Exhibit 99.1
Contact: |
| Brad Belhouse – Investors |
| Gary Thompson – Media |
|
| Harrah’s Entertainment, Inc. |
| Harrah’s Entertainment, Inc. |
|
| (702) 407-6367 |
| (702) 407-6529 |
Harrah’s Entertainment Reports Record Fourth-Quarter, Full-Year Results;
Same-Store Sales Growth, Accretive Acquisition Drive Records
LAS VEGAS, February 2, 2005 – Harrah’s Entertainment, Inc. (NYSE:HET) today reported record fourth-quarter revenues of $1.19 billion, up 25.1 percent from revenues of $950.2 million in the 2003 fourth quarter.
Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 31.3 percent in the fourth quarter to a record $288.7 million from Property EBITDA of $219.9 million in the year-earlier period. Fourth-quarter Adjusted Earnings Per Share increased to a record 72 cents, up 44.0 percent from the 50 cents achieved in 2003’s fourth quarter.
Property EBITDA and Adjusted EPS are not Generally Accepted Accounting Principles (GAAP) measurements but are commonly used in the gaming industry as measures of performance and as a basis for valuation of gaming companies. In addition, analysts’ per-share earnings estimates for gaming companies are comparable to Adjusted EPS. Reconciliations of Adjusted EPS to GAAP EPS and Property EBITDA to income from operations are attached to this release.
Fourth-quarter income from operations rose 33.4 percent to a record $165.0 million from $123.7 million in the year-earlier quarter. Fourth-quarter net income was a record $77.0 million, up 117.5 percent from $35.4 million in the 2003 fourth quarter.
Diluted earnings per share for the 2004 fourth quarter was a record 68 cents, 112.5 percent higher than the 32 cents achieved in the 2003 fourth quarter.
Fourth-quarter results included contributions from the three Horseshoe casinos, acquired by Harrah’s on July 1, 2004. Results for Harrah’s East Chicago and Harrah’s Tunica, which are contracted for sale to an affiliate of Colony Capital, LLC, have been reclassified to discontinued operations. Harrah’s anticipates closing the sale transaction during the 2005 first quarter.
“Strong organic growth, an accretive acquisition and prudent capital spending propelled the company to yet another record quarter,” said Gary Loveman, Harrah’s Entertainment’s chairman, president and chief executive officer. “We achieved these results despite a month-long strike at our Atlantic City properties. This robust performance also demonstrates the value of our unique customer-loyalty strategy and our geographic diversification, as often measured by same-store sales growth and cross-market play.”
Fourth-quarter 2004 same-store revenues increased 7.5 percent over the year-ago period. Cross-market play – gaming by customers at Harrah’s properties other than their “home” casino – rose 15.3 percent from the fourth quarter of 2003. Tracked play – gaming by customers using the company’s Total Rewards player cards – increased 10.8 percent from the year-ago fourth quarter.
“Our acquisitions have received considerable attention, but they are only one part of Harrah’s growth story,” Loveman said. “Over the past six years we have contended with recession, a post-9/11 travel slump, new competitors in multiple markets and the longest strike in the history of the Atlantic City gaming industry. Despite this litany of challenges, our company has posted same-store sales growth in all but one of the last 24
quarters. This remarkable record of consistent organic growth is a tribute to the effectiveness of our marketing and technological capabilities and our focus on delivering superior customer service.”
For the full year 2004, revenues rose 15.2 percent to a record $4.55 billion from $3.95 billion in 2003. Property EBITDA increased to a record $1.22 billion, up 16.0 percent from $1.05 billion in 2003. Adjusted EPS was a record $3.37, 15.8 percent higher than the $2.91 achieved in 2003.
Income from operations for the full year 2004 was a record $791.1 million, up 16.5 percent from $678.8 million in full year 2003. Net income was a record $367.7 million, up 25.7 percent from $292.6 million in 2003. Full-year 2004 diluted earnings per share was a record $3.26, up 23.0 percent from $2.65 in the year-ago period.
For the full year 2004, cross-market play rose 18.0 percent to $1.44 billion. Tracked play for the full year 2004 increased 11.9 percent, while same-store revenues rose 6.5 percent.
Poised For Long-Term Growth
“In 2004 we achieved record results in pursuit of our strategy to position Harrah’s as the world’s leading distributor of casino entertainment,” Loveman said. “Our implementation of marketing and customer-service initiatives, such as Total Rewards 2, strategic capital investments in existing properties and the acquisition of Horseshoe Gaming Holding Corp. set the stage for sustainable long-term growth.
“Our pending acquisition of Caesars Entertainment, Inc. will take Harrah’s to an even higher level, giving us both a premier luxury brand of international renown and an expanded property portfolio offering a presence in every major gaming market in this country,” Loveman said. “Our integration strategy calls for us to maintain and enhance
the Caesars brand as experienced by their players, while integrating the best tools, capabilities and personnel of both companies into the combined entity.
“We are in substantial compliance with the Federal Trade Commission’s second request for information with regards to the Caesars acquisition, and we remain optimistic we will be able to complete this transaction in the second quarter,” Loveman said.
