accounting standards, third-party relations and approvals,
and decisions of courts, regulators and governmental bodies;
-- litigation outcomes and judicial actions, including gaming legislative
action, referenda and taxation;
-- the ability of our customer-tracking, customer loyalty and yield-
management programs to continue to increase customer loyalty and same store
sales or hotel sales;
-- our ability to recoup costs of capital investments through higher
revenues;
-- acts of war or terrorist incidents or natural disasters;
-- abnormal gaming holds; and
-- the effects of competition, including locations of competitors and
operating and market competition.
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. Harrah's disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release.
HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(UNAUDITED)
Successor
------------------------------------------
Jan. 28,
Nine Months 2008
Three Months Ended Ended Through
Sept. 30, Sept. 30, Sept. 30,
-------------------- --------- ---------
(In millions) 2009 2008 2009 2008
--------- --------- --------- ---------
Revenues $ 2,282.2 $ 2,645.9 $ 6,808.3 $ 7,088.5
Property operating expenses (1,718.5) (2,004.2) (5,097.8) (5,321.6)
Depreciation and amortization (175.6) (152.0) (516.8) (452.4)
--------- --------- --------- ---------
Operating profit 388.1 489.7 1,193.7 1,314.5
Project opening costs and other
items (24.6) (63.1) (81.5) 35.5
Impairment of intangible assets (1,328.6) - (1,625.7) -
(Losses)/income on interests
in non-consolidated affiliates (1.2) (2.5) (1.3) (1.3)
Corporate expense (39.7) (34.7) (111.7) (95.9)
Merger and integration costs - (1.0) (0.3) (23.1)
Amortization of intangible
assets (44.2) (38.8) (131.7) (119.2)
--------- --------- --------- ---------
(Loss)/income from operations (1,050.2) 349.6 (758.5) 1,110.5
Interest expense, net of
interest capitalized (444.5) (533.4) (1,404.7) (1,469.4)
(Losses)/gains on early
extinguishments of debt (1.5) 7.4 4,279.2 (203.9)
Other income, including
interest income 4.1 7.2 23.2 18.7
--------- --------- --------- ---------
(Loss)/income before income
taxes (1,492.1) (169.2) 2,139.2 (544.1)
Income tax (provision)/benefit (128.9) 46.0 (1,590.8) 147.7
--------- --------- --------- ---------
(Loss)/income from continuing
operations, net of tax (a) (1,621.0) (123.2) 548.4 (396.4)
Discontinued operations, net of
tax (0.1) 0.7 (0.3) 88.4
--------- --------- --------- ---------
Net (loss)/income (a) (1,621.1) (122.5) 548.1 (308.0)
Less: net income attributable
to non-controlling
interests (3.2) (7.2) (16.1) (6.2)
--------- --------- --------- ---------
Net (loss)/income attributable
to Harrah's Entertainment,
Inc. $(1,624.3) $ (129.7) $ 532.0 $ (314.2)
========= ========= ========= =========
Predecessor Combined
--------- ---------
Jan. 1,
2008 Nine Months
Through Ended
Jan. 27, Sept. 30,
2008 2008
--------- ---------
(In millions) 2008 2008
--------- ---------
Revenues $ 760.1 $ 7,848.6
Property operating expenses (588.9) (5,910.5)
Depreciation and amortization (63.5) (515.9)
--------- ---------
Operating profit 107.7 1,422.2
Project opening costs and other
items (5.4) 30.1
Impairment of intangible assets - -
(Losses)/income on interests
in non-consolidated affiliates 0.5 (0.8)
Corporate expense (8.5) (104.4)
Merger and integration costs (125.6) (148.7)
Amortization of intangible
assets (5.5) (124.7)
--------- ---------
(Loss)/income from operations (36.8) 1,073.7
Interest expense, net of
interest capitalized (89.7) (1,559.1)
(Losses)/gains on early
extinguishments of debt - (203.9)
Other income, including
interest income 1.1 19.8
--------- ---------
(Loss)/income before income
taxes (125.4) (669.5)
Income tax (provision)/benefit 26.0 173.7
--------- ---------
(Loss)/income from continuing
operations, net of tax (a) (99.4) (495.8)
Discontinued operations, net of
tax 0.1 88.5
--------- ---------
Net (loss)/income (a) (99.3) (407.3)
Less: net income attributable
to non-controlling
interests (1.6) (7.8)
--------- ---------
Net (loss)/income attributable
to Harrah's Entertainment,
Inc. $ (100.9) $ (415.1)
========= =========
(a) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentations.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL OPERATING INFORMATION
(UNAUDITED)
Successor
------------------------------------------
Jan. 28,
Nine Months 2008
Three Months Ended Ended Through
Sept. 30, Sept. 30, Sept. 30,
-------------------- --------- ---------
2009 2008 2009 2008
--------- --------- --------- ---------
Revenues
Las Vegas Region $ 657.2 $ 796.8 $ 2,048.8 $ 2,279.2
Atlantic City Region 558.4 655.1 1,558.5 1,663.2
Louisiana/Mississippi Region 310.4 368.2 959.8 1,010.8
Iowa/Missouri Region 192.9 198.0 577.1 537.3
Illinois/Indiana Region 284.7 301.9 901.1 804.5
Other Nevada Region 141.5 170.4 370.6 419.0
Managed/International/Other 137.1 155.5 392.4 374.5
--------- --------- --------- ---------
Net Revenues $ 2,282.2 $ 2,645.9 $ 6,808.3 $ 7,088.5
========= ========= ========= =========
(Loss)/Income from operations
Las Vegas Region $ (778.8) $ 155.4 $ (778.3) $ 497.3
Atlantic City Region (98.5) 123.5 6.0 254.0
Louisiana/Mississippi Region 39.4 49.2 150.8 327.9
Iowa/Missouri Region 48.5 41.8 146.1 112.8
Illinois/Indiana Region (153.3) 21.5 (65.3) 91.3
Other Nevada Region 29.4 33.7 48.5 59.7
Managed/International/Other (97.2) (39.8) (154.3) (113.5)
Corporate Expense (39.7) (34.7) (111.7) (95.9)
Merger and integration costs - (1.0) (0.3) (23.1)
--------- --------- --------- ---------
Total (loss)/income from
operations $(1,050.2) $ 349.6 $ (758.5) $ 1,110.5
========= ========= ========= =========
Property EBITDA (a)
Las Vegas Region $ 173.0 $ 230.0 $ 582.2 $ 715.7
Atlantic City Region 132.5 164.5 333.2 397.3
Louisiana/Mississippi Region 71.4 73.8 236.7 217.9
Iowa/Missouri Region 61.1 53.5 184.1 148.0
Illinois/Indiana Region 49.1 54.3 188.7 150.7
Other Nevada Region 41.4 45.4 86.8 93.0
Managed/International/Other 35.2 20.2 98.8 44.3
--------- --------- --------- ---------
Total Property EBITDA $ 563.7 $ 641.7 $ 1,710.5 $ 1,766.9
========= ========= ========= =========
Project opening costs and other
items
Project opening costs $ (0.3) $ (16.3) $ (2.9) $ (26.3)
Insurance proceeds for
hurricane losses - - - 185.4
Impairment of intangible
assets (1,328.6) - (1,625.7) -
Other write-downs, reserves
and recoveries (24.3) (46.8) (78.6) (123.6)
--------- --------- --------- ---------
Total Project opening costs
and other items $(1,353.2) $ (63.1) $(1,707.2) $ 35.5
========= ========= ========= =========
Predecessor Combined
--------- ---------
Jan. 1,
2008 Nine Months
Through Ended
Jan. 27, Sept. 30,
(In millions) 2008 2008
--------- ---------
2008 2008
--------- ---------
Revenues
Las Vegas Region $ 253.6 $ 2,532.8
Atlantic City Region 160.8 1,824.0
Louisiana/Mississippi Region 106.1 1,116.9
Iowa/Missouri Region 55.8 593.1
Illinois/Indiana Region 85.5 890.0
