LAS VEGAS, Nov. 7 /PRNewswire/ -- Harrah's Entertainment, Inc. today
reported the following financial results for the 2008 third quarter and first
nine months:
HARRAH'S ENTERTAINMENT, INC.
Company-wide Results
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $2,645.9 $2,840.3 (6.8)%
Property EBITDA 641.7 790.4 (18.8)%
Adjusted EBITDA (1) 633.9 786.7 (19.4)%
(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 September 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 nine months ended September
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 Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $7,088.5 $760.1 $7,848.6 $8,197.7 (4.3)%
Property
EBITDA 1,766.9 171.2 1,938.1 2,202.7 (12.0)%
Adjusted
EBITDA (1) 1,722.2 172.0 1,894.2 2,194.7 (13.7)%
(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 third-quarter income from operations was $349.6 million,
compared with $577.2 million in the 2007 third quarter. The net loss for the
2008 third quarter was $129.7 million, compared with net income of $244.4
million in the year-ago quarter.
Revenues for the first nine months of 2008 declined 4.3 percent to $7.85
billion from $8.20 billion in the first nine months of 2007. Income from
operations totaled $1.07 billion in the 2008 first nine months, compared with
$1.51 billion in the prior-year period. The net loss for the first nine months
of 2008 was $415.1 million, compared with net income of $667.2 million in the
first nine months of 2007.
"The economic upheaval weighing on the country continued to impact our
results throughout the third quarter," said Gary Loveman, Harrah's chairman,
president and chief executive officer. "While we're hopeful the federal
government's recent actions to restore order to the financial markets may lead
to an eventual economic recovery, there is no certainty as to its timing.
"As a result, we believe it's prudent to ensure our costs remain aligned
with reduced levels of business activity and that we conserve cash," Loveman
said.
"Reduced spending by visitors to Las Vegas and the closure of our Gulf
Coast properties in advance of Hurricane Ike also impacted third-quarter
results," Loveman said. "But our ability to outperform our competition in
certain markets once again demonstrated the benefits of operating the most
geographically diverse portfolio of properties in gaming. In particular,
results from the opening of the $485 million expansion at Horseshoe Hammond
midway through the third quarter were strong."
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-January 2008
swap of certain properties between HOC and Harrah's Entertainment that was
consummated during the 2008 second quarter actually occurred on January 1,
2007.
HARRAH'S OPERATING COMPANY
Overall
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $2,025.5 $2,153.6 (5.9)%
Property EBITDA 464.4 584.5 (20.5)%
Adjusted EBITDA (1) 454.4 584.9 (22.3)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $5,364.9 $577.5 $5,942.4 $6,164.3 (3.6)%
Property
EBITDA 1,244.3 109.6 1,353.9 1,597.3 (15.2)%
Adjusted
EBITDA (1) 1,179.9 143.0 1,322.9 1,605.4 (17.6)%
(1) Does not include the pro forma effect of yet-to-be realized cost
savings.
Summaries of results by region follow:
Las Vegas Region
Third-quarter results for the company's Las Vegas Region were lower than
in the year-ago quarter due to reduced visitation and lower customer spend per
trip. Nine-month 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
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $796.8 $900.4 (11.5)%
Income from operations 155.4 212.8 (27.0)%
Property EBITDA 230.0 275.8 (16.6)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $2,279.2 $253.6 $2,532.8 $2,721.5 (6.9)%
Income from
operations 497.3 51.9 549.2 687.3 (20.1)%
Property
EBITDA 715.7 76.0 791.7 879.9 (10.0)%
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.
HARRAH'S OPERATING COMPANY
Las Vegas Region
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $355.1 $402.1 (11.7)%
Income from operations 66.8 96.1 (30.5)%
Property EBITDA 96.5 123.3 (21.7)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $996.5 $118.5 $1,115.0 $1,207.9 (7.7)%
Income from
operations 207.1 29.7 236.8 306.8 (22.8)%
Property
EBITDA 288.5 38.1 326.6 395.4 (17.4)%
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
Lower third-quarter results were due primarily to reduced visitor volume
and higher operating costs, partially offset by favorable results at Harrah's
Atlantic City, which benefited from a recent expansion.
Nine-month revenues were slightly higher due to the inclusion of Harrah's
Chester and a strong performance at Harrah's Atlantic City, which opened its
expansion in phases during the first half of the year. Income from operations
was affected by the Atlantic City smoking restrictions, competition from slot
parlors in feeder markets and higher operating costs.
HARRAH'S ENTERTAINMENT, INC.
Atlantic City Region
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $655.1 $671.5 (2.4)%
Income from operations 123.5 141.0 (12.4)%
Property EBITDA 164.5 202.7 (18.8)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $1,663.2 $160.8 $1,824.0 $1,810.2 0.8 %
Income from
operations 254.0 18.7 272.7 290.3 (6.1)%
Property
EBITDA 397.3 36.4 433.7 478.8 (9.4)%
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
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $495.1 $529.6 (6.5)%
Income from operations 88.1 106.8 (17.5)%
Property EBITDA 118.0 154.3 (23.5)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $1,276.0 $125.8 $1,401.8 $1,430.0 (2.0)%
Income from
operations 184.5 8.0 192.5 222.1 (13.3)%
Property
EBITDA 287.1 21.9 309.0 365.4 (15.4)%
Atlantic City Region properties include Showboat Atlantic City, Caesars
Atlantic City, Bally's Atlantic City and Harrah's Chester.
Louisiana/Mississippi Region
Combined third-quarter results declined for the Louisiana/Mississippi
Region due to temporary hurricane-related evacuations and property closures.
Income from operations declined in the 2008 third quarter from the year-ago
period, which included $61.1 million of insurance proceeds.
Combined nine-month revenues decreased due to lower visitor volume in the
Tunica market and the impact of disruptions during the renovations at the
former Grand Tunica. Income from operations for the first nine months of 2008
included $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 nine-month income from operations includes $116.9 million of such
insurance proceeds.
HARRAH'S ENTERTAINMENT, INC.
Louisiana/Mississippi Region
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $368.2 $391.6 (6.0)%
Income from operations 49.2 123.7 (60.2)%
Property EBITDA 73.8 92.8 (20.5)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $1,010.8 $106.1 $1,116.9 $1,171.1 (4.6)%
Income from
operations 327.9 10.1 338.0 292.9 15.4 %
Property
EBITDA 217.9 18.6 236.5 265.8 (11.0)%
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 third-quarter and nine-month 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 third
quarter as a result of cost savings and lower depreciation and amortization
resulting from the preliminary purchase price allocation in connection with
the merger.
HARRAH'S ENTERTAINMENT, INC.
Iowa/Missouri Region
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $198.0 $206.8 (4.3)%
Income from operations 41.8 39.7 5.3 %
Property EBITDA 53.5 59.7 (10.4)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $537.3 $55.8 $593.1 $613.8 (3.4)%
Income from
operations 112.8 7.7 120.5 110.0 9.5 %
Property
EBITDA 148.0 13.0 161.0 169.5 (5.0)%
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
The opening of a major renovation and expansion at Horseshoe Hammond on
August 8 helped partially offset the impact of a smoking ban in Illinois that
led to lower 2008 third-quarter and nine-month results in the Illinois/Indiana
Region. The nine-month numbers were also impacted by heavy rains and flooding
that lead to the closure of our Southern Indiana property, now known as
Horseshoe Southern Indiana, for four days in March 2008.
HARRAH'S ENTERTAINMENT, INC.
Illinois/Indiana Region
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $301.9 $328.5 (8.1)%
Income from operations 21.5 57.7 (62.7)%
Property EBITDA 54.3 69.7 (22.1)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $804.5 $85.5 $890.0 $974.7 (8.7)%
Income from
operations 91.3 8.7 100.0 158.9 (37.1)%
Property
EBITDA 150.7 13.6 164.3 204.1 (19.5)%
Illinois/Indiana properties include Horseshoe Hammond, Harrah's Joliet,
Harrah's Metropolis and Horseshoe Southern Indiana.
Other Nevada Region
Third-quarter and nine-month results for the Other Nevada Region declined
due to lower spend per trip and higher promotional costs in the Reno and
Laughlin markets, and increased competition in Reno.
HARRAH'S ENTERTAINMENT, INC.