“The Horseshoe acquisition continued to be accretive in the fourth quarter, adding an estimated four cents to Adjusted EPS,” Loveman said. “The integration of Horseshoe continues to proceed smoothly, an experience that will serve us well as we prepare for the integration of Caesars.
“We will be ready for the Caesars acquisition,” Loveman said. “Our existing operations provide strong momentum, fueled by robust organic growth, a history of successful acquisitions and high returns on capital investments. The recently announced increase in our bank-credit capacity will not only facilitate the Caesars transaction, but provide us with the financial flexibility to pursue other opportunities as they arise.
“On January 1, Phil Satre retired as chairman after a remarkable 25-year career with our company,” Loveman said. “Phil is truly a gaming-industry legend. His leadership and vision transformed a small Nevada casino chain into one of the largest companies in the gaming industry. On behalf of Harrah’s 48,000 employees, I would like to wish Phil a fond farewell, and extend to him the best wishes of all of my colleagues on the next challenges in his life.”
Among the fourth-quarter highlights:
• Building on the acquisition of Horseshoe, Harrah’s announced plans to re-brand its Bluffs Run Casino to the Horseshoe brand as part of an expansion and renovation of the Council Bluffs, Iowa, property. Upon completion in
the first quarter of 2006, Horseshoe Council Bluffs will feature 69 percent more gaming space, 1,900 slot machines, 36 table games and a 20-table poker room.
• Members of the UNITE-HERE Local 54 union in Atlantic City approved a five-year contract in November, ending a month-long strike at Harrah’s Atlantic City and the Showboat.
• The National Indian Gaming Commission approved an agreement between the Ak-Chin Indian Community and a Harrah’s subsidiary that extends Harrah’s contract to manage Harrah’s Phoenix Ak-Chin hotel and casino for an additional five years, starting January 1, 2005. Harrah’s has managed the Arizona casino since its December 1994 opening.
• Harrah’s 28 casinos received a record 580 awards, including 252 first-place finishes, in “Best of Slots,” an annual poll of Strictly Slots magazine readers. Harrah’s Laughlin, Harrah’s Lake Tahoe, Harrah’s New Orleans and Horseshoe Bossier City were named “Best Overall Gaming Resort” in their markets, while Total Rewards was voted Best Slot Club in 10 markets –Atlantic City, Chicagoland, Iowa, Lake Tahoe, Las Vegas Strip, Laughlin, Missouri, Native Midwest, Native West and New Orleans.
• Harrah’s announced the launch of the World Series of Poker Tournament Circuit, a series of five poker tournaments preceding the 36th Annual World Series of Poker in Las Vegas this summer. The first circuit tournament was held in January at Harrah’s Atlantic City; additional events will be held at Harrah’s Rincon, the Rio, Harveys Lake Tahoe and Harrah’s New Orleans.
• An expansion of Harrah’s Rincon near San Diego opened in December. The project added a 21-story, 459-room hotel tower, 14,000 square feet of additional gaming space and a 7,500-square-foot spa.
Southern Nevada Propels West Region To Record Results
West Results
(in millions)
|
| 2004 |
| 2003 |
| Percent |
| 2004 |
| 2003 |
| Percent |
| ||||
|
| Fourth |
| Fourth |
| Increase |
| Full |
| Full |
| Increase |
| ||||
|
| Quarter |
| Quarter |
| (Decrease) |
| Year |
| Year |
| (Decrease) |
| ||||
Southern Nevada |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 265.5 |
| $ | 226.0 |
| 17.5 | % | $ | 1,062.5 |
| $ | 899.5 |
| 18.1 | % |
Income from operations |
| 58.4 |
| 39.3 |
| 48.6 | % | 246.0 |
| 165.4 |
| 48.7 | % | ||||
Property EBITDA |
| 75.5 |
| 57.9 |
| 30.4 | % | 316.1 |
| 239.8 |
| 31.8 | % | ||||
Northern Nevada |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 99.8 |
| 99.0 |
| 0.8 | % | 452.4 |
| 447.2 |
| 1.2 | % | ||||
Income from operations |
| 3.4 |
| (2.3 | ) | N/M |
| 60.0 |
| 55.4 |
| 8.3 | % | ||||
Property EBITDA |
| 15.2 |
| 14.0 |
| 8.6 | % | 103.1 |
| 100.8 |
| 2.3 | % | ||||
Total West Region |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 365.3 |
| 325.0 |
| 12.4 | % | 1,514.9 |
| 1,346.7 |
| 12.5 | % | ||||
Income from operations |
| 61.8 |
| 37.0 |
| 67.0 | % | 306.0 |
| 220.8 |
| 38.6 | % | ||||
Property EBITDA |
| 90.7 |
| 71.9 |
| 26.1 | % | 419.2 |
| 340.6 |
| 23.1 | % | ||||
Strong market conditions and robust cross-market play at Harrah’s three Southern Nevada properties helped Harrah’s West Region achieve record fourth-quarter and full-year results.
“Our cross-market strategy and capabilities helped our Southern Nevada properties post particularly strong results,” said Tim Wilmott, Harrah’s chief operating officer. “Our competitive advantage was especially evident at Harrah’s Laughlin, which posted EBITDA gains of more than 42 percent.”
