<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 21, 1998
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HARRAH'S ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10410 61-1411755
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
1023 CHERRY ROAD MEMPHIS, TENNESSEE 38117
(Address of Principal Executive Offices) (Zip Code)
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(901) 762-8600
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events
On October 21, 1998, Harrah's Entertainment, Inc. ("Harrah's") reported its
results of operations for the third quarter and nine months ending September 30,
1998.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Text of Press Release, dated October 21, 1998.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARRAH'S ENTERTAINMENT, INC.
Date: November 9, 1998 By: /s/ JUDY T. WORMSER
---------------------
Name: Judy T. Wormser
Title: Controller
3
<PAGE>
Harrah's Entertainment Reports Third Quarter of 1998
Record Revenues in Las Vegas, Atlantic City, Lake Tahoe and St. Louis
Total Gold Continues to Drive Cross-Market Play
EBITDA Rises 34% to $152 Million
MEMPHIS, Oct. 21, 1998 -- Harrah's Entertainment, Inc.(NYSE: HET) today
reported results for the third quarter and first nine months ended
September 30, 1998. Diluted earnings per share before project opening costs
and expenses related to venture restructuring costs in New Orleans were 45 cents
for the quarter. This compares to 38 cents for the third quarter of 1997
excluding the gain on the sale of a New Zealand casino equity interest,
project write-downs, venture restructuring costs in New Orleans and project
opening costs. Diluted earnings per share for the quarter were 44 cents in
1998, compared to 52 cents in the 1997 period.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
before write-downs and reserves, venture restructuring costs, project opening
costs and equity interest sales totaled $152.2 million for third quarter
1998, an increase of 34.3% over the same period last year.
Harrah's posted record revenues for the quarter of $586.2 million, a
33.8% increase over the prior year period. Third quarter 1998 operating
profit before project opening costs, corporate expense, equity in losses of
nonconsolidated affiliates, write-downs and reserves and venture
restructuring costs was $123.3 million, compared to $91.9 million during the
same period last year, a 34.2% increase.
The above third quarter results include charges related to goodwill
amortization of the Showboat acquisition and the Missouri "boats in the
moats" November 1998 ballot initiative.
Revenue for the first nine months of 1998 reached a record $1.48
billion, up 21.1% over the 1997 period. Nine month operating profit increased
23.2% over the prior year period to $285.4 million. Diluted earnings per
share for the first nine months were up 1.2% at 87 cents in 1998 compared to 86
cents in 1997. EBITDA totaled $364.3 million for the first nine months of
1998, up 25.1% from prior year. The 1998 results include the
post-acquisition contributions from the Showboat properties which were
acquired in June 1998.
"Our performance in the third quarter demonstrates that our unique
strategy is working and reinforces our commitment to growth and enhancing
stockholder value," said Phil Satre, Harrah's Entertainment's chairman,
president and chief executive officer. "The integration of the Showboat
properties into the Harrah's network is progressing as expected. Our
revolutionary Total Gold player reward and recognition program, coupled with
enhanced database marketing capabilities, are driving cross-market play
across our network of casinos. Revenue increases in Las Vegas and Lake
Tahoe particularly illustrate the benefits attributable to cross-market play,
a key component of our customer relationship and loyalty strategy.
"Our pending merger with Rio Hotel and Casino, Inc. will add another
strong property for our Las Vegas bound customers and give our portfolio of
high-quality product offerings a further driver of growth and market share
gains," Satre continued. "Rio will also expand our distribution and customer
relationship opportunities with a proven casino resort complementing both our
current Las Vegas strip property and our nationwide distribution."
<PAGE>
Las Vegas and Lake Tahoe Set Revenue Records,
Benefit from Cross-Market Business
Nevada Results
(in millions)
Third Quarter First Nine Months
1998 1997 1998 1997
Southern Nevada
Revenues $86.9 $70.9 $259.5 $204.3
Operating profit 9.5 7.3 35.7 28.6
EBITDA 17.5 13.9 60.4 46.2
Northern Nevada
Revenues $96.7 $88.9 $230.0 $221.8
Operating profit 28.3 23.0 42.0 39.8
EBITDA 34.0 28.5 58.9 56.1
Harrah's Las Vegas and Lake Tahoe each reported record revenues in the
third quarter. Harrah's Laughlin and Reno were essentially even with the
prior year third quarter. EBITDA increased 19.5% at Harrah's operations in
northern Nevada and 26.4% in southern Nevada.