Other Nevada
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $170.4 $176.4 (3.4)%
Income from operations 33.7 36.7 (8.2)%
Property EBITDA 45.4 50.0 (9.2)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $419.0 $38.9 $457.9 $484.2 (5.4)%
Income from
operations 59.7 0.5 60.2 79.4 (24.2)%
Property
EBITDA 93.0 4.5 97.5 117.4 (17.0)%
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
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $127.5 $130.9 (2.6)%
Income from operations 27.4 25.0 9.6 %
Property EBITDA 34.1 35.5 (3.9)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $299.8 $26.8 $326.6 $347.2 (5.9)%
Income/(loss)
from
operations 40.5 (1.9) 38.6 43.8 (11.9)%
Property
EBITDA 60.3 1.2 61.5 73.6 (16.4)%
Other Nevada properties include Harrah's Reno, Harrah's Lake Tahoe,
Harveys Lake Tahoe and Bill's Casino.
Managed/International/Other
Third-quarter and nine-month 2008 results were impacted by a $12.6 million
charge to recognize the remaining exposure under a lease agreement for office
space no longer utilized by the company in Memphis, and a smoking ban in the
United Kingdom, a lower table-games hold percentage and higher gaming taxes,
all of which affected London Clubs International operations. Also impacting
results were lower management fees due to the impact of the economy on our
managed properties and a change in the fee structure at one of our managed
properties. Nine-month results were also affected by termination of a Native
American management contract in June 2007.
HARRAH'S ENTERTAINMENT, INC.
Managed/International/Other
Successor Predecessor Percent
Third Quarter Increase/
(In millions) 2008 2007 (Decrease)
Total revenues $155.5 $165.1 (5.8)%
Income from operations (39.8) 3.9 N/M
Property EBITDA 20.2 39.7 (49.1)%
Successor Predecessor
Jan. 28, Jan. 1,
2008 2008 Combined Predecessor
through through Nine Months Percent
(In millions) Sept. 30, Jan. 27, Ended Sept. 30, Increase/
2008 2008 2008 2007 (Decrease)
Total
revenues $374.5 $59.4 $433.9 $422.2 2.8%
Income from
operations (113.5) (0.3) (113.8) (6.5) N/M
Property
EBITDA 44.3 9.1 53.4 87.2 (38.8)%
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 third quarter and
nine months due to higher debt levels associated with the company's
acquisition, which was consummated in the 2008 first quarter. Interest expense
in the 2008 third quarter and nine months, respectively, includes a credit of
$14.0 million and a charge of $66.9 million representing changes in the fair-
market values of derivative instruments. The average interest rate on the
company's variable-rate debt, including the impact of the derivative
instruments, was 5.79 percent at September 30, 2008.
Third-quarter 2008 results also included gains of $7.4 million due to the
early extinguishments of debt.
For the 2008 third quarter, tax benefits were generated by operating
losses at an effective rate of 26.1 percent, whereas in the 2007 third quarter
operating income resulted in tax expenses at an effective rate of 38.4
percent.
The company performs its annual assessment of intangible assets for
impairment during the fourth quarter of each year. The company's annual budget
and forecasting process is also completed in the fourth quarter and provides
key inputs into the impairment analysis. The provisions of Statement of
Financial Accounting Standards No. 142 call for interim testing if an event
occurs or circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying value. An example of an event is
a significant adverse change in the business climate, which the company
believes has occurred during the third quarter. Given that the purchase price
allocation related to the merger has not yet been finalized and that other key
inputs that support the impairment analysis are not yet available, it was not
reasonably possible to develop an estimate of any potential impairment in the
third quarter. The allocation of the purchase price related to the merger and
the annual impairment analysis will be completed during the fourth quarter.
Management believes there is reasonable possibility that the completion of
these activities will result in a non-cash impairment charge in the fourth
quarter. Management cannot reasonably estimate the amount of the charge until
the analysis is completed.
Harrah's will host a conference today at 8 a.m. Pacific Time to discuss
its 2008 third-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. PTNovember 21. The pass-code number for the conference call and replay is
68328144.
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.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071114/LAW061LOGO)
HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(UNAUDITED)
Suc- Prede- Successor Predecessor Prede-
cessor cessor Jan. 28, Jan. 1, Combined cessor
Third 2008 2008 Nine
Quarter Ended Through Through Months Ended
(In Sept. 30, Sept. 30, Sept. 30, Jan. 27, Sept. 30,
millions) 2008 2007 2008 2008 2008 2007
Revenues $2,645.9 $2,840.3 $7,088.5 $760.1 $7,848.6 $8,197.7
Property
operating
expenses (2,004.2) (2,049.9) (5,321.6) (588.9) (5,910.5) (5,995.0)
Depreciation
and
amorti-
zation (152.0) (206.8) (452.4) (63.5) (515.9) (601.4)
Operating
profit 489.7 583.6 1,314.5 107.7 1,422.2 1,601.3
Corporate
expense (34.7) (37.6) (95.9) (8.5) (104.4) (97.7)
Merger and
integration
costs (1.0) (0.7) (23.1) (125.6) (148.7) (8.3)
Income/(loss)
on interests
in non-
consolidated
affiliates (2.5) (0.1) (1.3) 0.5 (0.8) 3.6
Amortization
of intangible
assets (38.8) (17.7) (119.2) (5.5) (124.7) (53.5)
Project
opening
costs and
other items (63.1) 49.7 35.5 (5.4) 30.1 60.9
Income/(loss)
from
operations 349.6 577.2 1,110.5 (36.8) 1,073.7 1,506.3
Interest
expense,
net of
interest
capitalized (533.4) (216.1) (1,469.4) (89.7) (1,559.1) (578.4)
Losses on
early
extinguishments
of debt 7.4 (2.0) (203.9) - (203.9) (2.0)
Other income,
including
interest
income 7.2 4.9 18.7 1.1 19.8 28.7
(Loss)/income
before income
taxes and
minority
interests (169.2) 364.0 (544.1) (125.4) (669.5) 954.6
Income tax
benefit/
(provision) 46.0 (137.4) 147.7 26.0 173.7 (354.1)
Minority
interests (7.2) (6.0) (6.2) (1.6) (7.8) (17.2)
(Loss)/income
from
continuing
operations (130.4) 220.6 (402.6) (101.0) (503.6) 583.3
Discontinued
operations,
net of tax 0.7 23.8 88.4 0.1 88.5 83.9
Net (loss)/
income $(129.7) $244.4 $(314.2) $(100.9) $(415.1) $667.2
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL OPERATING INFORMATION
(UNAUDITED)
Suc- Prede- Successor Predecessor Prede-
cessor cessor Jan. 28, Jan. 1, Combined cessor
Third 2008 2008 Nine
Quarter Ended Through Through Months Ended
(In Sept. 30, Sept. 30, Sept. 30, Jan. 27, Sept. 30,
millions) 2008 2007 2008 2008 2008 2007
Revenues
Las Vegas
Region $796.8 $900.4 $2,279.2 $253.6 $2,532.8 $2,721.5
Atlantic
City
Region 655.1 671.5 1,663.2 160.8 1,824.0 1,810.2
Louisiana/
Mississippi
Region 368.2 391.6 1,010.8 106.1 1,116.9 1,171.1
Iowa/
Missouri
Region 198.0 206.8 537.3 55.8 593.1 613.8
Illinois/
Indiana
Region 301.9 328.5 804.5 85.5 890.0 974.7
Other
Nevada
Region 170.4 176.4 419.0 38.9 457.9 484.2
Managed/
International/
Other 155.5 165.1 374.5 59.4 433.9 422.2
Total
Revenues $2,645.9 $2,840.3 $7,088.5 $760.1 $7,848.6 $8,197.7
Income/(loss)
from operations
Las Vegas
Region $155.4 $212.8 $497.3 $51.9 $549.2 $687.3
Atlantic
City Region 123.5 141.0 254.0 18.7 272.7 290.3
Louisiana/
Mississippi
Region 49.2 123.7 327.9 10.1 338.0 292.9
Iowa/
Missouri
Region 41.8 39.7 112.8 7.7 120.5 110.0
Illinois/
Indiana
Region 21.5 57.7 91.3 8.7 100.0 158.9
Other
Nevada
Region 33.7 36.7 59.7 0.5 60.2 79.4
Managed/
International/
Other (39.8) 3.9 (113.5) (0.3) (113.8) (6.5)
Corporate
Expense (34.7) (37.6) (95.9) (8.5) (104.4) (97.7)
Merger and
integration
costs (1.0) (0.7) (23.1) (125.6) (148.7) (8.3)
Total
Income/
(loss)
from
operations $349.6 $577.2 $1,110.5 $(36.8) $1,073.7 $1,506.3
Property
EBITDA (a)
Las Vegas
Region $230.0 $275.8 $715.7 $76.0 $791.7 $879.9
Atlantic City
Region 164.5 202.7 397.3 36.4 433.7 478.8
Louisiana/
Mississippi
Region 73.8 92.8 217.9 18.6 236.5 265.8
Iowa/Missouri
Region 53.5 59.7 148.0 13.0 161.0 169.5
Illinois/
Indiana
Region 54.3 69.7 150.7 13.6 164.3 204.1
Other Nevada
Region 45.4 50.0 93.0 4.5 97.5 117.4
Managed/
International/
Other 20.2 39.7 44.3 9.1 53.4 87.2