Other Nevada Region 38.9 457.9
Managed/International/Other 59.4 433.9
--------- ---------
Net Revenues $ 760.1 $ 7,848.6
========= =========
(Loss)/Income from operations
Las Vegas Region $ 51.9 $ 549.2
Atlantic City Region 18.7 272.7
Louisiana/Mississippi Region 10.1 338.0
Iowa/Missouri Region 7.7 120.5
Illinois/Indiana Region 8.7 100.0
Other Nevada Region 0.5 60.2
Managed/International/Other (0.3) (113.8)
Corporate Expense (8.5) (104.4)
Merger and integration costs (125.6) (148.7)
--------- ---------
Total (loss)/income from
operations $ (36.8) $ 1,073.7
========= =========
Property EBITDA (a)
Las Vegas Region $ 76.0 $ 791.7
Atlantic City Region 36.4 433.7
Louisiana/Mississippi Region 18.6 236.5
Iowa/Missouri Region 13.0 161.0
Illinois/Indiana Region 13.6 164.3
Other Nevada Region 4.5 97.5
Managed/International/Other 9.1 53.4
--------- ---------
Total Property EBITDA $ 171.2 $ 1,938.1
========= =========
Project opening costs and other
items
Project opening costs $ (0.7) $ (27.0)
Insurance proceeds for
hurricane losses - 185.4
Impairment of intangible
assets - -
Other write-downs, reserves
and recoveries (4.7) (128.3)
--------- ---------
Total Project opening costs
and other items $ (5.4) $ 30.1
========= =========
(a) Property EBITDA (earnings before interest, taxes, depreciation and
amortization) consists of loss from operations before depreciation and
amortization, write-downs, reserves and recoveries, project opening
costs, corporate expense, merger and integration costs, income/(losses)
on interests in non-consolidated affiliates and amortization of
intangible assets. 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 loss from operations (as an indicator of our operating
performance) or to Cash flows from operating activities (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
RECONCILIATION OF PROPERTY EBITDA TO INCOME/(LOSS) FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
Three Months Ended September 30, 2009
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In Millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 657.2 $ 558.4 $ 310.4 $ 192.9
Property operating
expenses (484.2) (425.9) (239.0) (131.8)
----------- ----------- ----------- -----------
Property EBITDA 173.0 132.5 71.4 61.1
Depreciation and
amortization (46.2) (48.1) (20.4) (12.6)
----------- ----------- ----------- -----------
Operating profit 126.8 84.4 51.0 48.5
Project opening costs
and other items (10.8) (0.5) (0.2) -
Impairment of
intangible assets (875.8) (178.6) (6.0) -
Income/(losses) on
interests in
nonconsolidated
affiliates - - 0.1 -
Corporate expense - - - -
Amortization of
intangible assets (19.0) (3.8) (5.5) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (778.8) $ (98.5) $ 39.4 $ 48.5
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2009
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In Millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 284.7 $ 141.5 $ 137.1 $ 2,282.2
Property operating
expenses (235.6) (100.1) (101.9) (1,718.5)
----------- ----------- ----------- -----------
Property EBITDA 49.1 41.4 35.2 563.7
Depreciation and
amortization (21.5) (8.5) (18.3) (175.6)
----------- ----------- ----------- -----------
Operating profit 27.6 32.9 16.9 388.1
Project opening costs
and other items 0.1 (0.1) (13.1) (24.6)
Impairment of
intangible assets (180.7) - (87.5) (1,328.6)
Income/(losses) on
interests in
nonconsolidated
affiliates - - (1.3) (1.2)
Corporate expense - - (39.7) (39.7)
Amortization of
intangible assets (0.3) (3.4) (12.2) (44.2)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (153.3) $ 29.4 $ (136.9) $ (1,050.2)
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In Millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 796.8 $ 655.1 $ 368.2 $ 198.0
Property operating
expenses (566.8) (490.6) (294.4) (144.5)
----------- ----------- ----------- -----------
Property EBITDA 230.0 164.5 73.8 53.5
Depreciation and
amortization (40.7) (40.5) (16.4) (11.6)
----------- ----------- ----------- -----------
Operating profit 189.3 124.0 57.4 41.9
Project opening costs
and other items (14.7) (0.6) (4.4) (0.1)
Losses on interests in
non-consolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (19.2) 0.1 (4.0) -
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 155.4 $ 123.5 $ 49.2 $ 41.8
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In Millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 301.9 $ 170.4 $ 155.5 $ 2,645.9
Property operating
expenses (247.6) (125.0) (135.3) (2,004.2)
----------- ----------- ----------- -----------
Property EBITDA 54.3 45.4 20.2 641.7
Depreciation and
amortization (18.5) (8.4) (15.9) (152.0)
----------- ----------- ----------- -----------
Operating profit 35.8 37.0 4.3 489.7
Project opening costs
and other items (14.1) - (29.2) (63.1)
Losses on interests in
non-consolidated
affiliates - - (2.7) (2.5)
Corporate expense - - (34.7) (34.7)
Merger and integration
costs - - (1.0) (1.0)
Amortization of
intangible assets (0.2) (3.3) (12.2) (38.8)
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 21.5 $ 33.7 $ (75.5) $ 349.6
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods on our
CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED SUMMARY OF
OPERATIONS for the additional income and expenses recorded in the
determination of Net (loss)/income attributable to Harrah's
Entertainment, Inc.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME/(LOSS) FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
Nine Months Ended September 30, 2009
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 2,048.8 $ 1,558.5 $ 959.8 $ 577.1
Property operating
expenses (1,466.6) (1,225.3) (723.1) (393.0)
----------- ----------- ----------- -----------
Property EBITDA 582.2 333.2 236.7 184.1
Depreciation and
amortization (139.2) (133.4) (61.2) (37.8)
----------- ----------- ----------- -----------
Operating profit 443.0 199.8 175.5 146.3
Project opening costs
and other items (33.4) (3.8) (2.9) (0.2)
Impairment of
intangible assets (1,130.9) (178.6) (6.0) -
Income/(losses) on
interests in
non-consolidated
affiliates - - 0.6 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (57.0) (11.4) (16.4) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (778.3) $ 6.0 $ 150.8 $ 146.1
=========== =========== =========== ===========
Successor
--------------------------------------------------
Nine Months Ended September 30, 2009
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 901.1 $ 370.6 $ 392.4 $ 6,808.3
Property operating
expenses (712.4) (283.8) (293.6) (5,097.8)
----------- ----------- ----------- -----------
Property EBITDA 188.7 86.8 98.8 1,710.5
Depreciation and
amortization (64.0) (26.4) (54.8) (516.8)
----------- ----------- ----------- -----------
Operating profit 124.7 60.4 44.0 1,193.7
Project opening costs
and other items (8.3) (1.5) (31.4) (81.5)
Impairment of