Cross-market tracked play at Harrah's Las Vegas during the third quarter
accounted for more than 24% of Las Vegas gaming revenues, driving a total
revenue increase of 30.5% and EBITDA growth of 40.7%. Occupancy at the
expanded Harrah's Las Vegas hotel averaged more than 93% for third quarter
1998.
Harrah's Lake Tahoe EBITDA increased 31.3% from third quarter 1997.
"Increases in cross-market visitation to the Las Vegas property show that
we can capture demand in a market preoccupied with supply," explained Satre.
"Las Vegas continues to be the biggest recipient of cross-market play driven
by our year-old Total Gold player reward and recognition program.
"Unfortunately, certain marketing efforts undertaken in July aimed at
generating trial and pedestrian traffic to our Harrah's Las Vegas property
were costly and unsuccessful. We quickly responded to this, discontinuing
these programs and implementing other cost containment efforts. As a result,
while July and August margins were disappointing, margins in September
returned to the level achieved earlier this year. We have made leadership
changes at Harrah's Las Vegas that I am confident will result in a strong
team effort to pursue cost containment measures and revenue programs
necessary to maintain or improve upon these margins," Satre added.
"Harrah's Lake Tahoe is also beginning to benefit from cross-market
play," Satre pointed out. "Like Las Vegas, Lake Tahoe is a destination
market, and we believe our ability to build player loyalty is an important
strategic advantage to Harrah's in the long term."
Harrah's Atlantic City Also Sets Revenue Record in Third Quarter 1998
Atlantic City Results
(in millions)
Third Quarter First Nine Months
1998 1997 1998 1997
Atlantic City
Revenues $204.3 $99.0 $414.5 $270.0
Operating profit 51.6 25.6 96.4 60.7
EBITDA 61.8 31.1 118.6 76.1
Record third quarter revenue were reported for the company in its
Atlantic City division, which includes the Harrah's property in the marina
district and the Showboat property on the boardwalk, acquired in June.
Revenues at Harrah's Atlantic City increased 5.5% over third quarter 1997
as the property continues to improve utilization of its hotel expansion which
opened in June 1997. In the quarter, EBITDA at Harrah's Atlantic City rose
3.7% and, at Showboat Atlantic City, EBITDA was 10.9% higher than the amount
Showboat reported in the third quarter last year.
"While we are very happy with the individual results of our two Atlantic
City properties, we are particularly encouraged by the progress of the
integration of Showboat Atlantic City," Satre explained. "We are concentrating
on achieving synergies in such cost areas as purchasing and insurance
programs that will improve margins at this very successful property."
<PAGE>
Riverboat Division Impacted by Missouri Initiative, Tax Increases and R & D
Riverboat Results
(in millions)
Third Quarter First Nine Months
1998 1997 1998 1997
Riverboat Division
Revenues $181.3 $171.3 $523.9 $498.1
Operating profit 29.8 35.5 98.8 96.9
EBITDA 39.9 44.1 129.8 125.3
Record revenues for the Riverboat division were led by records at
Harrah's St. Louis and a strong increase in revenues at Harrah's Joliet.
A gaming tax increase in Illinois, expenses related to the Missouri "boats in
the moats" ballot initiative, and research and development related
disruptions in Tunica led to a 9.5% decline in EBITDA for the quarter.
Riverboat results do not include Showboat East Chicago which is reported as a
nonconsolidated affiliate.
"Revenue growth in Joliet demonstrates that the market continues to
grow," Satre explained. "Despite a drop in EBITDA for the Joliet property
compared to prior year, which is solely attributable to the state's new
graduated tax rate, we are very excited about the potential of the 204-room
hotel project that broke ground at Harrah's Joliet in the third quarter."
Harrah's Mississippi casinos reported a substantial decline in operating
results primarily due to the on-going testing of service initiatives at
Harrah's Tunica that have disrupted operations since the beginning of the
year. The Company is taking action now to bring that property back to
profitability. Overall in the state, EBITDA in Tunica was slightly positive
and down 26.3% in Vicksburg.
