Harrah’s has sparkling quarter

August 14, 2007 6:41 AM
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Harrah’s Entertainment Inc. (HET), which has agreed to be bought out by a pair of private equity companies, came up with a sparkling earnings sheet for the second quarter that ended on June 30.

For the quarter, the company said profit surged 85% to $237.5 million or $1.25 per share compared to last year’s $128.6 million or $0.69 per share.

Income from continuing operations rose to $195.5 million or $1.03 per share while in 2006 the earnings were $128.7 million or $0.69 per share.

Helped by the addition of race track revenue from Pennsylvania but hurt by a downturn in Atlantic City, the company said revenue grew 14% to $2.7 billion, topping analysts’ expectations of $2.59 billion.

Harrah’s Las Vegas continued to show strength with the Strip properties, and the Rio, where the company held its World Series of Poker tournament, climbing 14.8% to $922.5 million. Regional operations were up 13.9 billion to $238.8 million.

Hurting profits were the additional promotions the company was forced to implement in Atlantic City to counter competition from New York and Pennsylvania where the growing number of slot machines have hampered growth.

"Increased costs associated with marketing and promotional programs continued to hurt results in the Atlantic City region," the company said in an accompanying statement (there was no Q&A).

"However, strong results at Harrah’s Chester Casino and Racetrack, which opened its slot operations in early first quarter 2007, helped buoy the region’s overall revenues.

The company’s individual share price has been tied to the $90 per share offer from Apollo Management Group and Texas Pacific Group, but because of the recent credit crunch that afflicted the market and put all leveraged buyouts in question, the share price has dropped to the low $80s mark.

On Friday, Harrah’s announced it had adjusted the conversion price on some senior notes to $65.54 from $65.85 to reflect the $0.40 per share dividend the company paid earlier this month.

Additional reports

Other gaming companies that have issued financial reports in recent days include:

Pinnacle Entertainment Inc. (PNK) which saw earnings tumble to $9.9 million or $0.16 per share compared to $46 million or $0.93 per share in 2006. Last year’s earnings benefited from $44.8 million in proceeds related to a terminated merger agreement with Aztar Corp.

Sitting on a part of the Las Vegas Strip where two casinos have recently closed, Riviera Holdings Corporation (RIV) reported record net income of $9.4 million, a 36.9% increase over the previous year. However, the company’s stock price is still reflecting previous buyout offers.