Vegas properties hit hard as Harrah’s reports wider 3Q loss

By Steve Green

Published Tuesday, Oct. 27, 2009 | 8:01 a.m.

Updated Tuesday, Oct. 27, 2009 | 1:04 p.m.

Still struggling with the recession, Harrah's Entertainment Inc. of Las Vegas today posted a $1.33 billion charge against earnings to write down the value of certain assets around the country, and overall posted a third quarter loss from continuing operations after taxes of $1.621 billion.

The loss, compared to a loss of $123.2 million a year earlier, was driven by the one-time writeoff as well as a 13.7 percent decline in quarterly revenue to $2.282 billion.

The Las Vegas market was hit especially hard, with revenue down 17.5 percent during the quarter ended Sept. 30 to $657.2 million.

Harrah's is a big operator on and near the Las Vegas Strip with properties such as Caesars Palace, the Rio, Paris, Bally's, Flamingo, Harrah's and the Imperial Palace -- and like other operators in town it's struggling with an oversupply of hotel rooms and gaming capacity as the economic downturn has reduced travel to the U.S. casino capital.

The world's largest casino operator said the charge of $1.33 billion for the impairment of goodwill and other intangible assets was mostly related to properties in the Las Vegas, Atlantic City and Illinois/Indiana regions. Such accounting charges reflect reductions in expected future profits from the affected assets.

With the recession reducing activity at its table games and slot machines and putting downward pressure on hotel room rates, the company also reported a big decline in the operating measure of earnings before interest, taxes, depreciation and amortization (EBITDA).

EBITDA companywide in the 2009 quarter of $539.2 million was down from $633.9 million in the year-ago quarter.

Harrah's said $875.8 million of the impairment charge related to certain of its Las Vegas Strip properties, which is on top of a $225.1 million charge for those properties in the second quarter. Harrah's said that without the impairment charges, income from operations would have been $278.4 million vs. $349.6 million in the year-ago quarter.

"While hotel occupancy remained strong at more than 90 percent, third-quarter and year-to-date revenues declined in the Las Vegas Region from the 2008 periods due to lower spend per visitor and weakness in the group-travel business, which led to lower average daily room rates," Harrah's said in its earnings report.

Elsewhere in Nevada, quarterly revenue tumbled 17 percent to $141.5 million for Harrah's properties in Laughlin, Reno and Lake Tahoe.

"The third quarter was challenging from an operations standpoint, as lower spending by consumers affected by the global recession continued to impact revenues," Chairman and Chief Executive Gary Loveman said in a statement.

"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," Loveman said in the statement.