In Missouri, Harrah's properties in North Kansas City and St. Louis each
recorded third quarter revenues and EBITDA improvements over the prior year
third quarter. EBITDA in St. Louis was five times higher than prior year and
up 3.1% in Kansas City.
In Louisiana, Shreveport saw a decline due to competitive pressures.
EBITDA in Shreveport was down 15.6% on a revenue decline of 3.7%.
"Despite a rocky beginning for Harrah's St. Louis last year, that
property has shown significant progress as a result of increased awareness
and customer loyalty, driving a slow, but steady ramp-up of its operating
results," Satre said.
Consistent Strong Performance by Two New Casinos on Native American Lands
Highlight Indian Gaming and Other Managed Results
Managed and Other Results
(in millions)
Third Quarter First Nine Months
1998 1997 1998 1997
Managed and Other
Revenues $17.1 $8.1 $51.4 $27.0
Operating profit 4.1 1.0 12.5 5.7
EBITDA (1.1) (4.2) (3.3) (12.5)
The better than expected performance of newly opened casinos for the
Eastern Band of Cherokee in Cherokee, North Carolina, and the Prairie Band of
Potawatomi north of Topeka, Kansas, resulted in increased management fees.
The 1998 results include management fee income from the Star City casino
in Sydney, Australia. The 1997 results included management fees from the Sky
City casino in Auckland, New Zealand, which Harrah's discontinued managing on
June 30, 1998. Third quarter 1997 results included the gain from the sale of
the company's remaining equity interest in that New Zealand casino project.
Image advertising costs were significantly higher during the 1998 third
quarter compared to the prior year, as the company continues to build a
foundation for the brand elements of its strategy.
Satre explained, "We are making a significant investment in 1998 toward
building our brand awareness and earlier this year launched an aggressive
image advertising campaign, committing $30 million to this effort. The first
year of such programs are generally more expensive than subsequent years.
Consequently, as we move forward, we look for a lower cost for the second
year of this advertising program in 1999."
Project opening costs during the 1998 period included costs incurred
with initiatives and project research and development aimed at developing
enhanced marketing tools and training programs designed to better serve
target customers. Corporate expense increased for the 1998 period due to
timing of the Showboat acquisition. Interest costs were higher due to higher
debt levels associated with the acquisition of Showboat and interest income
being significantly lower. Project write-down and reserves of $12.3 million
during
<PAGE>
the third quarter 1997 were primarily reserves against the debtor in
possession financing provided to the casino project in New Orleans in which
Harrah's is a minority partner.
Extraordinary losses reported in both years reflect primarily the costs
incurred to refinance prior to maturity certain debt issues. The early
retirement of debt resulted in lower interest rates going forward.
Total Gold Celebrates First Year Anniversary
Harrah's Total Gold player reward and recognition system celebrated its
first full year in September. The program has had a measurable impact on
cross-market play at Harrah's, and has been an extremely popular program with
the company's target customers.
In total, Harrah's customers earned approximately three billion Total
Gold points in the first year. Tracked play across Harrah's in the period
from September 1997 through August 1998 compared to September 1996 through
August 1997 increased 18 percent, driven by both increases in same-store
tracked play and the addition of new properties during the period. Across
the company during the 12 month period, revenues from tracked cross-market
play in which a customer uses a Total Gold card issued at one Harrah's to play
at another Harrah's increased to 11% of gaming revenues compared to 8%
during the earlier 12 month period.
"When Total Gold was launched in September of last year, we said it was
the most important customer loyalty tool ever introduced in the casino
entertainment industry. We believe the first year results indicate that our
prediction was well founded. First, customers are using Total Gold in their
home markets, as evidenced by the increases in tracked play company-wide and,
in particular, on a same-store basis in established markets. Second,
customers are using the Total Gold card when they travel as indicated by the
increase in the percent of our gaming revenue generated from cross-market
visitors," Satre stated. "Not only are the numerical measurements of Total
Gold play impressive, customers have been generous in their praise of the
program. In the July issue of Casino Player magazine, Harrah's was rated by
readers as the number one "slot club" in the two largest casino markets, Las
Vegas and Atlantic City."