East Region Reports Lower Results
East Results
(in millions)
|
| 2004 |
| 2003 |
| Percent |
| 2004 |
| 2003 |
| Percent |
| ||||
|
| Fourth |
| Fourth |
| Increase |
| Full |
| Full |
| Increase |
| ||||
|
| Quarter |
| Quarter |
| (Decrease) |
| Year |
| Year |
| (Decrease) |
| ||||
Harrah’s Atlantic City |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 96.0 |
| $ | 99.9 |
| -3.9 | % | $ | 423.3 |
| $ | 433.5 |
| -2.4 | % |
Income from operations |
| 18.1 |
| 25.9 |
| -30.1 | % | 109.4 |
| 133.4 |
| -18.0 | % | ||||
Property EBITDA |
| 28.1 |
| 34.3 |
| -18.1 | % | 148.0 |
| 167.5 |
| -11.6 | % | ||||
Showboat Atlantic City |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 82.0 |
| 82.4 |
| -0.5 | % | 357.6 |
| 347.8 |
| 2.8 | % | ||||
Income from operations |
| 15.5 |
| 17.0 |
| -8.8 | % | 90.4 |
| 83.9 |
| 7.7 | % | ||||
Property EBITDA |
| 24.1 |
| 23.9 |
| 0.8 | % | 123.5 |
| 110.8 |
| 11.5 | % | ||||
Total East Region |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 178.0 |
| 182.3 |
| -2.4 | % | 780.9 |
| 781.3 |
| -0.1 | % | ||||
Income from operations |
| 33.6 |
| 42.9 |
| -21.7 | % | 199.8 |
| 217.3 |
| -8.1 | % | ||||
Property EBITDA |
| 52.2 |
| 58.2 |
| -10.3 | % | 271.5 |
| 278.3 |
| -2.4 | % | ||||
A month-long strike at Harrah’s two Atlantic City properties impacted fourth-quarter revenues, operating income and Property EBITDA from the Eastern Region.
“The strike presented a significant challenge to our Atlantic City operations, but we are pleased we were ultimately able to achieve our goal – a five-year contract that is fair and equitable to both union members and our shareholders,” Wilmott said. “We’re excited about the scheduled opening of the House of Blues club at the Showboat this summer. We believe it will provide a gaming and entertainment experience without rival in Atlantic City.”
North Central Region Reports Record Results
North Central Results
(in millions)
|
| 2004 |
| 2003 |
| Percent |
| 2004 |
| 2003 |
| Percent |
| ||||
|
| Fourth |
| Fourth |
| Increase |
| Full |
| Full |
| Increase |
| ||||
|
| Quarter |
| Quarter |
| (Decrease) |
| Year |
| Year |
| (Decrease) |
| ||||
Illinois/Indiana |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 187.2 |
| $ | 87.2 |
| 114.7 | % | $ | 587.8 |
| $ | 390.7 |
| 50.4 | % |
Income from operations |
| 33.0 |
| 16.0 |
| 106.3 | % | 103.0 |
| 74.5 |
| 38.3 | % | ||||
Property EBITDA |
| 40.0 |
| 20.2 |
| 98.0 | % | 126.2 |
| 91.1 |
| 38.5 | % | ||||
Iowa |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 64.6 |
| 59.1 |
| 9.3 | % | 254.0 |
| 238.7 |
| 6.4 | % | ||||
Income from operations |
| 13.8 |
| 7.1 |
| 94.4 | % | 68.1 |
| 32.1 |
| 112.1 | % | ||||
Property EBITDA |
| 19.8 |
| 12.7 |
| 55.9 | % | 75.7 |
| 52.5 |
| 44.2 | % | ||||
Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 119.7 |
| 109.5 |
| 9.3 | % | 458.1 |
| 441.0 |
| 3.9 | % | ||||
Income from operations |
| 20.7 |
| 16.6 |
| 24.7 | % | 78.2 |
| 83.0 |
| -5.8 | % | ||||
Property EBITDA |
| 34.0 |
| 26.9 |
| 26.4 | % | 123.1 |
| 120.8 |
| 1.9 | % | ||||
Total North Central |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 371.5 |
| 255.8 |
| 45.2 | % | 1,299.9 |
| 1,070.4 |
| 21.4 | % | ||||
Income from operations |
| 67.5 |
| 39.7 |
| 70.0 | % | 249.3 |
| 189.6 |
| 31.5 | % | ||||
Property EBITDA |
| 93.8 |
| 59.8 |
| 56.9 | % | 325.0 |
| 264.4 |
| 22.9 | % | ||||
The addition of Horseshoe Hammond, a lower tax rate at Bluffs Run Casino and improved business from a recently completed expansion of Harrah’s St. Louis all contributed to record fourth-quarter results for the company’s North Central Region.
Due to the decision to sell the property, operating results from Harrah’s East Chicago are reported as discontinued operations. The prior year results have been reclassified to conform to this presentation.
