Harrah’s posts loss after charges from hurricanes
LAS VEGAS (AP) – Casino operator Harrah’s Entertainment Inc. posted a fourth-quarter loss Wednesday, citing hurricane-related expenses and costs from writing off a Mississippi property it plans to sell.
But Wall Street had expected the world’s largest gambling company to report losses from damage to its Gulf Coast properties, and analysts pointed to success of customer loyalty programs and plans for new casinos in Las Vegas, Spain, Slovenia and the Bahamas.
“If you look at cash flow, they had a very solid quarter, particularly in Las Vegas and Atlantic City,” said Joseph Greff, an analyst with Bear Stearns in New York.
The deficit for the quarter ending Dec. 31 amounted to $142.2 million, or 78 cents per share, compared with income of $76.9 million, or 68 cents, the year before. Without the items and charges, adjusted earnings of 66 cents per share topped the average 56-cent estimate from analysts polled by Thomson Financial.
“We had a fantastic quarter operationally. … despite the loss of operating income from four properties along the Gulf Coast,” Gary Loveman, company chairman, chief executive and president, said in a conference call.
Loveman said the company rode out the storm with its philosophy of geographic diversification and its emphasis on rewarding repeat customers.
“Harrah’s posted solid growth in year-over-year comparisons,” he said.
Revenue jumped 56 percent in 2005, to $7.11 billion, from $4.55 billion in 2004. Earnings, however, slid to $236.4 million, or $1.57 per share, from $367.7 million, or $3.26 per share, a year earlier.
Quarterly revenue of $2.09 billion was 76 percent higher than $1.19 billion a year earlier, reflecting the $9 billion June acquisition of rival casino chain Caesars Entertainment and strength in its East and West regions. Analysts expected $2.06 billion in revenue.
Harrah’s closed four Gulf Coast casinos in August and September after hurricanes Katrina and Rita. It reopened Harrah’s New Orleans last week with a scaled-back operation.
The company wrote off $78.6 million, after taxes, to hurricane damage at its Gulfport, Miss., property, which it plans to sell.
It wrote off $88.7 million pretax at its Biloxi, Miss., property, which it plans to rebuild; and wrote off $56.1 million pretax for damage at its hotel-casino in Lake Charles, La., property. Harrah’s reopened its 263-room hotel this month in Lake Charles, but is considering leaving that market.
The earnings report lifted Harrah’s shares 98 cents Wednesday, to $73.34 in trading on the New York Stock Exchange. Harrah’s stock has traded from $57.29 to $79.69 over the past year.
“When you take out the one-time charges, they actually beat the projected results by 10 cents per share,” said Marc Falcone, an analyst with Deutsche Bank in New York.
Analysts noted that the number of Harrah’s casino visitors was up 10 percent for the fourth quarter and that customers spent 7 percent more per visit.
“The more you go, the more you spend, the more customer loyalty points you accrue, the less you want to go to other properties,” Greff said. “It’s not altogether different from airline frequent flier programs.”
Tim Wilmott, Harrah’s chief operating officer, attributed many of the 551,000 new visits per quarter to loyalty among the nearly 40 million Caesars and Harrah’s customers in company database rewards programs.
“Our core customers continue to increase their number of trips and amount of spend per visit,” he said.
Greff also pointed to what he called “a pretty good development pipeline in Spain, Slovenia and the Bahamas.”
Harrah’s announced last quarter that it plans to build casino resorts under the Caesars brand in a master-planned community about 118 miles south of Madrid, and as part of Baja Mar, a resort in Nassau, the Bahamas. The company also plans a resort under another brand in Nova Gorica, Slovenia, which is within driving distance of the Italian cities of Venice and Milan.
Harrah’s intends this summer to announce a master plan for 330 acres it owns on both sides of the Las Vegas Strip, including seven current properties. Loveman said the project would be “more akin to Disney World” than a single resort development.
The company also expects to unveil plans for an Atlantic City, N.J., hotel, casino and retail improvement project that Loveman called Center Boardwalk.
Harrah’s owns or manages 40 hotel-casino properties around the world.
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