Harrah's Entertainment Reports 2008 Second-Quarter Global Results

LAS VEGAS, Aug. 8 /PRNewswire/ -- Harrah's Entertainment, Inc. today reported the following financial results for the 2008 second quarter and first half:

    HARRAH'S ENTERTAINMENT, INC.

    Company-wide Results
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                 $2,602.1        $2,701.7        (3.7)%
    Property EBITDA                   646.0           713.9        (9.5)%
    Adjusted EBITDA (1)               634.3           713.4       (11.1)%

    (1) Does not include the pro forma effect of yet-to-be realized cost
        savings.

In accordance with Generally Accepted Accounting Principles, we have separated our historical financial results for the Successor period from January 28, 2008 to June 30, 2008 and the Predecessor period from January 1, 2008 to January 27, 2008; however, we have also combined the Successor and Predecessor periods' results for the six months ended June 30, 2008, in the presentations included herein because Company management believes that it enables a meaningful presentation and comparison of results.

                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through       Six Months Ended      Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues  $4,442.6      $760.1     $5,202.7    $5,357.4     (2.9)%
    Property EBITDA  1,125.2       171.2      1,296.4     1,412.4     (8.2)%
    Adjusted
     EBITDA (1)      1,088.3       172.0      1,260.3     1,408.0    (10.5)%

    (1) Does not include the pro forma effect of yet-to-be realized cost
        savings.

Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) and Adjusted EBITDA are not Generally Accepted Accounting Principles (GAAP) measurements 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 from operations and Adjusted EBITDA to income from continuing operations are attached to this release.

On January 28, 2008, Harrah's Entertainment was acquired by affiliates of Apollo Global Management, LLC and TPG Capital, LP in a transaction valued at $30.7 billion, including assumption of $12.4 billion of debt and approximately $1.0 billion of acquisition costs. Harrah's stockholders received $90 cash for each share of common stock, or a total of $17.3 billion.

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.

First-half revenues declined 2.9 percent to $5.2 billion from $5.4 billion in the first six months of 2007. Income from operations totaled $724.1 million in the 2008 first half, compared with $929.1 million in the prior-year period. The net loss for the first six months of 2008 was $285.4 million, compared with net income of $422.8 million in the first half of 2007.

"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, Harrah's chairman, president and chief executive officer. "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.

"During the second quarter, we reduced certain costs in response to reduced demand, but continued to fund for the future," Loveman said. "We completed the re-branding of Caesars Indiana to Horseshoe Southern Indiana and Grand Tunica to Harrah's Casino Tunica.

"Today we celebrate the grand opening of the $485 million expansion at Horseshoe Hammond in Northern Indiana, and we remain on track with the expansion of the hotel tower and convention center areas at Caesars Palace in Las Vegas," Loveman said. "Further, we have completed the $565 million expansion of Harrah's Atlantic City."

A substantial portion of the debt of Harrah's Entertainment's consolidated group is issued by Harrah's Operating Company, Inc., (HOC) a wholly owned subsidiary of Harrah's Entertainment, Inc. Therefore, the company believes it is meaningful to also provide information pertaining solely to the results of operations of HOC. The information for HOC assumes that a post-closing swap of certain properties between HOC and Harrah's Entertainment that was consummated during the second quarter actually occurred on January 1, 2007.

    HARRAH'S OPERATING COMPANY

    Overall
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                 $1,783.4         $2,023.0       (11.8)%
    Property EBITDA                   436.7            526.6       (17.1)%
    Adjusted EBITDA (1)               424.2            534.2       (20.6)%


                   Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008      Combined   Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $3,072.7    $577.5     $3,650.2    $4,010.7      (9.0)%
    Property EBITDA     779.9     109.6        889.5     1,012.9     (12.2)%
    Adjusted
     EBITDA (1)         725.5     143.0        868.5     1,020.5     (14.9)%

    (1)Does not include the pro forma effect of yet-to-be realized cost
       savings.



    Summaries of results by region follow:

Las Vegas Region

Second-quarter results for the company's Las Vegas Region were lower than in the year-ago quarter due to reduced visitation and lower spend per trip. First-half declines were driven by lower spend per trip and fewer hotel rooms available due to room remodeling and remediation projects at three Harrah's properties.

    HARRAH'S ENTERTAINMENT, INC.

    Las Vegas Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $873.1          $922.5        (5.4)%
    Income from operations            199.0           238.8       (16.7)%
    Property EBITDA                   286.4           306.5        (6.6)%


                   Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $1,482.5    $253.6     $1,736.1    $1,821.1      (4.7)%
    Income from
     operations         341.9      51.9        393.8       474.5     (17.0)%
    Property EBITDA     485.8      76.0        561.8       604.1      (7.0)%

    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 since its acquisition on February 27, 2007.



