The analysts were eagerly hanging on every word when Gary Loveman, chairman and CEO of Harrah’s Entertainment Inc. (HET) began to speak during the conference call the company held last week to announce its quarterly results.
But what they heard was not what they were seeking. Actually, they wanted to know how the company planned to respond to the $15.05 billion buyout offer it received from two private equity firms.
Loveman thwarted all questions by telling his listeners that he would not address the offer since a special committee of non-management directors was still appraising the offer.
He did have news relative to the company’s earnings for the third fiscal quarter, but they failed to spark much enthusiasm.
Net income for the period climbed to $177.2 million or $0.95 per share which was better than the $196 million and $0.91 recorded a year earlier but failed to reach the analysts’ expectations of $0.99 per share.
One of the problems encountered during the quarter, Loveman explained, was the three-day shutdown incurred at the Atlantic City casinos because Gov. Jon Corzine was engaged in a budget battle with the legislature.
"Clearly," said Loveman, "Atlantic City was our Achilles heel”¦We believe our thorough review will enable us to regain lost ground. Also contributing to the Atlantic City problem was the increase in promotional costs. They were incurred because other casinos, including the Borgata, co-owned by Boyd Gaming Corp. (BYD) and MGM MIRAGE Inc. (MGM) increased their promotional activities.
In recent weeks, HET shares have been trading in a range between $73 and $75 per share, even though the buyout offer reportedly was for something in the neighborhood of $83.50 per share. Yet, one analyst said he believed the shares were trading on fundamentals even though the share price when the offer was received was closer to $66 per share.
A bright spot in the report was the increased business at Harrah’s Las Vegas properties that were up about 21%. Of particular note, said Loveman, were the results at Caesars, which benefited from the Harrah’s Total Rewards program, and the Rio, whose revenues spiked during the World Series of Poker.
Recent openings of so-called "locals" casinos and the sale and closing of others had a negative impact on the quarterly earnings at Boyd Gaming Corporation (BYD).
The company said it encountered a loss of $12.9 million or $0.15 per share compared to last year’s profit of $32.9 million or $0.36 per share during the third fiscal quarter.
Income from continuing operations totaled $28.1 million or $0.32 per share compared to $33.9 million or $0.37 per share in 2005.
Causing a hit was Boyd Gaming’s sale of the South Coast Casino to Michael Gaughan for $401 million in cash and 3.4 million shares valued at about $112 million. This resulted in the company taking a $65 million impairment charge.
But, the transfer of Boyd Gaming’s Barbary Coast Hotel/Casino in exchange for about 24 acres of land formerly held by Westward Ho Hotel/Casino between Las Vegas Boulevard and Industrial Road and bordering on the company’s proposed development, Echelon Place, is expected to provide a substantial profit.
Even the company’s reported quarterly revenue of $530.7 million, compared to $523.5 million a year ago, fell below analysts’ estimates of $566.7 million.
Contributing to the decline was the Borgata Hotel/Casino in Atlantic City that posted record revenues, exceeding $70 million in each of the three months, net income declined to $45.1 million from last year’s $55.9 million.
Showing dramatic improvement were the Central Region led by the Blue Chip riverboat whose net revenues increased by 16.8%, and the Louisiana operations including the Treasure Chest riverboat and Delta Downs racino.