“Harrah’s St. Louis, Harrah’s Council Bluffs, Bluffs Run and Horseshoe Hammond all posted strong fourth-quarter performances,” Wilmott said. “The completion of the expansion of Harrah’s North Kansas City later this year, along with the renovation, expansion and rebranding of Bluffs Run, will reinforce our strong position in the Midwest.”
South Central Region Also Posts Record Results
South Central Results
(in millions)
|
| 2004 |
| 2003 |
| Percent |
| 2004 |
| 2003 |
| Percent |
| ||||
|
| Fourth |
| Fourth |
| Increase |
| Full |
| Full |
| Increase |
| ||||
|
| Quarter |
| Quarter |
| (Decrease) |
| Year |
| Year |
| (Decrease) |
| ||||
Louisiana |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 198.9 |
| $ | 165.5 |
| 20.2 | % | $ | 762.5 |
| $ | 659.9 |
| 15.5 | % |
Income from operations |
| 21.3 |
| 22.2 |
| -4.1 | % | 97.3 |
| 92.3 |
| 5.4 | % | ||||
Property EBITDA |
| 35.0 |
| 30.8 |
| 13.6 | % | 148.6 |
| 136.3 |
| 9.0 | % | ||||
Mississippi |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 55.3 |
| — |
| N/A |
| 113.4 |
| — |
| N/A |
| ||||
Income from operations |
| 11.2 |
| — |
| N/A |
| 25.8 |
| — |
| N/A |
| ||||
Property EBITDA |
| 15.8 |
| — |
| N/A |
| 33.4 |
| — |
| N/A |
| ||||
Total South Central |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| 254.2 |
| 165.5 |
| 53.6 | % | 875.9 |
| 659.9 |
| 32.7 | % | ||||
Income from operations |
| 32.5 |
| 22.2 |
| 46.4 | % | 123.1 |
| 92.3 |
| 33.4 | % | ||||
Property EBITDA |
| 50.8 |
| 30.8 |
| 64.9 | % | 182.0 |
| 136.3 |
| 33.5 | % | ||||
The South Central Region benefited from the addition of Horseshoe Bossier City and Horseshoe Tunica, as well as continued strong business trends at Harrah’s New Orleans.
Due to the decision to sell the property, operating results from Harrah’s Tunica are reported as discontinued operations. Prior year results have been reclassified to conform to this presentation.
“Strong cross-market play continues to drive outstanding growth at Harrah’s New Orleans,” Wilmott said. “We look forward to the addition of a 450-room hotel tower in early 2006 that will position Harrah’s New Orleans to extend its strong results well into the future.”
Managed Properties And Other Items
Fourth-quarter management-fee revenues were down 10.4 percent from the year-ago period due to lower fee schedules associated with contract extensions at tribal-owned properties.
Fourth-quarter development costs declined to $4.4 million from $10.2 million in the year-ago quarter. In the first quarter of 2005, Harrah’s and Gala Group dissolved the joint venture formed in 2003 for the development of regional casinos in the United Kingdom in response to the government’s proposal to restrict development of regional casinos. Harrah’s will focus its UK efforts on opportunities to develop large-scale
destination casino resorts with more than 50,000 square feet of gaming space, as well as hotel rooms, restaurants and entertainment venues.
Corporate expense increased 42.2 percent over the year-ago quarter due to on-going costs related to Sarbanes-Oxley compliance, increased depreciation and incentive-compensation costs. Interest expense was 29.8 percent higher than in the 2003 fourth quarter due to additional debt related to the Horseshoe acquisition. The company recorded $2.3 million in costs during the quarter related to integration planning for the Caesars acquisition.
The effective income tax rate after minority interest for the full year 2004 was 36.7 percent, compared to 37.3 percent for the year 2003. The tax rate for the fourth quarter of 2004 was 33.8 percent, the same as in the year-ago period.
Discontinued operations, which includes the operating results of Harrah’s East Chicago and Harrah’s Tunica, increased over the prior year due to the cessation of depreciation following the third-quarter 2004 agreement to sell the properties, lower income taxes and improved operating performance.
Harrah’s Entertainment will host a conference call Wednesday, February 2, 2005, at 9:00 a.m. Eastern Standard Time to review its 2004 fourth-quarter and year-end results. Those interested in participating in the call should dial 1-888-399-2695, or 1-706-679-7646 for international callers, approximately 10 minutes before the call start time.
A taped replay of the conference call can be accessed at 1-800-642-1687, or 1-706-645-9291 for international callers, beginning at 10:00 a.m. EST Wednesday, February 2. The replay will be available through 11:59 p.m. EST on Tuesday, February 8. The passcode number for the replay is 3289511.
Interested parties wanting to listen to the live conference call on the Internet may do so on the company’s web site – www.harrahs.com – in the Investor Relations section under the Investor News tab.
Various subsidiaries of Harrah’s Entertainment, Inc. own or manage 28 casinos in the United States, primarily under the Harrah’s and Horseshoe brand names. Founded 67 years ago, Harrah’s Entertainment is focused on building loyalty and value with its valued customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership.