    HARRAH'S OPERATING COMPANY

    Las Vegas Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $380.9          $412.2        (7.6)%
    Income from operations             83.8           109.8       (23.7)%
    Property EBITDA                   114.9           142.3       (19.3)%


                   Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $641.4      $118.5       $759.9      $805.8      (5.7)%
    Income from
     operations       140.3        29.7        170.0       210.8     (19.4)%
    Property EBITDA   192.0        38.1        230.1       272.1     (15.4)%

    Las Vegas Region properties include Bally's Las Vegas, Caesars Palace,
    Imperial Palace and Bill's Gamblin' Hall & Saloon since its acquisition on
    February 27, 2007.

Atlantic City Region

Second-quarter revenue gains were attributable to strong results at Harrah's Chester and the phased opening of the expansion at Harrah's Atlantic City; those properties' performances partially offset the impact of reduced visitation, smoking restrictions and new competition in key feeder markets. Income from operations declined due to reduced visitor volume and higher advertising spending.

First-half results also benefited from strong performances at Harrah's Chester and from Harrah's Atlantic City, which opened in phases during the first half of the year. Income from operations was affected by the Atlantic City smoking restrictions and competition from slot parlors in feeder markets.

    HARRAH'S ENTERTAINMENT, INC.

    Atlantic City Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $599.8          $592.6         1.2 %
    Income from operations             71.3            77.2        (7.6)%
    Property EBITDA                   133.1           143.4        (7.2)%


                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through        Six Months Ended     Percent
                     June 30,    Jan. 27,          June 30,          Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $1,008.0    $160.8      $1,168.8    $1,138.7       2.6 %
    Income from
     operations         130.5      18.7         149.2       149.3      (0.1)%
    Property EBITDA     232.8      36.4         269.2       276.2      (2.5)%

    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      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $460.4          $471.0        (2.3)%
    Income from operations             51.3            63.5       (19.2)%
    Property EBITDA                    95.0           111.8       (15.0)%


                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues    $780.9     $125.8       $906.7      $900.3       0.7 %
    Income from
     operations         96.4        8.0        104.4       115.4      (9.5)%
    Property EBITDA    169.1       21.9        191.0       211.1      (9.5)%

    Atlantic City Region properties include Showboat Atlantic City, Caesars
    Atlantic City, Bally's Atlantic City and Harrah's Chester.

Louisiana/Mississippi Region

Combined second-quarter revenues declined for the Louisiana/Mississippi Region as a result of lower visitor volume due in part to disruptions during the renovation in preparation for the re-branding of Grand Casino Tunica, which became Harrah's Casino Tunica in mid-May. Income from operations was lower than in the year-earlier second quarter, when $37.0 million of insurance proceeds were included in the results.

Combined first-half revenues decreased due to a decline in visitation in the Tunica market and the impact of disruptions during the renovations at the former Grand Tunica. Income from operations in the first half of 2008 includes $185.4 million of insurance proceeds in excess of the net book value of impacted assets, costs and expenses related to 2005 hurricanes, while the 2007 first-half income from operations includes $55.7 million of such insurance proceeds.

    HARRAH'S ENTERTAINMENT, INC.

    Louisiana/Mississippi Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $368.2          $389.0        (5.3)%
    Income from operations             46.1            93.6       (50.7)%
    Property EBITDA                    77.2            88.8       (13.1)%


                   Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues    $642.6     $106.1       $748.7      $779.5      (4.0)%
    Income from
     operations        278.8       10.1        288.9       169.2      70.7 %
    Property EBITDA    144.1       18.6        162.7       172.9      (5.9)%

    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

Combined second-quarter and first-half revenues were lower than in the year-ago periods due primarily to competition from a new facility that opened in the St. Louis market. Income from operations was higher in the 2008 second quarter as a result of cost savings, especially at our Iowa operations.

    HARRAH'S ENTERTAINMENT, INC.

    Iowa/Missouri Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $196.3          $205.3         (4.4)%
    Income from operations             40.3            37.2          8.3%
    Property EBITDA                    53.8            56.9         (5.4)%


                   Successor    Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues    $339.3      $55.8       $395.1      $407.0      (2.9)%
    Income from
     operations         71.0        7.7         78.7        70.3      11.9 %
    Property EBITDA     94.5       13.0        107.5       109.8      (2.1)%

    Iowa/Missouri Region properties include Harrah's St. Louis, Harrah's
    Council Bluffs, Horseshoe Council Bluffs and Harrah's North Kansas City.

Illinois/Indiana Region

A smoking ban in Illinois led to lower 2008 second-quarter and first-half results in the Illinois/Indiana Region. The first-half numbers were also impacted by heavy rains and flooding that lead to closure of our Southern Indiana property, now known as Horseshoe Southern Indiana, for four days in March 2008.

Construction has been completed on a $485 million renovation of Horseshoe Hammond that celebrates its grand opening today.

    HARRAH'S ENTERTAINMENT, INC.