intangible assets (180.7) - (129.5) (1,625.7)
Income/(losses) on
interests in
non-consolidated
affiliates - - (1.9) (1.3)
Corporate expense - - (111.7) (111.7)
Merger and integration
costs - - (0.3) (0.3)
Amortization of
intangible assets (1.0) (10.4) (35.5) (131.7)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (65.3) $ 48.5 $ (266.3) $ (758.5)
=========== =========== =========== ===========
Combined
--------------------------------------------------
Nine Months Ended September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 2,532.8 $ 1,824.0 $ 1,116.9 $ 593.1
Property operating
expenses (1,741.1) (1,390.3) (880.4) (432.1)
----------- ----------- ----------- -----------
Property EBITDA 791.7 433.7 236.5 161.0
Depreciation and
amortization (142.5) (144.1) (62.4) (40.0)
----------- ----------- ----------- -----------
Operating profit 649.2 289.6 174.1 121.0
Project opening costs
and other items (48.4) (5.0) 178.9 (0.3)
Income/(losses) on
interests in
non-consolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (51.6) (11.9) (15.2) (0.2)
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 549.2 $ 272.7 $ 338.0 $ 120.5
=========== =========== =========== ===========
Combined
--------------------------------------------------
Nine Months Ended September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 890.0 $ 457.9 $ 433.9 $ 7,848.6
Property operating
expenses (725.7) (360.4) (380.5) (5,910.5)
----------- ----------- ----------- -----------
Property EBITDA 164.3 97.5 53.4 1,938.1
Depreciation and
amortization (44.3) (28.0) (54.6) (515.9)
----------- ----------- ----------- -----------
Operating profit 120.0 69.5 (1.2) 1,422.2
Project opening costs
and other items (18.5) - (76.6) 30.1
Income/(losses) on
interests in
non-consolidated
affiliates - - (1.0) (0.8)
Corporate expense - - (104.4) (104.4)
Merger and integration
costs - - (148.7) (148.7)
Amortization of
intangible assets (1.5) (9.3) (35.0) (124.7)
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 100.0 $ 60.2 $ (366.9) $ 1,073.7
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods on our
CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED SUMMARY OF
OPERATIONS for the additional income and expenses recorded in the
determination of Net (loss)/income attributable to Harrah's
Entertainment, Inc.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO (LOSS)/INCOME FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
Jan. 28, 2008 Through September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 2,279.2 $ 1,663.2 $ 1,010.8 $ 537.3
Property operating
expenses (1,563.5) (1,265.9) (792.9) (389.3)
----------- ----------- ----------- -----------
Property EBITDA 715.7 397.3 217.9 148.0
Depreciation and
amortization (123.8) (128.4) (53.8) (34.9)
----------- ----------- ----------- -----------
Operating profit 591.9 268.9 164.1 113.1
Project opening costs
and other items (44.0) (4.9) 178.3 (0.3)
Income/(losses) on
interests in
nonconsolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (50.6) (10.0) (14.7) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 497.3 $ 254.0 $ 327.9 $ 112.8
=========== =========== =========== ===========
Successor
--------------------------------------------------
Jan. 28, 2008 Through September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 804.5 $ 419.0 $ 374.5 $ 7,088.5
Property operating
expenses (653.8) (326.0) (330.2) (5,321.6)
----------- ----------- ----------- -----------
Property EBITDA 150.7 93.0 44.3 1,766.9
Depreciation and
amortization (40.0) (24.1) (47.4) (452.4)
----------- ----------- ----------- -----------
Operating profit 110.7 68.9 (3.1) 1,314.5
Project opening costs
and other items (18.5) - (75.1) 35.5
Income/(losses) on
interests in
nonconsolidated
affiliates - - (1.5) (1.3)
Corporate expense - - (95.9) (95.9)
Merger and integration
costs - - (23.1) (23.1)
Amortization of
intangible assets (0.9) (9.2) (33.8) (119.2)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 91.3 $ 59.7 $ (232.5) $ 1,110.5
=========== =========== =========== ===========
Predecessor
--------------------------------------------------
Jan. 1, 2008 Through Jan. 27, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 253.6 $ 160.8 $ 106.1 $ 55.8
Property operating
expenses (177.6) (124.4) (87.5) (42.8)
----------- ----------- ----------- -----------
Property EBITDA 76.0 36.4 18.6 13.0
Depreciation and
amortization (18.7) (15.7) (8.6) (5.1)
----------- ----------- ----------- -----------
Operating profit 57.3 20.7 10.0 7.9
Project opening costs
and other items (4.4) (0.1) 0.6 -
Income on interests in
non-consolidated
affiliates - - - -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (1.0) (1.9) (0.5) (0.2)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 51.9 $ 18.7 $ 10.1 $ 7.7
=========== =========== =========== ===========
Predecessor
--------------------------------------------------
Jan. 1, 2008 Through Jan. 27, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 85.5 $ 38.9 $ 59.4 $ 760.1
Property operating
expenses (71.9) (34.4) (50.3) (588.9)
----------- ----------- ----------- -----------
Property EBITDA 13.6 4.5 9.1 171.2
Depreciation and
amortization (4.3) (3.9) (7.2) (63.5)
----------- ----------- ----------- -----------
Operating profit 9.3 0.6 1.9 107.7
Project opening costs
and other items - - (1.5) (5.4)
Income on interests in
non-consolidated
affiliates - - 0.5 0.5
Corporate expense - - (8.5) (8.5)
Merger and integration
costs - - (125.6) (125.6)
Amortization of
intangible assets (0.6) (0.1) (1.2) (5.5)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 8.7 $ 0.5 $ (134.4) $ (36.8)
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods on our
CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED SUMMARY OF
OPERATIONS for the additional income and expenses recorded in the
determination of Net (loss)/income attributable to Harrah's
Entertainment, Inc.
HARRAH'S ENTERTAINMENT, INC.SUPPLEMENTAL INFORMATION
RECONCILIATION OF INCOME/(LOSS) FROM CONTINUING OPERATIONS
TO LTM ADJUSTED EBITDA
(UNAUDITED)
Last twelve months (LTM) Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant compliance under the indenture governing the senior notes, first lien notes, second lien notes and/or our senior secured credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting LTM Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Because not all companies use identical calculations, our presentation of LTM Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
The following table reconciles Income/(loss) from continuing operations, net of tax and LTM Adjusted EBITDA of Harrah's Entertainment, Inc. for the Successor period for the nine months ended September 30, 2009, the Predecessor period from January 1, 2008 through January 27, 2008, the Successor period from January 28, 2008 through September 30, 2008 and the Successor period from January 28, 2008 through December 31, 2008.