Additional information about Harrah’s is available at 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, strategies, future performance, future financial results of Harrah’s and Caesars Entertainment, Inc. and Harrah’s anticipated acquisition of Caesars. 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 or results of Caesars and 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): financial community and rating agency perceptions of Harrah’s and Caesars; the effects of economic, credit and capital market conditions on the economy in general, and on gaming and hotel companies in particular; construction factors, including delays, 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; the ability to timely and cost-effectively integrate into Harrah’s operations the companies that it acquires, including with respect to its acquisition of Caesars; access to available and feasible financing, including financing for Harrah’s acquisition of Caesars, on a timely basis; changes in laws (including increased tax rates), 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; our ability to recoup costs of capital investments through higher revenues; acts of war or terrorist incidents; 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 and Caesars disclaim 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.
Additional Information about the Acquisition and Where to Find It
In connection with Harrah’s proposed acquisition of Caesars (“Acquisition”), on January 24, 2005, Harrah’s filed definitive materials with the Securities and Exchange Commission (SEC), including a registration statement on Form S-4 that contains a definitive prospectus and joint proxy statement. INVESTORS AND SECURITY HOLDERS OF HARRAH’S AND CAESARS ARE URGED TO READ THE PROSPECTUS AND JOINT PROXY STATEMENT BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT HARRAH’S, CAESARS AND THE ACQUISITION. The definitive materials filed on January 24, 2005, the preliminary versions of these materials filed on October 20, 2004, December 20, 2004, and January 24, 2005 and other relevant materials, and any other documents filed by Harrah’s or Caesars with the SEC, may be obtained free of charge at the SEC’s web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Harrah’s by directing a written request to: Harrah’s, One Harrah’s Court, Las Vegas, Nevada 89119, Attention: Investor Relations or Caesars Entertainment, Inc., 3930 Howard Hughes Parkway, Las Vegas, Nevada 89109, Attention: Investor Relations. Investors and security holders are urged to read the proxy statement, prospectus and the other relevant materials before making any voting or investment decision with respect to the Acquisition.
Harrah’s, Caesars and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of Caesars and Harrah’s in connection with the Acquisition. Information about those executive officers and directors of Harrah’s and their ownership of Harrah’s common stock is set forth in the Harrah’s Form 10-K for the year ended December 31, 2003, which was filed with the SEC on March 5, 2004, and the proxy statement for Harrah’s 2004 Annual
Meeting of Stockholders, which was filed with the SEC on March 4, 2004. Information about the executive officers and directors of Caesars and their ownership of Caesars common stock is set forth in the proxy statement for Caesars’ 2004 Annual Meeting of Stockholders, which was filed with the SEC on April 16, 2004. Investors and security holders may obtain additional information regarding the direct and indirect interests of Harrah’s, Caesars and their respective executive officers and directors in the Acquisition by reading the proxy statement and prospectus regarding the Acquisition.
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
-MORE-
HARRAH’S ENTERTAINMENT, INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(UNAUDITED)
(In thousands, except per share |
| Fourth Quarter Ended |
| Year Ended |
| ||||||||
amounts) |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues* |
| $ | 1,189,065 |
| $ | 950,221 |
| $ | 4,548,326 |
| $ | 3,948,865 |
|
Property operating expenses |
| (900,370 | ) | (730,272 | ) | (3,331,470 | ) | (2,899,527 | ) | ||||
Depreciation and amortization |
| (89,047 | ) | (74,027 | ) | (327,188 | ) | (294,336 | ) | ||||
Operating profit |
| 199,648 |
| 145,922 |
| 889,668 |
| 755,002 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Corporate expense |
| (18,854 | ) | (13,260 | ) | (66,818 | ) | (52,602 | ) | ||||
Caesars acquisition costs |
| (2,331 | ) | — |
| (2,331 | ) | — |
| ||||
Losses on interests in nonconsolidated affiliates |
| (559 | ) | (389 | ) | (879 | ) | (999 | ) | ||||
Amortization of intangible assets |
| (3,765 | ) | (1,200 | ) | (9,439 | ) | (4,798 | ) | ||||
Project opening costs and other items |
| (9,180 | ) | (7,334 | ) | (19,093 | ) | (17,828 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income from operations |
| 164,959 |
| 123,739 |
| 791,108 |
| 678,775 |
| ||||
Interest expense, net of interest Capitalized |
| (76,299 | ) | (58,781 | ) | (271,802 | ) | (234,419 | ) | ||||
Loss on early extinguishment of debt |
| — |
| (15,938 | ) | — |
| (19,074 | ) | ||||
Other income/(expense) including interest income |
| 4,114 |
| (4,264 | ) | 9,483 |
| 2,913 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes and minority interests |
| 92,774 |
| 44,756 |
| 528,789 |
| 428,195 |
| ||||
Provision for income taxes |
| (30,568 | ) | (14,329 | ) | (190,641 | ) | (155,568 | ) | ||||
Minority interests |
| (2,334 | ) | (2,334 | ) | (8,623 | ) | (11,563 | ) | ||||
Income from continuing operations |
| 59,872 |
| 28,093 |
| 329,525 |
| 261,064 |
| ||||
Discontinued operations, net of tax Expense |
| 17,084 |
| 7,283 |
| 38,184 |
| 31,559 |
| ||||
Net income |
| $ | 76,956 |
| $ | 35,376 |
| $ | 367,709 |
| $ | 292,623 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share - basic |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| $ | 0.54 |
| $ | 0.25 |
| $ | 2.97 |
| $ | 2.40 |
|
Discontinued operations, net of tax |
| 0.15 |
| 0.07 |
| 0.34 |
| 0.29 |
| ||||
Net income |
| $ | 0.69 |
| $ | 0.32 |
| $ | 3.31 |
| $ | 2.69 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share - diluted |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| $ | 0.53 |
| $ | 0.25 |
| $ | 2.92 |
| $ | 2.36 |
|
Discontinued operations, net of tax |
| 0.15 |
| 0.07 |
| 0.34 |
| 0.29 |
| ||||
Net income |
| $ | 0.68 |
| $ | 0.32 |
| $ | 3.26 |
| $ | 2.65 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares Outstanding |
| 111,371 |
| 109,551 |
| 111,162 |
| 108,972 |
| ||||
Weighted average common and common equivalent shares outstanding |
| 113,706 |
| 111,259 |
| 112,867 |
| 110,403 |
| ||||
*See note (a) on Supplemental Operating Information.