    Illinois/Indiana Region
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $294.5          $321.8        (8.5)%
    Income from operations             42.7            50.1       (14.8)%
    Property EBITDA                    59.9            66.3        (9.7)%


                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues    $502.6      $85.5       $588.1      $646.2      (9.0)%
    Income from
     operations         69.8        8.7         78.5       101.2     (22.4)%
    Property EBITDA     96.4       13.6        110.0       134.4     (18.2)%

    Illinois/Indiana properties include Horseshoe Hammond, Harrah's Joliet,
    Harrah's Metropolis and Horseshoe Southern Indiana.

Other Nevada Region

Second-quarter and first-half results for the Other Nevada Region declined due to lower spend per trip in the Reno and Laughlin markets, increased competition in Reno and higher promotional costs.

    HARRAH'S ENTERTAINMENT, INC.

    Other Nevada
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $140.8          $154.2        (8.7)%
    Income from operations             11.8            22.3       (47.1)%
    Property EBITDA                    24.5            34.7       (29.4)%


                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues    $248.6      $38.9       $287.5      $307.9      (6.6)%
    Income from
     operations         25.9        0.5         26.4        42.7     (38.2)%
    Property EBITDA     47.6        4.5         52.1        67.5     (22.8)%

    Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
    Harveys Lake Tahoe, Bill's Casino and Harrah's Laughlin.



    HARRAH'S OPERATING COMPANY

    Other Nevada
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                    $96.6          $108.0       (10.6)%
    Income from operations              4.9            10.6       (53.8)%
    Property EBITDA                    12.5            20.3       (38.4)%


                    Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $172.3       $26.8       $199.1      $216.3      (8.0)%
    Income from
     operations        13.1        (1.9)        11.2        18.8     (40.4)%
    Property EBITDA    26.2         1.2         27.4        38.2     (28.3)%

    Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
    Harveys Lake Tahoe and Bill's Casino.

Managed/International/Other

Second-quarter revenues increased due to the inclusion of three new London Clubs International properties that opened in 2007. Income from operations was impacted by a smoking ban, lower table-games hold percentage and higher gaming taxes, all of which affected LCI results.

Second-quarter and first-half results from managed properties were lower due to termination of a Native American management contract in June 2007 and lower operating results from other managed properties.

    HARRAH'S ENTERTAINMENT, INC.

    Managed/International/Other
                                   Successor      Predecessor      Percent
                                         Second Quarter           Increase/
    (In millions)                     2008            2007       (Decrease)
    Total revenues                   $129.4          $116.3         11.3%
    Income from operations            (46.4)          (11.2)          N/M
    Property EBITDA                    11.1            17.3        (35.8)%


                   Successor   Predecessor
                     Jan. 28,     Jan. 1,
                      2008         2008     Combined    Predecessor
                     through     through         Six Months Ended     Percent
                     June 30,    Jan. 27,           June 30,         Increase/
    (In millions)      2008        2008        2008        2007     (Decrease)
    Total revenues   $219.0       $59.4       $278.4      $257.0        8.3%
    Income from
     operations       (73.6)       (0.3)       (73.9)      (10.4)        N/M
    Property EBITDA    24.0         9.1         33.1        47.5      (30.3)%

    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

Interest expense increased significantly from the 2007 second quarter and first half due to higher debt levels associated with the company's acquisition, which was consummated in the 2008 first quarter. Second-quarter results were favorably affected by a credit of $61.0 million due to an increase in the fair value of the company's derivative instruments. For the first six months of the year, the change in the fair value of the derivative instruments increased interest expense by $80.8 million. The average interest rate on the company's variable-rate debt, including the impact of the derivative instruments, was 5.5 percent at June 30, 2008.

For the 2008 second quarter, tax benefits were generated by operating losses at an effective rate of 20.5 percent, whereas in the second quarter of 2007, operating income resulted in tax expenses at an effective rate of 37.3 percent.

Harrah's will host a conference today at 8 a.m. Pacific Daylight Time to discuss its 2008 second-quarter results. Persons from the United States and Canada who are interested in participating in the call should dial 1-877-876-8924, or 1-706-758-4271 for international callers, approximately 10 minutes before the call start time. A taped replay of the conference call will be available at 1-800-642-1687, or 1-706-645-9291 for international callers, beginning at 9 a.m. PDT the day of the call. The replay will be available through 8:59 p.m. PDT August 22. The pass code number for the conference call and replay is 54273574.

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(R), Caesars(R) and Horseshoe(R) brand names; Harrah's also owns the London Clubs International family of casinos and the World Series of Poker(R). 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 http://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 outcome of any legal proceedings that have been, or will be, instituted against the company related to the acquisition of the company by affiliates of TPG Capital and Apollo Management; 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 acquisition 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; the potential difficulties in employee retention as a result of the sale of the company to affiliates of TPG Capital and Apollo Management; 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.