Economic turmoil hammers Harrah's latest results

Harrah's Las Vegas

Harrah's Entertainment Inc., owner of the World Series of Poker and numerous international casino properties, announced late last week that its second-quarter revenues in 2008 were just over $2.6 billion, down 3.7% from the company's $2.7 billion revenue during the same quarter of 2007.

The company's second-quarter income from operations was $323.1 million, compared with $477.9 million in the 2007 second quarter. The net loss for the 2008 second quarter was $97.6 million, compared with net income of $237.5 million in the year-ago quarter.

"The first half of the year presented us with the most turbulent economic conditions the casino-entertainment industry has faced in years," said Gary Loveman, the chairman, president and chief executive officer of Harrah's.

"Customer visitation fell in the second quarter as consumers coped with higher fuel costs, declining asset values, the impact of widespread flooding in the Midwest and other financial challenges."

All of those factors added up to Harrah's patrons both visiting the casino company's properties less often than they did in the second quarter of 2007 and spending less money when they did make the trip to their favorite Harrah's property.

Other factors held down revenues at Harrah's properties in different regions. In the Las Vegas region, for instance, a 5.4% decline in revenue was partially attributed to room remodeling projects at three different properties.

At Harrah's Casino Tunica - formerly known as Grand Casino Tunica - overall visitor volume was lower due to disruptions in service during renovation for the casino's rebranding, contributing to an overall revenue decrease of 5.3% in the Louisiana-Mississippi region. Much of the region's income for Harrah's during the first half of the year was due to insurance proceeds related to hurricane damage to its properties on the Gulf Coast during 2005.

In the Iowa-Missouri region, a 4.4% decline in total revenues was attributed to increased competition from a new casino in St. Louis. And in three other markets, new bans on smoking helped to drop Harrah's revenues across the board.

One bright spot in the Harrah's report was the performance of the company's properties in the Atlantic City region. Despite the smoking ban in Atlantic City affecting the bottom line, the region as a whole saw a 1.2% increase in revenues during the second quarter. Harrah's attributed this small success to the phased opening of an expansion to Harrah's Atlantic City and a strong performance from Harrah's Chester in Pennsylvania.

Finally, the company's international properties saw a big 11.3% increase in revenues thanks to the success of three properties under the London Clubs International banner, which opened in 2007.

Not included in the figures released by Harrah's was the impact of the 2008 World Series of Poker on its bottom line. The WSOP did see an increase in overall attendance this year compared to 2007.

The second-quarter numbers are some of the first meaningful financial figures to be released since the company completed its $30.7 billion sale to Apollo Global Management and TPG Capital in January of this year.

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