HARRAH’S ENTERTAINMENT, INC.
SUPPLEMENTAL OPERATING INFORMATION
(UNAUDITED)
|
| Fourth Quarter Ended |
| Year Ended |
| ||||||||
(In thousands) |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues (a) |
|
|
|
|
|
|
|
|
| ||||
West Region |
| $ | 365,276 |
| $ | 325,027 |
| $ | 1,514,927 |
| $ | 1,346,749 |
|
East Region |
| 178,018 |
| 182,346 |
| 780,885 |
| 781,295 |
| ||||
North Central Region |
| 371,515 |
| 255,845 |
| 1,299,864 |
| 1,070,382 |
| ||||
South Central Region |
| 254,207 |
| 165,529 |
| 875,913 |
| 659,862 |
| ||||
Managed |
| 15,237 |
| 17,009 |
| 60,701 |
| 73,035 |
| ||||
Other |
| 4,812 |
| 4,465 |
| 16,036 |
| 17,542 |
| ||||
Total Revenues |
| $ | 1,189,065 |
| $ | 950,221 |
| $ | 4,548,326 |
| $ | 3,948,865 |
|
|
|
|
|
|
|
|
|
|
| ||||
Income from operations(a) |
|
|
|
|
|
|
|
|
| ||||
West Region |
| $ | 61,765 |
| $ | 36,993 |
| $ | 305,955 |
| $ | 220,806 |
|
East Region |
| 33,592 |
| 42,903 |
| 199,849 |
| 217,285 |
| ||||
North Central Region |
| 67,499 |
| 39,670 |
| 249,316 |
| 189,595 |
| ||||
South Central Region |
| 32,544 |
| 22,151 |
| 123,106 |
| 92,277 |
| ||||
Managed |
| 12,664 |
| 14,582 |
| 51,752 |
| 64,372 |
| ||||
Other |
| (21,920 | ) | (19,300 | ) | (69,721 | ) | (52,958 | ) | ||||
Corporate expense |
| (18,854 | ) | (13,260 | ) | (66,818 | ) | (52,602 | ) | ||||
Caesars acquisition costs |
| (2,331 | ) | — |
| (2,331 | ) | — |
| ||||
Total Income from operations |
| $ | 164,959 |
| $ | 123,739 |
| $ | 791,108 |
| $ | 678,775 |
|
|
|
|
|
|
|
|
|
|
| ||||
Property EBITDA(a)(b) |
|
|
|
|
|
|
|
|
| ||||
West Region |
| $ | 90,692 |
| $ | 71,910 |
| $ | 419,155 |
| $ | 340,563 |
|
East Region |
| 52,228 |
| 58,229 |
| 271,494 |
| 278,254 |
| ||||
North Central Region |
| 93,774 |
| 59,771 |
| 325,017 |
| 264,385 |
| ||||
South Central Region |
| 50,794 |
| 30,750 |
| 182,035 |
| 136,347 |
| ||||
Managed |
| 12,777 |
| 14,626 |
| 52,097 |
| 64,475 |
| ||||
Other |
| (11,570 | ) | (15,337 | ) | (32,942 | ) | (34,686 | ) | ||||
Total Property EBITDA |
| $ | 288,695 |
| $ | 219,949 |
| $ | 1,216,856 |
| $ | 1,049,338 |
|
|
|
|
|
|
|
|
|
|
| ||||
Project opening costs and other items(a) |
|
|
|
|
|
|
|
|
| ||||
Project opening costs |
| $ | (1,704 | ) | $ | (740 | ) | $ | (9,526 | ) | $ | (7,352 | ) |
Writedowns, reserves and recoveries |
| (7,476 | ) | (6,594 | ) | (9,567 | ) | (10,476 | ) | ||||
Total |
| $ | (9,180 | ) | $ | (7,334 | ) | $ | (19,093 | ) | $ | (17,828 | ) |
(a) In third quarter 2004, Harrah’s Tunica and East Chicago were classified as assets held-for-sale and their prior periods’ results were reclassified from Income from continuing operations to Discontinued operations.