Total
Property
EBITDA $641.7 $790.4 $1,766.9 $171.2 $1,938.1 $2,202.7
Project opening
costs and
other items
Project
opening
costs $(16.3) $(4.8) $(26.3) $(0.7) $(27.0) $(22.1)
Insurance
proceeds
for hurricane
losses - 61.1 185.4 - 185.4 116.9
Other write-
downs,
reserves
and
recoveries (46.8) (6.6) (123.6) (4.7) (128.3) (33.9)
Total
Project
opening
costs and
other
items $(63.1) $49.7 $35.5 $(5.4) $30.1 $60.9
(a) 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, merger and integration costs,
income/(losses) on interests in non-consolidated 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
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Successor
Third Quarter Ended Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $796.8 $655.1 $368.2 $198.0
Property operating
expenses (566.8) (490.6) (294.4) (144.5)
Property EBITDA 230.0 164.5 73.8 53.5
Depreciation and
amortization (40.7) (40.5) (16.4) (11.6)
Operating profit 189.3 124.0 57.4 41.9
Amortization of
intangible assets (19.2) 0.1 (4.0) -
Losses on interests in
non-consolidated
affiliates - - 0.2 -
Project opening costs
and other items (14.7) (0.6) (4.4) (0.1)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $155.4 $123.5 $49.2 $41.8
Successor
Third Quarter Ended Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $301.9 $170.4 $155.5 $2,645.9
Property operating
expenses (247.6) (125.0) (135.3) (2,004.2)
Property EBITDA 54.3 45.4 20.2 641.7
Depreciation and
amortization (18.5) (8.4) (15.9) (152.0)
Operating profit 35.8 37.0 4.3 489.7
Amortization of
intangible assets (0.2) (3.3) (12.2) (38.8)
Losses on interests in
non-consolidated
affiliates - - (2.7) (2.5)
Project opening costs
and other items (14.1) - (29.2) (63.1)
Corporate expense - - (34.7) (34.7)
Merger and integration
costs - - (1.0) (1.0)
Income/(loss) from
operations* $21.5 $33.7 $(75.5) $349.6
Predecessor
Third Quarter Ended Sept. 30, 2007
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $900.4 $671.5 $391.6 $206.8
Property operating
expenses (624.6) (468.8) (298.8) (147.1)
Property EBITDA 275.8 202.7 92.8 59.7
Depreciation and
amortization (60.4) (54.6) (25.8) (18.1)
Operating profit 215.4 148.1 67.0 41.6
Amortization of
intangible assets (3.4) (6.4) (2.0) (0.7)
Income on interests in
non-consolidated
affiliates - - - -
Project opening costs
and other items 0.8 (0.7) 58.7 (1.2)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $212.8 $141.0 $123.7 $39.7
Predecessor
Third Quarter Ended Sept. 30, 2007
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $328.5 $176.4 $165.1 $2,840.3
Property operating
expenses (258.8) (126.4) (125.4) (2,049.9)
Property EBITDA 69.7 50.0 39.7 790.4
Depreciation and
amortization (14.6) (13.0) (20.3) (206.8)
Operating profit 55.1 37.0 19.4 583.6
Amortization of
intangible assets (2.0) (0.2) (3.0) (17.7)
Income on interests in
non-consolidated
affiliates - - (0.1) (0.1)
Project opening costs
and other items 4.6 (0.1) (12.4) 49.7
Corporate expense - - (37.6) (37.6)
Merger and integration
costs - - (0.7) (0.7)
Income/(loss) from
operations* $57.7 $36.7 $(34.4) $577.2
* 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.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Successor
Jan. 28, 2008 Through Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $2,279.2 $1,663.2 $1,010.8 $537.3
Property operating
expenses (1,563.5) (1,265.9) (792.9) (389.3)
Property EBITDA 715.7 397.3 217.9 148.0
Depreciation and
amortization (123.8) (128.4) (53.8) (34.9)
Operating profit 591.9 268.9 164.1 113.1
Amortization of
intangible assets (50.6) (10.0) (14.7) -
Income on interests in
non-consolidated
affiliates - - 0.2 -
Project opening costs
and other items (44.0) (4.9) 178.3 (0.3)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $497.3 $254.0 $327.9 $112.8
Successor
Jan. 28, 2008 Through Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $804.5 $419.0 $374.5 $7,088.5
Property operating
expenses (653.8) (326.0) (330.2) (5,321.6)
Property EBITDA 150.7 93.0 44.3 1,766.9
Depreciation and
amortization (40.0) (24.1) (47.4) (452.4)
Operating profit 110.7 68.9 (3.1) 1,314.5
Amortization of
intangible assets (0.9) (9.2) (33.8) (119.2)
Income on interests in
non-consolidated
affiliates - - (1.5) (1.3)
Project opening costs
and other items (18.5) - (75.1) 35.5
Corporate expense - - (95.9) (95.9)
Merger and integration
costs - - (23.1) (23.1)
Income/(loss) from
operations* $91.3 $59.7 $(232.5) $1,110.5
Predecessor
Jan. 1, 2008 Through Jan. 27, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $253.6 $160.8 $106.1 $55.8
Property operating
expenses (177.6) (124.4) (87.5) (42.8)
Property EBITDA 76.0 36.4 18.6 13.0
Depreciation and
amortization (18.7) (15.7) (8.6) (5.1)
Operating profit 57.3 20.7 10.0 7.9
Amortization of
intangible assets (1.0) (1.9) (0.5) (0.2)
Income on interests in
non-consolidated
affiliates - - - -
Project opening costs
and other items (4.4) (0.1) 0.6 -
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $51.9 $18.7 $10.1 $7.7
Predecessor
Jan. 1, 2008 Through Jan. 27, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $85.5 $38.9 $59.4 $760.1
Property operating
expenses (71.9) (34.4) (50.3) (588.9)
Property EBITDA 13.6 4.5 9.1 171.2
Depreciation and
amortization (4.3) (3.9) (7.2) (63.5)
Operating profit 9.3 0.6 1.9 107.7
Amortization of
intangible assets (0.6) (0.1) (1.2) (5.5)
Income on interests in
non-consolidated
affiliates - - 0.5 0.5
Project opening costs
and other items - - (1.5) (5.4)
Corporate expense - - (8.5) (8.5)
Merger and integration
costs - - (125.6) (125.6)
Income/(loss) from
operations* $8.7 $0.5 $(134.4) $(36.8)
* 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.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Combined
Nine Months Ended Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $2,532.8 $1,824.0 $1,116.9 $593.1
Property operating
expenses (1,741.1) (1,390.3) (880.4) (432.1)
Property EBITDA 791.7 433.7 236.5 161.0
Depreciation and
amortization (142.5) (144.1) (62.4) (40.0)
Operating profit 649.2 289.6 174.1 121.0
Amortization of
intangible assets (51.6) (11.9) (15.2) (0.2)
Income on interests in
non-consolidated
affiliates - - 0.2 -
Project opening costs
and other items (48.4) (5.0) 178.9 (0.3)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $549.2 $272.7 $338.0 $120.5
Combined
Nine Months Ended Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $890.0 $457.9 $433.9 $7,848.6
Property operating
expenses (725.7) (360.4) (380.5) (5,910.5)
Property EBITDA 164.3 97.5 53.4 1,938.1
Depreciation and
amortization (44.3) (28.0) (54.6) (515.9)
Operating profit 120.0 69.5 (1.2) 1,422.2
Amortization of
intangible assets (1.5) (9.3) (35.0) (124.7)
Income on interests in
non-consolidated
affiliates - - (1.0) (0.8)
Project opening costs
and other items (18.5) - (76.6) 30.1
Corporate expense - - (104.4) (104.4)
Merger and integration
costs - - (148.7) (148.7)
Income/(loss) from
operations* $100.0 $60.2 $(366.9) $1,073.7
Predecessor
Nine Months Ended Sept. 30, 2007
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $2,721.5 $1,810.2 $1,171.1 $613.8
Property operating
expenses (1,841.6) (1,331.4) (905.3) (444.3)
Property EBITDA 879.9 478.8 265.8 169.5
Depreciation and
amortization (177.1) (157.9) (75.3) (55.3)
Operating profit 702.8 320.9 190.5 114.2
Amortization of
intangible assets (10.3) (19.2) (6.1) (2.4)
Income on interests in
non-consolidated
affiliates - - - -
Project opening costs
and other items (5.2) (11.4) 108.5 (1.8)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $687.3 $290.3 $292.9 $110.0
Predecessor
Nine Months Ended Sept. 30, 2007
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $974.7 $484.2 $422.2 $8,197.7
Property operating
expenses (770.6) (366.8) (335.0) (5,995.0)
Property EBITDA 204.1 117.4 87.2 2,202.7
Depreciation and
amortization (42.6) (36.9) (56.3) (601.4)
Operating profit 161.5 80.5 30.9 1,601.3
Amortization of
intangible assets (5.9) (0.6) (9.0) (53.5)
Income on interests in
non-consolidated
affiliates - - 3.6 3.6
Project opening costs
and other items 3.3 (0.5) (32.0) 60.9
Corporate expense - - (97.7) (97.7)
Merger and integration
costs - - (8.3) (8.3)
Income/(loss) from
operations* $158.9 $79.4 $(112.5) $1,506.3
* 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.