(1)
---------- ---------- ----------
Successor Predecessor Successor
---------- ---------- ----------
Nine Jan. 1, Jan. 28,
Months 2008 2008
Ended Through Through
Sept. 30, Jan. 27, Sept 30.,
(In millions) 2009 2008 2008
---------- ---------- ----------
Income/(loss)
from
continuing
operations,
net of tax $ 548.4 $ (99.4) $ (396.4)
Net loss
attributable
to
non-controlling
interests (16.1) (1.6) (6.2)
Interest
expense, net 1,381.5 89.7 1,451.2
Provision/
(benefit) for
income taxes 1,590.8 (26.0) (147.7)
Depreciation
and
amortization 658.8 72.7 583.5
---------- ---------- ----------
EBITDA 4,163.4 35.4 1,484.4
Project opening
costs,
abandoned
projects and
development
costs (a) 2.8 0.9 28.7
Merger and
integration
costs 0.3 125.6 23.1
(Gain)/losses
on early
extinguishment
of debt (b) (4,279.2) - 203.9
Net income
attributable
to
non-
controlling
interests,
net of
distributions
(c) 0.2 1.0 (3.6)
Impairment of
goodwill and
other
intangible
assets 1,625.7 - -
Non-cash
expense for
stock
compensation
benefits (d) 12.5 2.4 12.3
Income from
insurance
claims for
hurricane
losses (e) - - (185.5)
Other
non-recurring
or non-cash
items (f) 126.4 6.7 158.9
Pro forma
adjustment for
yet-to-be
realized cost
savings (g)
LTM adjusted
EBITDA
(2) (3)
--------- ----------- ---------- ----------
Combined Predecessor Successor Combined
---------- ---------- ---------- ----------
Jan. 1, Jan. 1, Jan. 28, Jan. 1,
2008 2008 2008 2008
Through Through Through Through
Sept 30., Jan. 27, Dec. 31, Dec. 31, (1)-(2)+(3)
(In millions) 2008 2008 2008 2008 LTM
---------- ---------- ---------- ---------- -----------
Income/(loss)
from
continuing
operations,
net of tax $ (495.8) $ (99.4) $ (5,174.7) $ (5,274.1) $ (4,229.9)
Net loss
attributable
to
non-controlling
interests (7.8) (1.6) (12.0) (13.6) (21.9)
Interest
expense, net 1,540.9 89.7 2,041.2 2,130.9 1,971.5
Provision/
(benefit) for
income taxes (173.7) (26.0) (360.4) (386.4) 1,378.1
Depreciation
and
amortization 656.2 72.7 805.2 877.9 880.5
---------- ---------- ---------- ---------- -----------
EBITDA 1,519.8 35.4 (2,700.7) (2,665.3) (21.7)
Project opening
costs,
abandoned
projects and
development
costs (a) 29.6 0.9 31.6 32.5 5.7
Merger and
integration
costs 148.7 125.6 24.0 149.6 1.2
(Gain)/losses
on early
extinguishment
of debt (b) 203.9 - (742.1) (742.1) (5,225.2)
Net income
attributable
to
non-
controlling
interests,
net of
distributions
(c) (2.6) 1.0 (7.4) (6.4) (3.6)
Impairment of
goodwill and
other
intangible
assets - - 5,489.6 5,489.6 7,115.3
Non-cash
expense for
stock
compensation
benefits (d) 14.7 2.4 16.3 18.7 16.5
Income from
insurance
claims for
hurricane
losses (e) (185.5) - (185.4) (185.4) 0.1
Other
non-recurring
or non-cash
items (f) 165.6 6.7 249.9 256.6 217.4
Pro forma
adjustment for
yet-to-be
realized cost
savings (g) 186.7
----------
LTM adjusted
EBITDA $ 2,292.4
==========
(a) Represents (i) project opening costs incurred in connection with
expansion and renovation projects at various properties; (ii) write-off
of abandoned development projects; and (iii) non-recurring strategic
planning and restructuring costs.
(b) Represents (i) the difference between the net book value and cash paid
for notes exchanged and retired for cash; (ii) the difference between
the net book value of the old notes and the fair market value of new
notes issued; and (iii) the write-off of historical unamortized
deferred financing costs and unamortized market value
premiums/discounts.
(c) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
(d) Represents non-cash compensation expense related to stock options.
(e) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
(f) Represents the elimination of other non-recurring or non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of
assets, equity in non-consolidated subsidiaries (net of distributions)
and one-time costs relating to new state gaming legislation.
(g) Represents the cost savings yet-to-be-realized from our previously
announced profitability improvement program.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO (LOSS)/INCOME FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
Three Months Ended September 30, 2009
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 295.8 $ 415.4 $ 310.4 $ 192.9
Property operating
expenses (221.7) (325.3) (239.0) (131.8)
----------- ----------- ----------- -----------
Property EBITDA 74.1 90.1 71.4 61.1
Depreciation and
amortization (21.1) (34.4) (20.4) (12.6)
----------- ----------- ----------- -----------
Operating profit 53.0 55.7 51.0 48.5
Project opening costs
and other items (3.5) (0.4) (0.2) -
Impairment of
intangible assets (671.8) (178.7) (6.0) -
Income on interests in
non-consolidated
affiliates - 0.8 0.1 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (8.1) (2.7) (5.5) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (630.4) $ (125.3) $ 39.4 $ 48.5
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2009
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 284.7 $ 104.7 $ 155.6 $ 1,759.5
Property operating
expenses (235.6) (74.4) (113.4) (1,341.2)
----------- ----------- ----------- -----------
Property EBITDA 49.1 30.3 42.2 418.3
Depreciation and
amortization (21.5) (6.5) (17.2) (133.7)
----------- ----------- ----------- -----------
Operating profit 27.6 23.8 25.0 284.6
Project opening costs
and other items 0.1 (0.1) (13.2) (17.3)
Impairment of
intangible assets (180.7) - (87.4) (1,124.6)
Income on interests in
non-consolidated
affiliates - - (1.4) (0.5)
Corporate expense - - (22.6) (22.6)
Merger and integration
costs - - - -
Amortization of
intangible assets (0.3) (0.6) (12.1) (29.3)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ (153.3) $ 23.1 $ (111.7) $ (909.7)
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 355.1 $ 495.1 $ 368.2 $ 198.0
Property operating
expenses (258.6) (377.1) (294.4) (144.5)
----------- ----------- ----------- -----------
Property EBITDA 96.5 118.0 73.8 53.5
Depreciation and
amortization (17.5) (27.8) (16.4) (11.6)
----------- ----------- ----------- -----------
Operating profit 79.0 90.2 57.4 41.9
Project opening costs
and other items (4.1) (0.4) (4.4) (0.1)
Income on interests in
non-consolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (8.1) (1.7) (4.0) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 66.8 $ 88.1 $ 49.2 $ 41.8
=========== =========== =========== ===========
Successor
--------------------------------------------------
Three Months Ended September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 301.9 $ 127.5 $ 179.7 $ 2,025.5
Property operating
expenses (247.6) (93.4) (145.5) (1,561.1)
----------- ----------- ----------- -----------
Property EBITDA 54.3 34.1 34.2 464.4
Depreciation and
amortization (18.5) (6.3) (16.0) (114.1)
----------- ----------- ----------- -----------
Operating profit 35.8 27.8 18.2 350.3
Project opening costs
and other items (14.1) - (20.1) (43.2)
Income on interests in
non-consolidated
affiliates - - (2.6) (2.4)
Corporate expense - - (18.3) (18.3)
Merger and integration
costs - - (1.0) (1.0)
Amortization of
intangible assets (0.2) (0.4) (12.2) (26.6)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 21.5 $ 27.4 $ (36.0) $ 258.8
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods on our
CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED SUMMARY OF
OPERATIONS for the additional income and expenses recorded in the
determination of Net (loss)/income attributable to Harrah's Operating
Company, Inc.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO (LOSS)/INCOME FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
Nine Months Ended September 30, 2009
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 907.6 $ 1,176.0 $ 959.8 $ 577.1
Property operating