(b) Property EBITDA (earnings before interest, taxes, depreciation and amortization) consists of Income from operations before depreciation and amortization, write-downs, reserves and recoveries, project opening costs, corporate expense, Caesars acquisition costs, losses on interests in nonconsolidated 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 Income 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
(UNAUDITED)
Calculation of Adjusted Earnings Per Share
(In thousands, except per |
| Fourth Quarter Ended |
| Year Ended |
| ||||||||
share amounts) |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before taxes and minority interests |
| $ | 92,774 |
| $ | 44,756 |
| $ | 528,789 |
| $ | 428,195 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
| ||||
Project opening costs and other items: |
|
|
|
|
|
|
|
|
| ||||
True-up of Bluffs Run prior year’s gaming tax accrual |
| — |
| — |
| (16,558 | ) | — |
| ||||
Contribution to the Harrah’s Foundation |
| — |
| — |
| 10,000 |
| — |
| ||||
Other |
| 9,180 |
| 7,334 |
| 25,651 |
| 17,828 |
| ||||
Loss on ownership interests |
| — |
| — |
| — |
| 128 |
| ||||
Loss on early extinguishment of debt |
| — |
| 15,938 |
| — |
| 19,074 |
| ||||
Insurance claim settlement |
| — |
| 1,896 |
| — |
| 1,896 |
| ||||
Settlement of litigation |
| — |
| 4,200 |
| — |
| 4,200 |
| ||||
Caesars acquisition costs |
| 2,331 |
| — |
| 2,331 |
| — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Adjusted income before taxes and minority interests |
| 104,285 |
| 74,124 |
| 550,213 |
| 471,321 |
| ||||
Provision for income taxes |
| (34,459 | ) | (24,291 | ) | (198,493 | ) | (171,592 | ) | ||||
Minority interests |
| (2,334 | ) | (2,334 | ) | (8,623 | ) | (11,563 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Adjusted income before discontinued operations |
| 67,492 |
| 47,499 |
| 343,097 |
| 288,166 |
| ||||
Discontinued operations, net of tax |
| 17,084 |
| 7,283 |
| 38,184 |
| 31,559 |
| ||||
Add/(deduct): |
|
|
|
|
|
|
|
|
| ||||
Loss on sale of Vicksburg assets, net of tax |
| — |
| 14 |
| — |
| 474 |
| ||||
Tax benefit from realization of net operating loss carry- forwards arising from disposition of Harrah’s Tunica |
| (2,483 | ) | — |
| (2,483 | ) | — |
| ||||
Loss on sale of Harveys Colorado assets, net of tax |
| — |
| — |
| — |
| 674 |
| ||||
Project opening costs and other items at Harrah’s Tunica and East Chicago, net of tax |
| 91 |
| 475 |
| 1,338 |
| 728 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Adjusted net income |
| $ | 82,184 |
| $ | 55,271 |
| $ | 380,136 |
| $ | 321,601 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted diluted earnings per share |
| $ | 0.72 |
| $ | 0.50 |
| $ | 3.37 |
| $ | 2.91 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common and common equivalent shares outstanding |
| 113,706 |
| 111,259 |
| 112,867 |
| 110,403 |
| ||||
HARRAH’S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In thousands)
Fourth Quarter Ended December 31, 2004
|
| West |
| East |
| North |
| South |
| Managed |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 365,276 |
| $ | 178,018 |
| $ | 371,515 |
| $ | 254,207 |
| $ | 20,049 |
| $ | 1,189,065 |
|
Property operating expenses |
| (274,584 | ) | (125,790 | ) | (277,741 | ) | (203,413 | ) | (18,842 | ) | (900,370 | ) | ||||||
Property EBITDA |
| 90,692 |
| 52,228 |
| 93,774 |
| 50,794 |
| 1,207 |
| 288,695 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| (27,100 | ) | (18,065 | ) | (23,478 | ) | (15,606 | ) | (4,798 | ) | (89,047 | ) | ||||||
Operating profit |
| 63,592 |
| 34,163 |
| 70,296 |
| 35,188 |
| (3,591 | ) | 199,648 |
| ||||||
Amortization of intangible assets |
| (181 | ) | — |
| (1,268 | ) | (1,691 | ) | (625 | ) | (3,765 | ) | ||||||
Losses on interests in nonconsolidated affiliates |
| — |
| — |
| — |
| — |
| (559 | ) | (559 | ) | ||||||
Project opening costs and other items |
| (1,646 | ) | (571 | ) | (1,529 | ) | (953 | ) | (4,481 | ) | (9,180 | ) | ||||||
Corporate expense |
| — |
| — |
| — |
| — |
| (18,854 | ) | (18,854 | ) | ||||||
Caesars acquisition costs |
| — |
| — |
| — |
| — |
| (2,331 | ) | (2,331 | ) | ||||||
