Harrah's Entertainment, Inc. has reported its financial results for the 2009 third quarter and first nine months, posting a 13.7 percent decline in net revenues for the third quarter of 2009 compared with the third quarter of 2008, from $2.65 billion to $2.28 billion. The loss from operations was $1.05 billion, compared with income from operations of $349.6 million in the 2008 third quarter. Included in the third-quarter 2009 loss from operations was a charge of $1.33 billion for impairments of goodwill and non-amortizing intangible assets. Excluding the impairment charges, income from operations would have been $278.4 million, compared with income from operations of $349.6 million in the 2008 third quarter. The loss from continuing operations, net of tax, for the 2009 third quarter was $1.62 billion, compared with a loss of $123.2 million in the year-ago quarter.
 

Revenue for the first nine months of 2009 declined 13.3 percent to $6.81 billion from $7.85 billion in the first nine months of 2008. The loss from operations was $758.5 million in the 2009 first nine months, compared with income from operations of $1.07 billion in the prior-year period. Income from continuing operations, net of tax, for the first nine months of 2009 was $548.4 million, compared with a net loss of $495.8 million in the first nine months of 2008. Income from continuing operations, net of tax, for the nine months ended Sept. 30, 2009, includes an impairment charge for goodwill and non-amortizing intangible assets totaling $1.63 billion ($1.56 billion net of taxes) and a pre-tax gain of $4.28 billion ($2.59 billion net of taxes) related to the early extinguishment of debt, primarily in the 2009 second quarter.

The company attributed the declines primarily to the impact of the recession on customers' discretionary spending. During the 2009 third quarter, Harrah's wholly owned subsidiary Harrah's Operating Company, Inc. (HOC) issued $720 million aggregate principal amount of senior-secured notes due 2017, with net proceeds used to repay a portion of Harrah's existing term-loan and revolving-credit indebtedness under HOC's senior-secured credit facilities. During the 2009 third quarter, HOC also announced both a cash tender offer for up to $160 million of its outstanding senior notes maturing in 2010 and 2011 and the placement of a new $1 billion term loan tranche for its credit facilities. The tender offer expired on Oct. 21, 2009, and approximately $45 million of notes were tendered. The term loan was drawn on Oct. 15, 2009, with the proceeds used to repay most of Harrah's revolving-credit indebtedness under HOC's senior-secured credit facilities and to provide additional liquidity.

“During the third quarter, we continued our focus on aligning expenses with revenues and addressing our capital structure to cope with the protracted economic slump,” said Gary Loveman, Harrah's chairman, president and chief executive officer. "We conducted another round of financing activities to shore up our balance sheet and enhance our financial flexibility, which has enabled us to take advantage of some exciting growth opportunities. We increased our ownership of Harrah's Chester to approximately 95 percent and announced an agreement to purchase the Thistledown racetrack in Cleveland. In addition, we agreed to a seven-year contract extension with ESPN to televise the World Series of Poker. The third quarter was challenging from an operations standpoint, as lower spending by consumers affected by the global recession continued to impact revenues."

During the third quarter of 2009, the company recorded a total charge of $1.33 billion for the impairment of goodwill and other intangible assets, the majority of which related to properties in the Las Vegas, Atlantic City and Illinois/Indiana regions. Total impairment charges for goodwill and other intangible assets were $1.63 billion for the nine months ended Sept. 30, 2009. Interest expense decreased in the 2009 third-quarter and year-to-date periods compared with 2008 due to lower debt levels resulting from HOC debt exchanges completed in December 2008 and April 2009 and repurchases of debt in open-market transactions. As a result of exchange offers and open-market purchases during the second quarter, pre-tax gains of $4.3 billion on early extinguishment of debt were recognized and are included in the year-to-date results.

For the 2009 third quarter, the company recorded a tax provision of $128.9 million on a pre-tax loss from continuing operations of $1.492 billion, compared to a tax benefit of $46 million on a pre-tax loss from continuing operations of $169.2 million in the comparable period of 2008. For the nine months ended Sept. 30, 2009, the company recognized a tax provision of $1.591 billion on pre-tax income from continuing operations of $2.139 billion, which equates to an effective tax rate of 74.4 percent. The primary difference between the company's year-to date recorded provision and the provision that would have resulted from applying the U.S. statutory tax rate of 35 percent to the company's pre-tax income from continuing operations is primarily attributable to non-deductible impairments of goodwill and adjustments to uncertain tax positions. For more information, call 800-4277247 or visit www.harrahs.com.

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