ADD: /FIRST AND FINAL ADD -- LAF506 -- Harrah's Entertainment, Inc. Earnings/
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(UNAUDITED)
Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual
items and other adjustments required or permitted in calculating covenant
compliance under the indenture governing the senior notes and senior toggle
notes, the interim loan agreement and/or our new senior credit facilities. We
believe that the inclusion of supplementary adjustments to EBITDA applied in
presenting Adjusted EBITDA are appropriate to provide additional information
to investors about certain material non-cash items and about unusual items
that we do not expect to continue at the same level in the future. Because not
all companies use identical calculations, our presentation of Adjusted EBITDA
may not be comparable to other similarly titled measures of other companies.
The following table reconciles EBITDA and Adjusted EBITDA of Harrah's
Entertainment, Inc. for the Successor period for three months ended September
30, 2008.
Successor Predecessor
Three Three
months ended months ended
September 30, September 30,
(In millions) 2008 2007
(Loss)/income from continuing operations $(130.4) $220.6
Interest expense, net 526.2 213.8
(Benefit)/provision for income taxes (46.0) 137.4
Depreciation and amortization 194.4 235.2
EBITDA 544.2 807.0
Project opening costs, abandoned projects and
development costs (a) 17.1 6.3
Merger and integration costs (b) 1.0 0.7
Losses on early extinguishment of debt (c) (7.4) 2.0
Minority interests, net of distributions (d) 1.8 0.6
Non-cash expense for stock compensation
benefits (e) 5.5 12.9
Income from insurance claims for hurricane
losses (f) 0.2 (61.2)
Other non-recurring or non-cash items (g) 71.5 17.4
Pro forma adjustment for acquired, new or
disposed properties (h) - 1.0
Adjusted EBITDA (1) $633.9 $786.7
(1) Does not include the pro forma effect of yet-to-be realized cost
savings.
a) Represents (i) project opening costs incurred in connection with the
integration of acquired properties and with expansion and renovation
projects at various properties, (ii) write-off of abandoned
development projects and (iii) non-recurring strategic planning and
restructuring costs.
b) Represents costs in connection with the Merger, including review of
certain strategic matters by the special committee established by
Harrah's Entertainment's Board of Directors, and costs for
consultants and dedicated internal resources executing the plans for
the integration of Caesars into Harrah's.
c) Represents premiums paid and the write-off of historical unamortized
deferred financing costs.
d) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
e) Represents non-cash compensation expense related to stock options.
f) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
g) Represents the elimination of other non-recurring and non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of
assets, equity in non-consolidated subsidiaries (net of
distributions) and one-time costs relating to new state gaming
legislation.
h) Represents the full year/period estimated impact of acquired, new
and disposed properties.
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(UNAUDITED)
Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual
items and other adjustments required or permitted in calculating covenant
compliance under the indenture governing the senior notes and senior toggle
notes, the interim loan agreement and/or our new senior credit facilities. We
believe that the inclusion of supplementary adjustments to EBITDA applied in
presenting Adjusted EBITDA are appropriate to provide additional information
to investors about certain material non-cash items and about unusual items
that we do not expect to continue at the same level in the future. Because not
all companies use identical calculations, our presentation of Adjusted EBITDA
may not be comparable to other similarly titled measures of other companies.
The following table reconciles EBITDA and Adjusted EBITDA of Harrah's
Entertainment, Inc. for the Predecessor period from January 1, 2008 to January
27, 2008 and for the Successor period from January 28, 2008 to September 30,
2008.
Predecessor Successor Combined
Jan. 1, Jan. 28, Jan. 1,
2008 2008 2008
Through Through Through
Dec. 31, Sept. 30, Jan. 27, Sept. 30, Sept. 30,
(In millions) 2007 2007 2008 2008 2008 LTM
Income/(loss)
from
continuing
operations $527.2 $583.3 $(101.0) $(402.6) $(503.6) $(559.7)
Interest
expense, net 780.8 572.7 89.7 1,451.2 1,540.9 1,749.0
Provision/
(benefit) for
income taxes 350.1 354.1 (26.0) (147.7) (173.7) (177.7)
Depreciation and
amortization 934.7 686.9 72.7 583.5 656.2 904.0
EBITDA 2,592.8 2,197.0 35.4 1,484.4 1,519.8 1,915.6
Project opening
costs, abandoned
projects and
development
costs (a) 29.8 25.3 0.9 28.7 29.6 34.1
Merger and
integration
costs (b) 13.4 8.3 125.6 23.1 148.7 153.8
Losses on early
extinguishment
of debt (c) 2.0 2.0 - 203.9 203.9 203.9
Minority interests,
net of
distributions (d) (4.8) 4.6 1.0 (3.6) (2.6) (12.0)
Impairment of
goodwill,
intangible assets
and investment
securities (e) 169.6 - - - - 169.6
Non-cash expense
for stock
compensation
benefits (f) 53.0 39.4 2.4 12.3 14.7 28.3
Income from
insurance
claims for
hurricane
losses (g) (130.3) (116.9) - (185.5) (185.5) (198.9)
Other non-
recurring or
non-cash
items (h) 84.0 31.2 6.7 158.9 165.6 218.4
Pro forma
adjustment
for acquired,
new or disposed
properties (i) 3.3 3.8 - - - (0.5)
Pro forma
adjustment for
yet-to-be realized
cost savings (j) - - - - - 439.6
Adjusted EBITDA $2,951.9
a) Represents (i) project opening costs incurred in connection with the
integration of acquired properties and with expansion and renovation
projects at various properties, (ii) write-off of abandoned
development projects and (iii) non-recurring strategic planning and
restructuring costs.
b) Represents costs in connection with the Merger, including review of
certain strategic matters by the special committee established by
Harrah's Entertainment's Board of Directors, and costs for
consultants and dedicated internal resources executing the plans for
the integration of Caesars into Harrah's.
c) Represents premiums paid and the write-off of historical unamortized
deferred financing costs.
d) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
e) Represents impairment of intangible assets and impairment of
investment securities.
f) Represents non-cash compensation expense related to stock options.
g) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
h) Represents the elimination of other non-recurring and non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of
assets, equity in non-consolidated subsidiaries (net of
distributions) and one-time costs relating to new state gaming
legislation.
i) Represents the full year/period estimated impact of acquired, new
and disposed properties.
j) Represents the cost savings yet-to-be realized from our
profitability improvement programs.