Income from operations |
| $ | 61,765 |
| $ | 33,592 |
| $ | 67,499 |
| $ | 32,544 |
| $ | (30,441 | ) | $ | 164,959 | * |
Fourth Quarter Ended December 31, 2003
|
| West |
| East |
| North |
| South |
| Managed |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 325,027 |
| $ | 182,346 |
| $ | 255,845 |
| $ | 165,529 |
| $ | 21,474 |
| $ | 950,221 |
|
Property operating expenses |
| (253,117 | ) | (124,117 | ) | (196,074 | ) | (134,779 | ) | (22,185 | ) | (730,272 | ) | ||||||
Property EBITDA |
| 71,910 |
| 58,229 |
| 59,771 |
| 30,750 |
| (711 | ) | 219,949 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| (28,139 | ) | (15,393 | ) | (17,786 | ) | (8,941 | ) | (3,768 | ) | (74,027 | ) | ||||||
Operating profit |
| 43,771 |
| 42,836 |
| 41,985 |
| 21,809 |
| (4,479 | ) | 145,922 |
| ||||||
Amortization of intangible assets |
| (181 | ) | — |
| (1,019 | ) | — |
| — |
| (1,200 | ) | ||||||
Losses on interests in nonconsolidated affiliates |
| — |
| — |
| — |
| — |
| (389 | ) | (389 | ) | ||||||
Project opening costs and other items |
| (6,597 | ) | 67 |
| (1,296 | ) | 342 |
| 150 |
| (7,334 | ) | ||||||
Corporate expense |
| — |
| — |
| — |
| — |
| (13,260 | ) | (13,260 | ) | ||||||
Income from operations |
| $ | 36,993 |
| $ | 42,903 |
| $ | 39,670 |
| $ | 22,151 |
| $ | (17,978 | ) | $ | 123,739 | * |
*Total 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 and Earnings per share for the periods presented.
Year Ended December 31, 2004
|
| West |
| East |
| North |
| South |
| Managed |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 1,514,927 |
| $ | 780,885 |
| $ | 1,299,864 |
| $ | 875,913 |
| $ | 76,737 |
| $ | 4,548,326 |
|
Property operating expenses |
| (1,095,772 | ) | (509,391 | ) | (974,847 | ) | (693,878 | ) | (57,582 | ) | (3,331,470 | ) | ||||||
Property EBITDA |
| 419,155 |
| 271,494 |
| 325,017 |
| 182,035 |
| 19,155 |
| 1,216,856 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| (106,014 | ) | (70,000 | ) | (83,194 | ) | (50,601 | ) | (17,379 | ) | (327,188 | ) | ||||||
Operating profit |
| 313,141 |
| 201,494 |
| 241,823 |
| 131,434 |
| 1,776 |
| 889,668 |
| ||||||
Amortization of intangible assets |
| (725 | ) | — |
| (4,739 | ) | (2,725 | ) | (1,250 | ) | (9,439 | ) | ||||||
Losses on interests in nonconsolidated affiliates |
| — |
| — |
| — |
| — |
| (879 | ) | (879 | ) | ||||||
Project opening costs and other items |
| (6,461 | ) | (1,645 | ) | 12,232 |
| (5,603 | ) | (17,616 | ) | (19,093 | ) | ||||||
Corporate expense |
| — |
| — |
| — |
| — |
| (66,818 | ) | (66,818 | ) | ||||||
Caesars acquisition costs |
| — |
| — |
| — |
| — |
| (2,331 | ) | (2,331 | ) | ||||||
Income from operations |
| $ | 305,955 |
| $ | 199,849 |
| $ | 249,316 |
| $ | 123,106 |
| $ | (87,118 | ) | $ | 791,108 | * |
Year Ended December 31, 2003
|
| West |
| East |
| North |
| South |
| Managed |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 1,346,749 |
| $ | 781,295 |
| $ | 1,070,382 |
| $ | 659,862 |
| $ | 90,577 |
| $ | 3,948,865 |
|
Property operating expenses |
| (1,006,186 | ) | (503,041 | ) | (805,997 | ) | (523,515 | ) | (60,788 | ) | (2,899,527 | ) | ||||||
Property EBITDA |
| 340,563 |
| 278,254 |
| 264,385 |
| 136,347 |
| 29,789 |
| 1,049,338 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| (112,033 | ) | (59,733 | ) | (67,512 | ) | (40,028 | ) | (15,030 | ) | (294,336 | ) | ||||||
Operating profit |
| 228,530 |
| 218,521 |
| 196,873 |
| 96,319 |
| 14,759 |
| 755,002 |
| ||||||
Amortization of intangible assets |
| (725 | ) | — |
| (4,073 | ) | — |
| — |
| (4,798 | ) | ||||||
Losses on interests in nonconsolidated affiliates |
| — |
| — |
| — |
| — |
| (999 | ) | (999 | ) | ||||||
Project opening costs and other items |
| (6,999 | ) | (1,236 | ) | (3,205 | ) | (4,042 | ) | (2,346 | ) | (17,828 | ) | ||||||
Corporate expense |
| — |
| — |
| — |
| — |
| (52,602 | ) | (52,602 | ) | ||||||
Income from operations |
| $ | 220,806 |
| $ | 217,285 |
| $ | 189,595 |
| $ | 92,277 |
| $ | (41,188 | ) | $ | 678,775 | * |
*Total 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 and Earnings per share for the periods presented.