expenses (672.7) (944.8) (723.1) (393.0)
----------- ----------- ----------- -----------
Property EBITDA 234.9 231.2 236.7 184.1
Depreciation and
amortization (63.0) (95.2) (61.2) (37.8)
----------- ----------- ----------- -----------
Operating profit 171.9 136.0 175.5 146.3
Project opening costs
and other items (6.1) (2.6) (2.9) (0.2)
Impairments of
intangible assets (671.8) (178.7) (6.0) -
Income on interests in
non-consolidated
affiliates - 2.2 0.6 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (24.2) (8.2) (16.4) -
----------- ----------- ----------- -----------
Loss/(income) from
operations* $ (530.2) $ (51.3) $ 150.8 $ 146.1
=========== =========== =========== ===========
Successor
--------------------------------------------------
Nine Months Ended September 30, 2009
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 901.1 $ 261.6 $ 458.5 $ 5,241.7
Property operating
expenses (712.4) (208.5) (322.7) (3,977.2)
----------- ----------- ----------- -----------
Property EBITDA 188.7 53.1 135.8 1,264.5
Depreciation and
amortization (64.0) (20.2) (54.9) (396.3)
----------- ----------- ----------- -----------
Operating profit 124.7 32.9 80.9 868.2
Project opening costs
and other items (8.3) (1.4) (31.5) (53.0)
Impairments of
intangible assets (180.7) - (129.4) (1,166.6)
Income on interests in
non-consolidated
affiliates - - (1.9) 0.9
Corporate expense - - (56.3) (56.3)
Merger and integration
costs - - (0.3) (0.3)
Amortization of
intangible assets (1.0) (1.7) (35.5) (87.0)
----------- ----------- ----------- -----------
Loss/(income) from
operations* $ (65.3) $ 29.8 $ (174.0) $ (494.1)
=========== =========== =========== ===========
Combined
--------------------------------------------------
Nine Months Ended September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 1,115.0 $ 1,401.8 $ 1,116.9 $ 593.1
Property operating
expenses (788.4) (1,092.8) (880.4) (432.1)
----------- ----------- ----------- -----------
Property EBITDA 326.6 309.0 236.5 161.0
Depreciation and
amortization (61.1) (104.1) (62.4) (40.0)
----------- ----------- ----------- -----------
Operating profit 265.5 204.9 174.1 121.0
Project opening costs
and other items (6.2) (3.3) 178.9 (0.3)
Income/(losses) on
interests in
non-consolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (22.5) (9.1) (15.2) (0.2)
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 236.8 $ 192.5 $ 338.0 $ 120.5
=========== =========== =========== ===========
Combined
--------------------------------------------------
Nine Months Ended September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 890.0 $ 326.6 $ 499.0 $ 5,942.4
Property operating
expenses (725.7) (265.1) (404.0) (4,588.5)
----------- ----------- ----------- -----------
Property EBITDA 164.3 61.5 95.0 1,353.9
Depreciation and
amortization (44.3) (21.4) (54.6) (387.9)
----------- ----------- ----------- -----------
Operating profit 120.0 40.1 40.4 966.0
Project opening costs
and other items (18.5) - (67.6) 83.0
Income/(losses) on
interests in
non-consolidated
affiliates - - (0.9) (0.7)
Corporate expense - - (62.3) (62.3)
Merger and integration
costs - - (148.7) (148.7)
Amortization of
intangible assets (1.5) (1.5) (34.9) (84.9)
----------- ----------- ----------- -----------
Income/(loss) from
operations* $ 100.0 $ 38.6 $ (274.0) $ 752.4
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods on our
CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED SUMMARY OF
OPERATIONS for the additional income and expenses recorded in the
determination of Net Income/(loss) attributable to Harrah's Operating
Company, Inc.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO (LOSS)/INCOME FROM OPERATIONS
(UNAUDITED)
Successor
--------------------------------------------------
January 28, 2008 Through September 30, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 996.5 $ 1,276.0 $ 1,010.8 $ 537.3
Property operating
expenses (708.0) (988.9) (792.9) (389.3)
----------- ----------- ----------- -----------
Property EBITDA 288.5 287.1 217.9 148.0
Depreciation and
amortization (53.7) (92.2) (53.8) (34.9)
----------- ----------- ----------- -----------
Operating profit 234.8 194.9 164.1 113.1
Project opening costs
and other items (6.2) (3.2) 178.3 (0.3)
Income on interests in
non-consolidated
affiliates - - 0.2 -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (21.5) (7.2) (14.7) -
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 207.1 $ 184.5 $ 327.9 $ 112.8
=========== =========== =========== ===========
Successor
--------------------------------------------------
January 28, 2008 Through September 30, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 804.5 $ 299.8 $ 440.0 $ 5,364.9
Property operating
expenses (653.8) (239.5) (348.2) (4,120.6)
----------- ----------- ----------- -----------
Property EBITDA 150.7 60.3 91.8 1,244.3
Depreciation and
amortization (40.0) (18.4) (47.4) (340.4)
----------- ----------- ----------- -----------
Operating profit 110.7 41.9 44.4 903.9
Project opening costs
and other items (18.5) - (66.2) 83.9
Income on interests in
non-consolidated
affiliates - - (1.4) (1.2)
Corporate expense - - (88.5) (88.5)
Merger and integration
costs - - (23.1) (23.1)
Amortization of
intangible assets (0.9) (1.4) (33.7) (79.4)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 91.3 $ 40.5 $ (168.5) $ 795.6
=========== =========== =========== ===========
Predecessor
--------------------------------------------------
January 1, 2008 Through January 27, 2008
--------------------------------------------------
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
(In millions) Region Region Region Region
----------- ----------- ----------- -----------
Revenues $ 118.5 $ 125.8 $ 106.1 $ 55.8
Property operating
expenses (80.4) (103.9) (87.5) (42.8)
----------- ----------- ----------- -----------
Property EBITDA 38.1 21.9 18.6 13.0
Depreciation and
amortization (7.4) (11.9) (8.6) (5.1)
----------- ----------- ----------- -----------
Operating profit 30.7 10.0 10.0 7.9
Project opening costs
and other items - (0.1) 0.6 -
Income on interests in
non-consolidated
affiliates - - - -
Corporate expense - - - -
Merger and integration
costs - - - -
Amortization of
intangible assets (1.0) (1.9) (0.5) (0.2)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 29.7 $ 8.0 $ 10.1 $ 7.7
=========== =========== =========== ===========
Predecessor
--------------------------------------------------
January 1, 2008 Through January 27, 2008
--------------------------------------------------
Illinois/ Other
Indiana Nevada
(In millions) Region Region Other Total
----------- ----------- ----------- -----------
Revenues $ 85.5 $ 26.8 $ 59.0 $ 577.5
Property operating
expenses (71.9) (25.6) (55.8) (467.9)
----------- ----------- ----------- -----------
Property EBITDA 13.6 1.2 3.2 109.6
Depreciation and
amortization (4.3) (3.0) (7.2) (47.5)
----------- ----------- ----------- -----------
Operating profit 9.3 (1.8) (4.0) 62.1
Project opening costs
and other items - - (1.4) (0.9)
Income on interests in
non-consolidated
affiliates - - 0.5 0.5
Corporate expense - - 26.2 26.2
Merger and integration
costs - - (125.6) (125.6)
Amortization of
intangible assets (0.6) (0.1) (1.2) (5.5)
----------- ----------- ----------- -----------
(Loss)/income from
operations* $ 8.7 $ (1.9) $ (105.5) $ (43.2)
=========== =========== =========== ===========
* Total (loss)/income from operations as reported on this schedule
corresponds with the amounts reported for the respective periods
on our CONSOLIDATED SUMMARY OF OPERATIONS. See our CONSOLIDATED
SUMMARY OF OPERATIONS for the additional income and expenses recorded
in the determination of Net income/(loss) attributable to
Harrah's Operating Company, Inc.