HARRAH'S OPERATING COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Successor
Third Quarter Ended Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $355.1 $495.1 $368.2 $198.0
Property operating
expenses (258.6) (377.1) (294.4) (144.5)
Property EBITDA 96.5 118.0 73.8 53.5
Depreciation and
amortization (17.5) (27.8) (16.4) (11.6)
Operating profit 79.0 90.2 57.4 41.9
Amortization of
intangible assets (8.1) (1.7) (4.0) -
Income/(losses) on
interests in non-
consolidated affiliates - - 0.2 -
Project opening costs
and other items (4.1) (0.4) (4.4) (0.1)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $66.8 $88.1 $49.2 $41.8
Successor
Third Quarter Ended Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $301.9 $127.5 $179.7 $2,025.5
Property operating
expenses (247.6) (93.4) (145.5) (1,561.1)
Property EBITDA 54.3 34.1 34.2 464.4
Depreciation and
amortization (18.5) (6.3) (16.0) (114.1)
Operating profit 35.8 27.8 18.2 350.3
Amortization of
intangible assets (0.2) (0.4) (12.2) (26.6)
Income/(losses) on
interests in non-
consolidated affiliates - - (2.6) (2.4)
Project opening costs
and other items (14.1) - (20.1) (43.2)
Corporate expense - - (18.3) (18.3)
Merger and integration
costs - - (1.0) (1.0)
Income/(loss) from
operations* $21.5 $27.4 $(36.0) $258.8
Predecessor
Third Quarter Ended Sept. 30, 2007
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $402.1 $529.6 $391.6 $206.8
Property operating
expenses (278.8) (375.3) (298.8) (147.1)
Property EBITDA 123.3 154.3 92.8 59.7
Depreciation and
amortization (24.8) (40.5) (25.8) (18.1)
Operating profit 98.5 113.8 67.0 41.6
Amortization of
intangible assets (3.3) (6.4) (2.0) (0.7)
Losses on interests
in non-consolidated
affiliates - - - -
Project opening costs
and other items 0.9 (0.6) 58.7 (1.2)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $96.1 $106.8 $123.7 $39.7
Predecessor
Third Quarter Ended Sept. 30, 2007
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $328.5 $130.9 $164.1 $2,153.6
Property operating
expenses (258.8) (95.4) (114.9) (1,569.1)
Property EBITDA 69.7 35.5 49.2 584.5
Depreciation and
amortization (14.6) (10.2) (20.5) (154.5)
Operating profit 55.1 25.3 28.7 430.0
Amortization of
intangible assets (2.0) (0.2) (3.0) (17.6)
Losses on interests in
non-consolidated
affiliates - - (0.1) (0.1)
Project opening costs
and other items 4.6 (0.1) (11.6) 50.7
Corporate expense - - (27.9) (27.9)
Merger and integration
costs - - (0.7) (0.7)
Income/(loss) from
operations* $57.7 $25.0 $(14.6) $434.4
* 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.
HARRAH'S OPERATING COMPANY, A WHOLLY OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Successor
Jan. 28, 2008 Through Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $996.5 $1,276.0 $1,010.8 $537.3
Property operating
expenses (708.0) (988.9) (792.9) (389.3)
Property EBITDA 288.5 287.1 217.9 148.0
Depreciation and
amortization (53.7) (92.2) (53.8) (34.9)
Operating profit 234.8 194.9 164.1 113.1
Amortization of
intangible assets (21.5) (7.2) (14.7) -
Income on interests in
non-consolidated
affiliates - - 0.2 -
Project opening costs
and other items (6.2) (3.2) 178.3 (0.3)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $207.1 $184.5 $327.9 $112.8
Successor
Jan. 28, 2008 Through Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $804.5 $299.8 $440.0 $5,364.9
Property operating
expenses (653.8) (239.5) (348.2) (4,120.6)
Property EBITDA 150.7 60.3 91.8 1,244.3
Depreciation and
amortization (40.0) (18.4) (47.4) (340.4)
Operating profit 110.7 41.9 44.4 903.9
Amortization of
intangible assets (0.9) (1.4) (33.7) (79.4)
Income on interests in
non-consolidated
affiliates - - (1.4) (1.2)
Project opening costs
and other items (18.5) - (66.2) 83.9
Corporate expense - - (88.5) (88.5)
Merger and integration
costs - - (23.1) (23.1)
Income/(loss) from
operations* $91.3 $40.5 $(168.5) $795.6
Predecessor
Jan. 1, 2008 Through Jan. 27, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $118.5 $125.8 $106.1 $55.8
Property operating
expenses (80.4) (103.9) (87.5) (42.8)
Property EBITDA 38.1 21.9 18.6 13.0
Depreciation and
amortization (7.4) (11.9) (8.6) (5.1)
Operating profit 30.7 10.0 10.0 7.9
Amortization of
intangible assets (1.0) (1.9) (0.5) (0.2)
Income on interests in
non-consolidated
affiliates - - - -
Project opening costs
and other items - (0.1) 0.6 -
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $29.7 $8.0 $10.1 $7.7
Predecessor
Jan. 1, 2008 Through Jan. 27, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $85.5 $26.8 $59.0 $577.5
Property operating
expenses (71.9) (25.6) (55.8) (467.9)
Property EBITDA 13.6 1.2 3.2 109.6
Depreciation and
amortization (4.3) (3.0) (7.2) (47.5)
Operating profit 9.3 (1.8) (4.0) 62.1
Amortization of
intangible assets (0.6) (0.1) (1.2) (5.5)
Income on interests in
non-consolidated
affiliates - - 0.5 0.5
Project opening costs
and other items - - (1.4) (0.9)
Corporate expense - - 26.2 26.2
Merger and integration
costs - - (125.6) (125.6)
Income/(loss) from
operations* $8.7 $(1.9) $(105.5) $(43.2)
* 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.
HARRAH'S OPERATING COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF PROPERTY EBITDA TO INCOME FROM OPERATIONS
(UNAUDITED)
(In millions) Combined
Nine Months Ended Sept. 30, 2008
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $1,115.0 $1,401.8 $1,116.9 $593.1
Property operating
expenses (788.4) (1,092.8) (880.4) (432.1)
Property EBITDA 326.6 309.0 236.5 161.0
Depreciation and
amortization (61.1) (104.1) (62.4) (40.0)
Operating profit 265.5 204.9 174.1 121.0
Amortization of
intangible assets (22.5) (9.1) (15.2) (0.2)
Income on interests in
non-consolidated
affiliates - - 0.2 -
Project opening costs
and other Items (6.2) (3.3) 178.9 (0.3)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $236.8 $192.5 $338.0 $120.5
Combined
Nine Months Ended Sept. 30, 2008
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $890.0 $326.6 $499.0 $5,942.4
Property operating
expenses (725.7) (265.1) (404.0) (4,588.5)
Property EBITDA 164.3 61.5 95.0 1,353.9
Depreciation and
amortization (44.3) (21.4) (54.6) (387.9)
Operating profit 120.0 40.1 40.4 966.0
Amortization of
intangible assets (1.5) (1.5) (34.9) (84.9)
Income on interests in
non-consolidated
affiliates - - (0.9) (0.7)
Project opening costs
and other Items (18.5) - (67.6) 83.0
Corporate expense - - (62.3) (62.3)
Merger and integration
costs - - (148.7) (148.7)
Income/(loss) from
operations* $100.0 $38.6 $(274.0) $752.4
Predecessor
Nine Months Ended Sept. 30, 2007
Las Atlantic Louisiana/ Iowa/
Vegas City Mississippi Missouri
Region Region Region Region
Revenues $1,207.9 $1,430.0 $1,171.1 $613.8
Property operating
expenses (812.5) (1,064.6) (905.3) (444.3)
Property EBITDA 395.4 365.4 265.8 169.5
Depreciation and
amortization (73.8) (117.9) (75.3) (55.3)
Operating profit 321.6 247.5 190.5 114.2
Amortization of
intangible assets (10.0) (19.3) (6.1) (2.4)
Income on interests in
non-consolidated
affiliates - - - -
Project opening costs
and other Items (4.8) (6.1) 108.5 (1.8)
Corporate expense - - - -
Merger and integration
costs - - - -
Income/(loss) from
operations* $306.8 $222.1 $292.9 $110.0
Predecessor
Nine Months Ended Sept. 30, 2007
Illinois/ Other
Indiana Nevada
Region Region Other Total
Revenues $974.7 $347.2 $419.6 $6,164.3
Property operating
expenses (770.6) (273.6) (296.1) (4,567.0)
Property EBITDA 204.1 73.6 123.5 1,597.3
Depreciation and
amortization (42.6) (28.8) (56.3) (450.0)
Operating profit 161.5 44.8 67.2 1,147.3
Amortization of
intangible assets (5.9) (0.5) (8.9) (53.1)
Income on interests in
non-consolidated
affiliates - - 3.6 3.6
Project opening costs
and other Items 3.3 (0.5) (31.1) 67.5
Corporate expense - - (68.9) (68.9)
Merger and integration
costs - - (8.3) (8.3)
Income/(loss) from
operations* $158.9 $43.8 $(46.4) $1,088.1
* 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.
HARRAH'S OPERATING COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
CALCULATION OF ADJUSTED EBITDA
(UNAUDITED)
Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual
items and other adjustments required or permitted in calculating covenant
compliance under the indenture governing the senior notes and senior toggle
notes, the interim loan agreement and/or our new senior credit facilities. We
believe that the inclusion of supplementary adjustments to EBITDA applied in
presenting Adjusted EBITDA are appropriate to provide additional information
to investors about certain material non-cash items and about unusual items
that we do not expect to continue at the same level in the future. Because not
all companies use identical calculations, our presentation of Adjusted EBITDA
may not be comparable to other similarly titled measures of other companies.
In connection with the acquisition of the Company by affiliates of Apollo
Global Management, LLC and TPG Capital, LP, eight of our properties and their
related operating assets were spun off from Harrah's Operating Company to
Harrah's Entertainment through a series of distributions, liquidations,
transfers and contributions, collectively referred to as "the CMBS Spin-Off."
The eight properties, as of the closing, are Harrah's Las Vegas, Rio, Flamingo
Las Vegas, Harrah's Atlantic City, Showboat Atlantic City, Harrah's Lake
Tahoe, Harveys Lake Tahoe and Bill's Lake Tahoe. Subsequent to the closing and
subject to regulatory approval, Paris Las Vegas and Harrah's Laughlin and
their related operating assets will be spun off from Harrah's Operating
Company and its subsidiaries to Harrah's Entertainment, and Harrah's Lake
Tahoe, Harveys Lake Tahoe, Bill's Lake Tahoe and Showboat Atlantic City and
their related operating assets will be transferred to subsidiaries of Harrah's
Operating Company from Harrah's Entertainment (the "Post-Close CMBS
Exchange"). The properties spun off from Harrah's Operating Company and owned
by Harrah's Entertainment, whether at closing or after the subsequent
transfer, will collectively be referred to as "the CMBS properties." Also in
connection with the acquisition by affiliates of Apollo and TPG, London Clubs
International Limited ("London Clubs") and its subsidiaries, with the
exception of the subsidiaries related to the South Africa operations, became
subsidiaries of Harrah's Operating Company ("the London Clubs Transfer").
London Clubs and its subsidiaries were previously subsidiaries of Harrah
Entertainment.
The following table reconciles EBITDA and Adjusted EBITDA of Harrah's
Operating for the Predecessor period from January 1, 2008 to January 27, 2008
and for the Successor period from January 28, 2008 to September 30, 2008 and
takes into consideration the CMBS Spin-Off, the London Clubs Transfer and the
Post-Close CMBS exchange:
HARRAH'S OPERATING COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(UNAUDITED)
Successor Predecessor
Three months ended Three months ended
(In millions) September 30, 2008 September 30, 2007
Income/(loss) from continuing
operations $(120.4) $134.2
Interest expense, net 430.5 213.0
Provision/(benefit) for income taxes (49.6) 82.8
Depreciation and amortization 144.3 182.8
EBITDA 404.8 612.8
Project opening costs, abandoned
projects and development costs (a) 16.6 5.9
Merger and integration costs (b) 1.0 0.5
Losses on early extinguishment of debt (c) (7.4) 2.0
Minority interests, net of distributions (d) 1.8 0.4
Non-cash expense for stock compensation
benefits (e) 4.1 9.0
Income from insurance claims for hurricane
losses (f) 0.2 (61.2)
Other non-recurring or non-cash items (g) 33.3 14.5
Pro forma adjustment for acquired, new or
disposed properties (h) - 1.0
Adjusted EBITDA (1) $454.4 $584.9
(1) Does not include the pro forma effect of yet-to-be realized cost
savings.
(a) Represents (i) project opening costs incurred in connection with the
integration of acquired properties and with expansion and renovation
projects at various properties, (ii) write-off of abandoned
development projects and (iii) non-recurring strategic planning and
restructuring costs.
(b) Represents costs in connection with the Acquisition, including review
of certain strategic matters by the special committee established by
Harrah's Entertainment's Board of Directors, and costs for consultants
and dedicated internal resources executing the plans for the
integration of Caesars into Harrah's.
(c) Represents premiums paid and the write-off of historical unamortized
deferred financing costs.
(d) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
(e) Represents non-cash compensation expense related to stock options.
(f) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
(g) Represents the elimination of other non-recurring and non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of assets,
equity in non-consolidated subsidiaries (net of distributions) and
one-time costs relating to new state gaming legislation.
(h) Represents the full year/period estimated impact of acquired, new and
disposed properties.
The following tables present the condensed combined statement of
operations of Harrah's Operating Company, Inc. for the Predecessor period from
January 1, 2008 to January 27, 2008 and for the Successor period from January
28, 2008 to September 30, 2008, taking into consideration the CMBS Spin-Off,
the London Clubs Transfer and the Post-Close CMBS Transactions:
HARRAH'S OPERATING COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
HARRAH'S ENTERTAINMENT, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(UNAUDITED)
Predecessor Successor Combined
(In millions) Jan. 1, Jan. 28, Jan. 1,
2008 2008 2008
Through Through Through
Dec. 31, Sept. 30, Jan. 27, Sept. 30, Sept. 30,
2007 2007 2008 2008 2008 LTM
Income/(loss)
from continuing
operations $166.8 $330.6 $(107.6) $(415.9) $(523.5) (687.3)
Interest expense,
net 787.5 570.1 85.7 1,193.2 1,278.9 1,496.3
Provision/(benefit)
for income taxes 152.6 195.3 (21.6) (186.7) (208.3) (251.0)
Depreciation and
amortization 729.4 535.1 56.7 431.7 491.3 682.7
EBITDA 1,836.3 1,631.1 13.2 1,022.3 1,038.4 1,240.7
Project opening
costs, abandoned
projects and
development
costs (a) 26.8 22.3 0.9 27.1 28.0 32.5
Merger and
integration
costs (b) 9.4 5.8 125.6 23.1 148.7 152.3
Losses on early
extinguishment
of debt (c) 2.0 2.0 - 203.9 203.9 203.9
Minority interests,
net of
distributions (d) (3.7) 5.3 0.8 (3.9) (3.1) (12.1)
Impairment of
goodwill,
intangible
assets and
investment
securities (e) 155.9 - - - - 155.9
Non-cash expense
for stock
compensation
benefits (f) 38.2 28.1 1.7 9.2 10.9 21.0
Income from
insurance claims
for hurricane
losses (g) (130.3) (116.9) - (185.5) (185.5) (198.9)
Other non-recurring
or non-cash
items (h) 55.6 23.9 0.8 83.7 81.5 116.2
Pro forma
adjustment for
acquired, new or
disposed
properties (i) 3.3 3.8 - - - (0.5)
Pro forma
adjustment
for yet-to-be
realized cost
savings (j) 321.3
Adjusted EBITDA $2,032.3
(a) Represents (i) project opening costs incurred in connection with the
integration of acquired properties and with expansion and renovation
projects at various properties, (ii) write-off of abandoned
development projects and (iii) non-recurring strategic planning and
restructuring costs.
(b) Represents costs in connection with the Acquisition, including review
of certain strategic matters by the special committee established by
Harrah's Entertainment's Board of Directors, and costs for consultants
and dedicated internal resources executing the plans for the
integration of Caesars into Harrah's.
(c) Represents premiums paid and the write-off of historical unamortized
deferred financing costs.
(d) Represents minority owners' share of income from our majority-owned
subsidiaries, net of cash distributions to minority owners.
(e) Represents impairment of intangible assets and impairment of
investment securities.
(f) Represents non-cash compensation expense related to stock options.
(g) Represents non-recurring insurance recoveries related to Hurricane
Katrina.
(h) Represents the elimination of other non-recurring and non-cash items
such as litigation awards and settlements, severance and relocation
costs, excess gaming taxes, gains and losses from disposal of assets,
equity in non-consolidated subsidiaries (net of distributions) and
one-time costs relating to new state gaming legislation.
(i) Represents the full year/period estimated impact of acquired, new and
disposed properties.
(j) Represents the cost savings yet-to-be realized from our profitability
improvement programs.
The following tables present the condensed combined statement of
operations of Harrah's Operating Company, Inc. for the Predecessor period from
January 1, 2008 to January 27, 2008 and for the Successor period from January
28, 2008 to September 30, 2008, taking into consideration the CMBS Spin-Off,
the London Clubs Transfer and the Post-Close CMBS Transactions:
Unaudited Condensed Combined Statement of Operations
Harrah's Operating Company, Inc. (Successor)
For the Three Months Ended Sept. 30, 2008
HET Parent and
Other Harrah's
Entertainment
Harrah's Subsidiaries and Harrah's
Entertainment(1) Accounts(2) Operating(3)
Revenues
Casino $2,130.1 $(424.2) $1,705.9
Food and beverage 427.6 (152.8) 274.8
Rooms 316.7 (128.8) 187.9
Management fees 16.6 - 16.6
Other 181.9 (31.7) 150.2
Less: casino promotional
allowances (427.0) 117.1 (309.9)
Net revenues 2,645.9 (620.4) 2,025.5
Operating expenses
Direct
Casino 1,129.4 (203.2) 926.2
Food and beverage 178.1 (73.7) 104.4
Rooms 64.9 (29.6) 35.3
Property general, administrative
and other 631.8 (136.6) 495.2
Depreciation and amortization 152.0 (37.9) 114.1
Write-downs, reserves and
recoveries 46.8 (19.6) 27.2
Project opening costs 16.3 (0.3) 16.0
Corporate expense 34.7 (16.4) 18.3
Merger and integration costs 1.0 - 1.0
Equity in losses of
non-consolidated affiliates 2.5 (0.1) 2.4
Amortization of intangible assets 38.8 (12.2) 26.6
Total operating expenses 2,296.3 (529.6) 1,766.7
Income from operations 349.6 (90.8) 258.8
Interest expense, net of interest
capitalized (533.4) 98.9 (434.5)
Gains on early extinguishment of
debt 7.4 - 7.4
Other income, including interest
income 7.2 (3.2) 4.0
Loss before income taxes and
minority interests (169.2) 4.9 (164.3)
Income tax benefit 46.0 3.6 49.6
Minority interests (7.2) 1.5 (5.7)
Loss from continuing operations $(130.4) $10.0 $(120.4)
(1) Represents the financial information of Harrah's Entertainment.