HARRAH'S OPERATING COMPANY, A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF INCOME/(LOSS) FROM CONTINUING OPERATIONS TO
LTM ADJUSTED EBITDA
(UNAUDITED)
Adjusted EBITDA and last twelve months (LTM) adjusted EBITDA are defined as EBITDA further adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant compliance under the indenture governing the senior notes, first lien notes, second lien notes and/or our senior secured credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA and LTM adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Because not all companies use identical calculations, our presentation of Adjusted EBITDA and LTM adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
In connection with the acquisition of the Company by affiliates of Apollo Global Management, LLC and TPG Capital, LP, eight of our properties and their related operating assets were spun off from Harrah's Operating Company to Harrah's Entertainment through a series of distributions, liquidations, transfers and contributions, collectively referred to as the "the CMBS Spin-Off." The eight properties, as of the closing, are Harrah's Las Vegas, Rio, Flamingo Las Vegas, Harrah's Atlantic City, Showboat Atlantic City, Harrah's Lake Tahoe, Harvey's Lake Tahoe and Bill's Lake Tahoe. Subsequent to the closing, Paris Las Vegas and Harrah's Laughlin and their related operating assets were spun off from Harrah's Operating Company and its subsidiaries to Harrah's Entertainment, and Harrah's Lake Tahoe, Harvey's Lake Tahoe, Bill's Lake Tahoe and Showboat Atlantic City and their related operating assets were transferred to subsidiaries of Harrah's Operating Company from Harrah's Entertainment (the "Post-Close CMBS Transaction"). The properties spun off from Harrah's Operating Company and owned by Harrah's Entertainment, whether at closing or after the subsequent transfer, are collectively referred to as "the CMBS properties." We refer to the CMBS Spin-Off and the Post-Closing CMBS Transaction as the "CMBS Transactions."
Also in connection with the acquisition by affiliates of Apollo and TPG, London Clubs International Limited ("London Clubs") and its subsidiaries, with the exception of the subsidiaries related to the South Africa operations, became subsidiaries of Harrah's Operating Company ("the London Clubs Transfer"). London Clubs and its subsidiaries were previously subsidiaries of Harrah Entertainment.
The following table reconciles Income/(loss) from continuing operations, net of tax and LTM Adjusted EBITDA of Harrah's Operating for the Successor period for the nine months ended September 30, 2009; the Predecessor period from January 1, 2008 through January 27, 2008 and Successor period from January 28, 2008 through September 30, 2008, which includes the South Africa operations; and the Predecessor period from January 1, 2008 through January 27, 2008 and Successor period from January 28, 2008 through December 31, 2008:
HARRAH'S OPERATING COMPANY, A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF INCOME/(LOSS) FROM CONTINUING OPERATIONS TO
LTM ADJUSTED EBITDA
(UNAUDITED)
(1)
---------- ---------- ----------
Successor Predecessor Successor
---------- ---------- ----------
Jan. 1, Jan. 28,
Nine 2008 2008
Months Through Through
Ended Sept Jan. 27, Sept 30,
(In millions) 30, 2009 2008 2008
---------- ---------- ----------
Income/(loss)
from
continuing
operations,
net of tax $ 733.9 $ (106.2) $ (414.3)
Net
(income)/loss
attributable
to
non-controlling
interests (11.7) (1.4) (1.6)
Interest
expense, net 1,222.6 85.7 1,193.2
Provision/
(benefit) for
income taxes 1,480.8 (21.6) (186.7)
Depreciation
and
amortization 493.6 56.7 431.7
---------- ---------- ----------
EBITDA 3,919.2 13.2 1,022.3
Project opening
costs,
abandoned
projects and
development
costs (b) 2.7 0.9 27.1
Merger and
integration
costs 0.3 125.6 23.1
(Gain)/losses
on early
extinguishment
of debt (c) (3,931.4) - 203.9
Net income
attributable
to
non-
controlling
interests,
net of
distributions
(d) (0.2) 0.8 (3.9)
Impairment of
goodwill and
other
intangible
assets 1,166.6 - -
Non-cash
expense for
stock
compensation
benefits (e) 9.3 1.7 9.2
Income from
insurance
claims for
hurricane
losses (f) - - (185.5)
Other
non-recurring
or non-cash
items (g) 66.9 0.8 83.7
Pro forma
adjustment for
yet-to-be
realized cost
savings (h)
LTM adjusted
EBITDA
(2) (3)
---------- ---------- ---------- ----------
Combined Predecessor Successor Combined
---------- ---------- ---------- ----------
Jan. 1, Jan. 1, Jan. 28, Jan. 1,
2008 2008 2008 2008
Through Through Through Through
Sept 30, Jan. 27, Dec. 31, Dec, 31, (1)-(2)+(3)
(In millions) 2008 2008 (a) 2008 (a) 2008 LTM
---------- ---------- ---------- ---------- -----------
Income/(loss)
from
continuing
operations,
net of tax $ (520.5) $ (106.2) $ (3,390.5) $ (3,496.7) $ (2,242.3)
Net
(income)/loss
attributable
to
non-controlling
interests (3.0) (1.4) (6.4) (7.8) (16.5)
Interest
expense, net 1,278.9 85.7 1,675.4 1,761.1 1,704.8
Provision/
(benefit) for
income taxes (208.3) (21.6) (378.5) (400.1) 1,289.0
Depreciation
and
amortization 488.4 56.7 597.2 653.9 659.1
---------- ---------- ---------- ---------- -----------
EBITDA 1,035.5 13.2 (1,502.8) (1,489.6) 1,394.1
Project opening
costs,
abandoned
projects and
development
costs (b) 28.0 0.9 30.0 30.9 5.6
Merger and
integration
costs 148.7 125.6 24.0 149.6 1.2
(Gain)/losses
on early
extinguishment
of debt (c) 203.9 - (742.1) (742.1) (4,877.4)
Net income
attributable
to
non-
controlling
interests,
net of
distributions
(d) (3.1) 0.8 (7.2) (6.4) (3.5)
Impairment of
goodwill and
other
intangible
assets - - 3,745.2 3,745.2 4,911.8
Non-cash
expense for
stock
compensation
benefits (e) 10.9 1.7 12.1 13.8 12.2
Income from
insurance
claims for
hurricane
losses (f) (185.5) - (185.4) (185.4) 0.1
Other
non-recurring
or non-cash
items (g) 84.5 0.8 130.1 130.9 113.3
Pro forma
adjustment for
yet-to-be
realized cost
savings (h) 134.4
----------
LTM adjusted
EBITDA $ 1,691.8
==========
(a) Includes operating results of South Africa.