(2) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies and the CMBS properties, pursuant to the
CMBS Spin-Off; and (ii) accounts at Harrah's Entertainment.
(3) Represents the financial information of HOC.
Unaudited Condensed Combined Statement of Operations
Harrah's Operating Company, Inc. (Predecessor)
For the Three Months Ended Sept. 30, 2007
HET Parent and
Other Harrah's
Entertainment
Subsidiaries
Harrah's and Historical
Entertainment(1) Accounts(2) HOC(3)
Revenues
Casino $2,333.6 $(90.2) $2,243.4
Food and beverage 445.1 (13.3) 431.8
Rooms 341.6 (0.7) 340.9
Management fees 20.5 (0.1) 20.4
Other 184.8 (3.5) 181.3
Less: casino promotional
allowances (485.3) 5.5 (479.8)
Net revenues 2,840.3 (102.3) 2,738.0
Operating expenses
Direct
Casino 1,195.9 (66.2) 1,129.7
Food and beverage 194.3 (11.9) 182.4
Rooms 67.0 (0.3) 66.7
Property general, administrative
and other 592.7 (25.7) 567.0
Depreciation and amortization 206.8 (3.1) 203.7
Write-downs, reserves and
recoveries (54.5) - (54.5)
Project opening costs 4.8 (4.6) 0.2
Corporate expense 37.6 - 37.6
Merger and integration costs 0.7 - 0.7
Equity in income of
non-consolidated affiliates 0.1 (0.9) (0.8)
Amortization of intangible assets 17.7 - 17.7
Total operating expenses 2,263.1 (112.7) 2,150.4
Income/(loss) from operations 577.2 10.4 587.6
Interest expense, net of interest
capitalized (216.1) 3.9 (212.2)
Losses on early extinguishment of
debt (2.0) 2.0 -
Other income, including interest
income 4.9 (0.4) 4.5
Income/(loss) before income taxes
and minority interests 364.0 15.9 379.9
Income tax (provision)/benefit (137.4) (3.2) (140.6)
Minority interests (6.0) 1.5 (4.5)
Income/(loss) from continuing
operations $220.6 $14.2 $234.8
London
CMBS Clubs HOC
Spin-Off(4) Transfer(5) Restructured
Revenues
Casino $(451.4) $90.2 $1,882.2
Food and beverage (160.5) 13.3 284.6
Rooms (139.2) 0.7 202.4
Management fees - 0.1 20.5
Other (65.0) 2.4 118.7
Less: casino promotional
allowances 130.5 (5.5) (354.8)
Net revenues (685.6) 101.2 2,153.6
Operating expenses
Direct
Casino (208.6) 66.2 987.3
Food and beverage (77.9) 11.9 116.4
Rooms (29.4) 0.3 37.6
Property general, administrative
and other (153.8) 14.6 427.8
Depreciation and amortization (52.3) 3.1 154.5
Write-downs, reserves and
recoveries (1.0) - (55.5)
Project opening costs - 4.6 4.8
Corporate expense (9.7) - 27.9
Merger and integration costs - - 0.7
Equity in income of
non-consolidated affiliates - 0.9 0.1
Amortization of intangible assets (0.1) - 17.6
Total operating expenses (532.8) 101.6 1,719.2
Income/(loss) from operations (152.8) (0.4) 434.4
Interest expense, net of interest
capitalized - (3.9) (216.1)
Losses on early extinguishment of
debt - (2.0) (2.0)
Other income, including interest
income 0.4 0.4 5.3
Income/(loss) before income taxes
and minority interests (152.4) (5.9) 221.6
Income tax (provision)/benefit 54.1 3.7 (82.8)
Minority interests 1.4 (1.5) (4.6)
Income/(loss) from continuing
operations $(96.9) $(3.7) $134.2
(1) Represents the financial information of Harrah's Entertainment.
(2) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies and London Clubs and its subsidiaries; and
(ii) accounts at Harrah's Entertainment.
(3) Represents the historical financial information of HOC.
(4) Reflects the removal of the operating results of the CMBS properties,
pursuant to the CMBS Transaction in which certain properties and
operations of HOC were spun-off into a separate borrowing structure
and held side-by-side with HOC under Harrah's Entertainment. The
historical operating expenses of HOC include unallocated costs
attributable to services that have been performed by HOC on behalf of
the CMBS properties. These costs are primarily related to corporate
functions such as accounting, tax, treasury, payroll and benefits
administration, risk management, legal, and information management and
technology. The CMBS spin-off reflects the push-down of corporate
expense of $9.7 million that was unallocated at September 30, 2007.
Following the Merger, many of these services will continue to be
provided by HOC pursuant to a shared services agreement with the CMBS
properties.
(5) Reflects the inclusion of the London Clubs operating results pursuant
to the London Clubs Transfer, in which London Clubs and its
subsidiaries became subsidiaries of HOC.
Unaudited Condensed Combined Statement of Operations
Harrah's Operating Company, Inc. (Successor)
For the Period from Jan. 28, 2008
Through Sept. 30, 2008
HET Parent and
Other Harrah's
Entertainment
Harrah's Subsidiaries and Harrah's
Entertainment(1) Accounts(2) Operating (3)
Revenues
Casino $5,653.2 $(1,152.1) $4,501.1
Food and beverage 1,160.2 (426.8) 733.4
Rooms 894.2 (375.4) 518.8
Management fees 45.8 - 45.8
Other 462.4 (82.4) 380.0
Less: casino promotional
allowances (1,127.3) 313.1 (814.2)
Net revenues 7,088.5 (1,723.6) 5,364.9
Operating expenses
Direct
Casino 3,037.1 (542.8) 2,494.3
Food and beverage 486.1 (203.9) 282.2
Rooms 179.4 (81.7) 97.7
Property general,
administrative and other 1,619.0 (372.6) 1,246.4
Depreciation and amortization 452.4 (112.0) 340.4
Write-downs, reserves and
recoveries (61.8) (47.1) (108.9)
Project opening costs 26.3 (1.3) 25.0
Corporate expense 95.9 (7.4) 88.5
Merger and integration costs 23.1 - 23.1
Equity in losses of
non-consolidated affiliates 1.3 (0.1) 1.2
Amortization of intangible assets 119.2 (39.8) 79.4
Total operating expenses 5,978.0 (1,408.7) 4,569.3
Income from operations 1,110.5 (314.9) 795.6
Interest expense, net of interest
capitalized (1,469.4) 261.2 (1,208.2)
Losses on early extinguishment of
debt (203.9) - (203.9)
Other income, including interest
income 18.7 (3.2) 15.5
(Loss)/income before income taxes
and minority interests (544.1) (56.9) (601.0)
Income tax benefit/(provision) 147.7 39.0 186.7
Minority interests (6.2) 4.6 (1.6)
(Loss)/income from continuing
operations $(402.6) $(13.3) $(415.9)
(1) Represents the financial information of Harrah's Entertainment.
(2) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies and the CMBS properties, pursuant to the
CMBS Spin-Off; and (ii) accounts at Harrah's Entertainment.
(3) Represents the financial information of HOC.
Unaudited Condensed Combined Statement of Operations
Harrah's Operating Company, Inc. (Predecessor)
For the Period from Jan. 1, 2008
Through Jan. 27, 2008
HET Parent and
Other Harrah's
Entertainment
Subsidiaries
Harrah's and Historical
Entertainment(1) Accounts(2) HOC(3)
Revenues
Casino $614.6 $(29.5) $585.1
Food and beverage 118.4 (4.7) 113.7
Rooms 96.4 (0.4) 96.0
Management fees 5.0 (0.1) 4.9
Other 42.7 (1.4) 41.3
Less: casino promotional
allowances (117.0) 1.8 (115.2)
Net revenues 760.1 (34.3) 725.8
Operating expenses
Direct
Casino 340.6 (24.5) 316.1
Food and beverage 50.5 (1.8) 48.7
Rooms 19.6 (0.2) 19.4
Property general, administrative
and other 178.2 (2.0) 176.2
Depreciation and amortization 63.5 (1.6) 61.9
Write-downs, reserves and
recoveries 4.7 - 4.7
Project opening costs 0.7 (0.7) -
Corporate expense 8.5 - 8.5
Merger and integration costs 125.6 - 125.6
Equity in income of
non-consolidated affiliates (0.5) - (0.5)
Amortization of intangible assets 5.5 (0.2) 5.3
Total operating expenses 796.9 (31.0) 765.9
(Loss)/income from operations (36.8) (3.3) (40.1)
Interest expense, net of interest
capitalized (89.7) - (89.7)
Losses on early extinguishment of
debt - - -
Other income, including interest
income 1.1 (3.3) (2.2)
(Loss)/income before income taxes
and minority interests (125.4) (6.6) (132.0)
Income tax benefit/(provision) 26.0 (4.1) 21.9
Minority interests (1.6) 0.9 (0.7)
(Loss)/income from continuing
operations $(101.0) $(9.8) $(110.8)
London
CMBS Clubs HOC
Spin-Off(4) Transfer(5) Restructured
Revenues
Casino $(116.4) $29.5 $498.2
Food and beverage (41.1) 4.7 77.3
Rooms (40.4) 0.4 56.0
Management fees - 0.1 5.0
Other (14.4) 1.1 28.0
Less: casino promotional
allowances 30.0 (1.8) (87.0)
Net revenues (182.3) 34.0 577.5
Operating expenses
Direct
Casino (55.4) 24.5 285.2
Food and beverage (20.2) 1.8 30.3
Rooms (8.9) 0.2 10.7
Property general, administrative
and other (42.0) 7.5 141.7
Depreciation and amortization (16.0) 1.6 47.5
Write-downs, reserves and
recoveries (4.5) - 0.2
Project opening costs - 0.7 0.7
Corporate expense (34.7) - (26.2)
Merger and integration costs - - 125.6
Equity in income of
non-consolidated affiliates - - (0.5)
Amortization of intangible assets - 0.2 5.5
Total operating expenses (181.7) 36.5 620.7
(Loss)/income from operations (0.6) (2.5) (43.2)
Interest expense, net of interest
capitalized - - (89.7)
Losses on early extinguishment of
debt - - -
Other income, including interest
income 4.0 3.3 5.1
(Loss)/income before income taxes
and minority interests 3.4 0.8 (127.8)
Income tax benefit/(provision) (1.2) 0.9 21.6
Minority interests 0.2 (0.9) (1.4)
(Loss)/income from continuing
operations $2.4 $0.8 $(107.6)
(1) Represents the financial information of Harrah's Entertainment.
(2) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies and London Clubs and its subsidiaries; and
(ii) accounts at Harrah's Entertainment.
(3) Represents the historical financial information of HOC.
(4) Reflects the removal of the operating results of the CMBS properties,
pursuant to the CMBS Transaction in which certain properties and
operations of HOC were spun-off into a separate borrowing structure
and held side-by-side with HOC under Harrah's Entertainment. The
historical operating expenses of HOC include unallocated costs
attributable to services that have been performed by HOC on behalf of
the CMBS properties. These costs are primarily related to corporate
functions such as accounting, tax, treasury, payroll and benefits
administration, risk management, legal, and information management and
technology. The CMBS spin-off reflects the push-down of corporate
expense of $34.7 million that was unallocated at January 27, 2008.
Following the Merger, many of these services will continue to be
provided by HOC pursuant to a shared services agreement with the CMBS
properties.
(5) Reflects the inclusion of the London Clubs operating results pursuant
to the London Clubs Transfer, in which London Clubs and its
subsidiaries became subsidiaries of HOC.
Unaudited Condensed Combined Statement of Operations
Harrah's Operating Company, Inc. (Predecessor)
For the Nine Months Ended Sept. 30, 2007
HET Parent and
Other Harrah's
Entertainment
Subsidiaries
Harrah's and Historical
Entertainment(1) Accounts(2) HOC(3)
Revenues
Casino $6,686.7 $(199.6) $6,487.1
Food and beverage 1,299.1 (25.5) 1,273.6
Rooms 1,035.9 (1.9) 1,034.0
Management fees 64.2 (0.4) 63.8
Other 525.1 (7.4) 517.7
Less: casino promotional
allowances (1,413.3) 10.4 (1,402.9)
Net revenues 8,197.7 (224.4) 7,973.3
Operating expenses
Direct
Casino 3,444.8 (152.2) 3,292.6
Food and beverage 553.7 (20.3) 533.4
Rooms 201.1 (0.9) 200.2
Property general, administrative
and other 1,795.4 (72.2) 1,723.2
Depreciation and amortization 601.4 (7.8) 593.6
Write-downs, reserves and
recoveries (83.0) - (83.0)
Project opening costs 22.1 (13.5) 8.6
Corporate expense 97.7 (0.1) 97.6
Merger and integration costs 8.3 - 8.3
Equity in income of
non-consolidated affiliates (3.6) 0.5 (3.1)
Amortization of intangible assets 53.5 - 53.5
Total operating expenses 6,691.4 (266.5) 6,424.9
Income/(loss) from operations 1,506.3 42.1 1,548.4
Interest expense, net of interest
capitalized (578.4) 9.0 (569.4)
Losses on early extinguishment of
debt (2.0) 2.0 -
Other income, including interest
income 28.7 (0.7) 28.0
Income/(loss) before income taxes
and minority interests 954.6 52.4 1,007.0
Income tax (provision)/benefit (354.1) (1.7) (355.8)
Minority interests (17.2) 1.5 (15.7)
Income/(loss) from continuing
operations $583.3 $52.2 $635.5
London
CMBS Clubs HOC
Spin-Off(4) Transfer(5) Restructured
Revenues
Casino $(1,315.8) $199.6 $5,370.9
Food and beverage (476.4) 25.5 822.7
Rooms (431.3) 1.9 604.6
Management fees - 0.4 64.2
Other (182.6) 4.9 340.0
Less: casino promotional
allowances 375.2 (10.4) (1,038.1)
Net revenues (2,030.9) 221.9 6,164.3
Operating expenses
Direct
Casino (608.2) 152.2 2,836.6
Food and beverage (231.1) 20.3 322.6
Rooms (90.2) 0.9 110.9
Property general, administrative
and other (459.0) 32.7 1,296.9
Depreciation and amortization (151.4) 7.8 450.0
Write-downs, reserves and
recoveries (4.5) - (87.5)
Project opening costs (2.1) 13.5 20.0
Corporate expense (28.7) - 68.9
Merger and integration costs - - 8.3
Equity in income of
non-consolidated affiliates - (0.5) (3.6)
Amortization of intangible assets (0.4) - 53.1
Total operating expenses (1,575.6) 226.9 5,076.2
Income/(loss) from operations (455.3) (5.0) 1,088.1
Interest expense, net of interest
capitalized - (9.0) (578.4)
Losses on early extinguishment of
debt - (2.0) (2.0)
Other income, including interest
income 1.8 0.8 30.6
Income/(loss) before income taxes
and minority interests (453.5) (15.2) 538.3
Income tax (provision)/benefit 158.1 2.4 (195.3)
Minority interests 4.8 (1.5) (12.4)
Income/(loss) from continuing
operations $(290.6) $(14.3) $330.6
(1) Represents the financial information of Harrah's Entertainment.
(2) Represents the financial information of (i) all subsidiaries of
Harrah's Entertainment that are not a component of HOC, namely,
captive insurance companies and London Clubs and its subsidiaries; and
(ii) accounts at Harrah's Entertainment.
(3) Represents the historical financial information of HOC.
(4) Reflects the removal of the operating results of the CMBS properties,
pursuant to the CMBS Transaction in which certain properties and
operations of HOC were spun-off into a separate borrowing structure
and held side-by-side with HOC under Harrah's Entertainment. The
historical operating expenses of HOC include unallocated costs
attributable to services that have been performed by HOC on behalf of
the CMBS properties. These costs are primarily related to corporate
functions such as accounting, tax, treasury, payroll and benefits
administration, risk management, legal, and information management and
technology. The CMBS spin-off reflects the push-down of corporate
expense of $28.7 million that was unallocated at September 30, 2007.
Following the Merger, many of these services will continue to be
provided by HOC pursuant to a shared services agreement with the CMBS
properties.
(5) Reflects the inclusion of the London Clubs operating results pursuant
to the London Clubs Transfer, in which London Clubs and its
subsidiaries became subsidiaries of HOC.