(b) Represents (i) project opening costs incurred in connection with
expansion and renovation projects at various properties;
(ii) write-off of abandoned development projects; and
(iii) non-recurring strategic planning and restructuring costs.
(c) Represents (i) the difference between the net book value and cash
paid for notes exchanged and retired for cash; (ii) the difference
between the net book value of the old notes and the fair market
value of new notes issued; and (iii) the write-off of historical
unamortized deferred financing costs and unamortized market value
premiums/discounts.
(d) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
(e) Represents non-cash compensation expense related to stock options.
(f) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
(g) Represents the elimination of other non-recurring or non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of assets,
equity in non-consolidated subsidiaries (net of distributions) and
one-time costs relating to new state gaming legislation.
(h) Represents the cost savings yet-to-be realized from our previously
announced profitability improvement program.
The following tables present the condensed combined statement of operations
of Harrah's Operating Company, Inc. for the quarter and nine months ended
September 30, 2009, the quarter ended September 30, 2008, the Successor
period from January 28, 2008 through September 30, 2008, and the
Predecessor period from January 1, 2008 through January 27, 2008, taking
into consideration the CMBS Transactions and the London Clubs Transfer:
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
CONDENSED COMBINED STATEMENT OF OPERATIONS
(SUCCESSOR)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)
HET Parent
and Other
Harrah's
Entertainment
Subsidiaries
Harrah's and
(In millions) Entertainment(a) Accounts(b) HOC(c)
---------------- ---------------- ----------------
Revenues $ 2,282.2 $ (522.7) $ 1,759.5
Property operating
expenses (1,718.5) 377.3 (1,341.2)
Depreciation and
amortization (175.6) 41.9 (133.7)
---------------- ---------------- ----------------
Operating profit 388.1 (103.5) 284.6
Project opening costs
and other items (24.6) 7.3 (17.3)
Impairment of
intangible assets (1,328.6) 204.0 (1,124.6)
Income on interests
in non-consolidated
affiliates (1.2) 0.7 (0.5)
Corporate expense (39.7) 17.1 (22.6)
Merger and
integration costs - - -
Amortization of
intangible assets (44.2) 14.9 (29.3)
---------------- ---------------- ----------------
Loss from operations (1,050.2) 140.5 (909.7)
Interest expense, net
of interest
capitalized (444.5) 45.0 (399.5)
Losses on early
extinguishment of
debt (1.5) - (1.5)
Other income,
including interest
income 4.1 (0.3) 3.8
---------------- ---------------- ----------------
Loss before income
taxes (1,492.1) 185.2 (1,306.9)
Income tax
(provision)/benefit (128.9) (17.3) (146.2)
---------------- ---------------- ----------------
Loss from continuing
operations, net of
tax (1,621.0) 167.9 (1,453.1)
Discontinued
operations, net of
tax (0.1) - (0.1)
---------------- ---------------- ----------------
Net loss (1,621.1) 167.9 (1,453.2)
Less: net income
attributable to
non-controlling
interests (3.2) 1.3 (1.9)
---------------- ---------------- ----------------
Net loss
attributable to
Harrah's Operating
Company, Inc. $ (1,624.3) $ 169.2 $ (1,455.1)
================ ================ ================
(a) Represents the financial information of Harrah's Entertainment.
(b) Represents the removal of (i) the financial information of all
subsidiaries of Harrah's Entertainment that are not a component of HOC,
primarily, captive insurance companies and the CMBS properties; and
(ii) accounts at Harrah's Entertainment.
(c) Represents the financial information of HOC.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(SUCCESSOR)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
(UNAUDITED)
HET Parent
and Other
Harrah's
Entertainment
Subsidiaries
Harrah's and
(In millions) Entertainment(a) Accounts(b) HOC(c)
---------------- ---------------- ----------------
Revenues $ 2,645.9 $ (620.4) $ 2,025.5
Property operating
expenses (2,004.2) 443.1 (1,561.1)
Depreciation and
amortization (152.0) 37.9 (114.1)
---------------- ---------------- ----------------
Operating profit 489.7 (139.4) 350.3
Project opening costs
and other items (63.1) 19.9 (43.2)
Loss on interests in
non-consolidated
affiliates (2.5) 0.1 (2.4)
Corporate expense (34.7) 16.4 (18.3)
Merger and
integration costs (1.0) - (1.0)
Amortization of
intangible assets (38.8) 12.2 (26.6)
---------------- ---------------- ----------------
Income from
operations 349.6 (90.8) 258.8
Interest expense, net
of interest
capitalized (533.4) 98.9 (434.5)
Gain on early
extinguishment of
debt 7.4 - 7.4
Other income,
including interest
income 7.2 (3.2) 4.0
---------------- ---------------- ----------------
Loss before income
taxes (169.2) 4.9 (164.3)
Income tax
benefit/(provision) 46.0 3.6 49.6
---------------- ---------------- ----------------
Loss from continuing
operations,
net of tax (d) (123.2) 8.5 (114.7)
Discontinued
operations, net of
tax 0.7 - 0.7
---------------- ---------------- ----------------
Net loss (d) (122.5) 8.5 (114.0)
Less: net income
attributable to
non-controlling
interests (7.2) 1.5 (5.7)
---------------- ---------------- ----------------
Net loss
attributable to
Harrah's Operating
Company, Inc. $ (129.7) $ 10.0 $ (119.7)
================ ================ ================
(a) Represents the financial information of Harrah's Entertainment.
(b) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely, captive
insurance companies and the CMBS properties, and (ii) accounts at
Harrah's Entertainment.
(c) Represents the financial information of HOC.
(d) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
CONDENSED COMBINED STATEMENT OF OPERATIONS
(SUCCESSOR)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)
HET Parent
and Other
Harrah's
Entertainment
Subsidiaries
Harrah's and
(In millions) Entertainment(a) Accounts(b) HOC(c)
---------------- ---------------- ----------------
Revenues $ 6,808.3 $ (1,566.6) $ 5,241.7
Property operating
expenses (5,097.8) 1,120.6 (3,977.2)
Depreciation and
amortization (516.8) 120.5 (396.3)
---------------- ---------------- ----------------
Operating profit 1,193.7 (325.5) 868.2
Project opening costs
and other items (81.5) 28.5 (53.0)
Impairment of
intangible assets (1,625.7) 459.1 (1,166.6)
Income on interests
in non-consolidated
affiliates (1.3) 2.2 0.9
Corporate expense (111.7) 55.4 (56.3)
Merger and
integration costs (0.3) - (0.3)
Amortization of
intangible assets (131.7) 44.7 (87.0)
---------------- ---------------- ----------------
Loss from operations (758.5) 264.4 (494.1)
Interest expense, net
of interest
capitalized (1,404.7) 159.7 (1,245.0)
Gains on early
extinguishment of
debt 4,279.2 (347.8) 3,931.4
Other income,
including interest
income 23.2 (0.8) 22.4
---------------- ---------------- ----------------
Income/(loss) before
income taxes 2,139.2 75.5 2,214.7
Income tax
(provision)/benefit (1,590.8) 110.0 (1,480.8)
---------------- ---------------- ----------------
Income/(loss) from
continuing
operations,
net of tax 548.4 185.5 733.9
Discontinued
operations, net of
tax (0.3) - (0.3)
---------------- ---------------- ----------------
Net income/(loss) 548.1 185.5 733.6
Less: net income
attributable to
non-controlling
interests (16.1) 4.4 (11.7)
---------------- ---------------- ----------------
Net income/(loss)
attributable to
Harrah's Operating
Company, Inc. $ 532.0 $ 189.9 $ 721.9
================ ================ ================
(a) Represents the financial information of Harrah's Entertainment.
(b) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, primarily,
captive insurance companies and the CMBS properties, and (ii) accounts
at Harrah's Entertainment.
(c) Represents the financial information of HOC.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(SUCCESSOR)
FOR THE PERIOD FROM JANUARY 28, 2008 THROUGH SEPTEMBER 30, 2008
(UNAUDITED)
HET Parent
and Other
Harrah's
Entertainment
Subsidiaries
Harrah's and
(In millions) Entertainment(a) Accounts(b) HOC(c)
---------------- ---------------- ----------------
Revenues $ 7,088.5 $ (1,723.6) $ 5,364.9
Property operating
expenses (5,321.6) 1,201.0 (4,120.6)
Depreciation and
amortization (452.4) 112.0 (340.4)
---------------- ---------------- ----------------
Operating profit 1,314.5 (410.6) 903.9
Project opening costs
and other items 35.5 48.4 83.9
Loss on interests in
non-consolidated
affiliates (1.3) 0.1 (1.2)
Corporate expense (95.9) 7.4 (88.5)
Merger and
integration costs (23.1) - (23.1)
Amortization of
intangible assets (119.2) 39.8 (79.4)
---------------- ---------------- ----------------
Income from
operations 1,110.5 (314.9) 795.6
Interest expense, net
of interest
capitalized (1,469.4) 261.2 (1,208.2)
Loss on early
extinguishment of
debt (203.9) - (203.9)
Other income,
including interest
income 18.7 (3.2) 15.5
---------------- ---------------- ----------------
(Loss)/income before
income taxes (544.1) (56.9) (601.0)
Income tax
benefit/(provision) 147.7 39.0 186.7
---------------- ---------------- ----------------
(Loss)/income from
continuing
operations,
net of tax (d) (396.4) (17.9) (414.3)
Discontinued
operations, net of
tax 88.4 - 88.4
---------------- ---------------- ----------------
Net (loss)/income(d) (308.0) (17.9) (325.9)
Less: net income
attributable to
non-controlling
interests (6.2) 4.6 (1.6)
---------------- ---------------- ----------------
Net (loss)/income
attributable to
Harrah's Operating
Company, Inc. $ (314.2) $ (13.3) $ (327.5)
================ ================ ================
(a) Represents the financial information of Harrah's Entertainment.
(b) Represents the removal of (i) financial information of all subsidiaries
of Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies, the CMBS properties and South Africa
interests; and (ii) accounts at Harrah's Entertainment.
(c) Represents the financial information of HOC.
(d) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentation.
HARRAH'S OPERATING COMPANY, INC., A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(PREDECESSOR)
FOR THE PERIOD FROM JANUARY 1, 2008 THROUGH JANUARY 27, 2008
(UNAUDITED)
HET Parent and
Other Harrah's
Entertainment London
Harrah's Subsidiaries CMBS Clubs HOC
Entertain- and Historical Trans- Trans- Restruc-
(In millions) ment(a) Accounts(b) HOC(c) actions(d) fer(e) tured
-------- -------- -------- -------- -------- --------
Revenues $ 760.1 $ (34.3) $ 725.8 $ (182.3) $ 34.0 $ 577.5
Property
operating
expenses (588.9) 28.5 (560.4) 126.5 (34.0) (467.9)
Depreciation
and
amortization (63.5) 1.6 (61.9) 16.0 (1.6) (47.5)
-------- -------- -------- -------- -------- --------
Operating
profit/(loss) 107.7 (4.2) 103.5 (39.8) (1.6) 62.1
Project opening
costs and
other items (5.4) 0.7 (4.7) 4.5 (0.7) (0.9)
Income on
interests in
non-
consolidated
affiliates 0.5 - 0.5 - - 0.5
Corporate
expense (8.5) - (8.5) 34.7 - 26.2
Merger and
integration
costs (125.6) - (125.6) - - (125.6)
Amortization of
intangible
assets (5.5) 0.2 (5.3) - (0.2) (5.5)
-------- -------- -------- -------- -------- --------
(Loss)/income
from
operations (36.8) (3.3) (40.1) (0.6) (2.5) (43.2)
Interest
expense, net
of interest
capitalized (89.7) - (89.7) - - (89.7)
Other
income/(expense)
including
interest
income 1.1 (3.3) (2.2) 4.0 3.3 5.1
-------- -------- -------- -------- -------- --------
(Loss)/income
before income
taxes (125.4) (6.6) (132.0) 3.4 0.8 (127.8)
Income tax
benefit/
(provision) 26.0 (4.1) 21.9 (1.2) 0.9 21.6
-------- -------- -------- -------- -------- --------
(Loss)/income
from
continuing
operations,
net of tax (f) (99.4) (10.7) (110.1) 2.2 1.7 (106.2)
Discontinued
operations,
net of tax 0.1 - 0.1 - - 0.1
-------- -------- -------- -------- -------- --------
Net
(loss)/
income(f) (99.3) (10.7) (110.0) 2.2 1.7 (106.1)
Less: net
income
attributable
to
non-
controlling
interests (1.6) 0.9 (0.7) 0.2 (0.9) (1.4)
-------- -------- -------- -------- -------- --------
Net
(loss)/
income
attributable
to Harrah's
Operating
Company, Inc. $ (100.9) $ (9.8) $ (110.7) $ 2.4 $ 0.8 $ (107.5)
======== ======== ======== ======== ======== ========
(a) Represents the financial information of Harrah's Entertainment.
(b) Represents the removal of (i) the financial information of all
subsidiaries of Harrah's Entertainment that are not a component of HOC,
namely, captive insurance companies and London Clubs and its
subsidiaries; and (ii) accounts at Harrah's Entertainment.
(c) Represents the historical financial information of HOC.
(d) Reflects the removal of the operating results of the CMBS properties,
pursuant to the CMBS Transactions in which certain properties and
operations of HOC were spun-off into a separate borrowing structure and
held side-by-side with HOC under Harrah's Entertainment. The operating
expenses of HOC include unallocated costs attributable to services that
have been performed by HOC on behalf of the CMBS properties. These
costs are primarily related to corporate functions such as accounting,
tax, treasury, payroll and benefits administration, risk management,
legal, and information management and technology. The CMBS spin-off
reflects the push-down of corporate expense of $34.7 million that was
unallocated at January 27, 2008. Following the Acquisition, many of
these services will continue to be provided by HOC pursuant to a shared
services agreement with the CMBS properties.
(e) Reflects the inclusion of the London Clubs operating results pursuant
to the London Clubs Transfer, in which London Clubs and its
subsidiaries became subsidiaries of HOC.
(f) Due to the January 1, 2009 adoption of a recent accounting
pronouncement, certain 2008 amounts have been recast to conform to the
2009 presentations.
Jacqueline Peterson
Media
Harrah's Entertainment, Inc.
(702) 494-4829
Jonathan Halkyard
Investors
Harrah's Entertainment, Inc.
(702) 407-6080