New Orleans Update
Suitability findings were completed after the close of the quarter,
marking another step toward a successful restructuring of the New Orleans
project. A plan of reorganization for the project was confirmed by the
bankruptcy court on October 13, 1998. The consummation of the bankruptcy is
currently expected near the end of October, after which construction can
resume with opening slated for fourth quarter 1999.
Harrah's Entertainment, Inc., is the most recognized and respected name
in the casino entertainment industry. Founded more than 60 years ago,
Harrah's is focused on building loyalty with its targeted customers through a
unique combination of great service, excellent products, unsurpassed
distribution, operational excellence and technology leadership.
Statements in this release concerning future events, future performance
and business prospects are forward-looking and are subject to certain risks
and uncertainties. These include, but are not limited to, political,
economic, bank, equity and debt market conditions, changes in laws or
regulations, third party relations and approvals, decisions of courts,
regulators and governmental bodies, factors affecting leverage, including
interest rates, and effects of competition. These risks and uncertainties
could significantly affect anticipated results or events in the future and
actual results may differ materially from any forward-looking statements. For
additional information, refer to the section entitled "Private Securities
Litigation Reform Act" in the company's Form 10-Q filed with the Securities
and Exchange Commission for the period ended June 30, 1998.
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
Consolidated Summary of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $586,242 $438,248 $1,479,323 $1,221,240
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Operating profit
before project
opening costs,
corporate expense,
equity in earnings
(losses) of
nonconsolidated
affiliates, write-
downs and reserves and
venture restructuring
costs $123,272 $ 91,932 $ 285,383 $ 231,655
Project
opening costs (1,161) (962) (7,157) (8,977)
Corporate expense (9,443) (6,563) (25,029) (22,240)
Equity in
nonconsolidated
affiliates:
Losses before
preopening
costs (2,404) (2,625) (8,706) (6,406)
Preopening costs -- (274) -- (1,864)
Write-downs
and reserves -- (12,345) (1,847) (12,345)
Venture
restructuring
costs (1,062) (1,414) (3,521) (5,584)
-------- -------- ---------- ----------
Income from
operations 109,202 67,749 239,123 174,239
Interest, net of
interest
capitalized (36,409) (19,757) (81,358) (57,901)
Gains on sales
of equity
interests in
subsidiaries -- 37,388 13,155 37,388
Other income,
including
interest income 273 2,133 5,798 8,360
-------- -------- ---------- ----------
Income before
income taxes and
minority
interests 73,066 87,513 176,718 162,086
Provision for
income taxes (27,091) (32,654) (65,043) (60,978)
Minority interests (1,773) (1,970) (5,551) (5,735)
-------- -------- ---------- ----------
Income before
extraordinary
losses 44,202 52,889 106,124 95,373
Extraordinary losses,
net of tax -- -- (18,280) (8,134)
-------- -------- ---------- ----------
Net income $ 44,202 $52,889 $ 87,844 $ 87,239
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Earnings per
share - basic
Before extraordinary
losses $ 0.44 $ 0.53 $ 1.06 $ 0.95
Extraordinary
losses, net
of tax -- -- (0.18) (0.08)
-------- -------- ---------- ----------
Net income $ 0.44 $ 0.53 $ 0.88 $ 0.87
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Earnings per share
- assuming dilution
Before extraordinary
losses $ 0.44 $ 0.52 $ 1.05 $ 0.94
Extraordinary
losses, net
of tax -- -- (0.18) (0.08)
-------- -------- ---------- ----------
Net income $ 0.44 $ 0.52 $ 0.87 $ 0.86
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Weighted average
common shares
outstanding 100,271 100,039 100,204 100,794
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Weighted average
common and common
equivalent shares
outstanding 100,911 100,835 101,278 100,367
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
<PAGE>
HARRAH'S ENTERTAINMENT, INC.
Supplemental Operating Information
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
<S> <C> <C> <C> <C>
(In thousands) 1998 1997 1998 1997
Revenues
Riverboats $181,271 $171,311 $ 523,916 $ 498,136
Atlantic City 204,284 98,954 414,494 270,001
Northern Nevada 96,691 88,918 230,002 221,835
Southern Nevada 86,891 70,918 259,498 204,260
Managed and Other 17,105 8,147 51,413 27,008
-------- -------- ---------- ----------
Total $586,242 $438,248 $1,479,323 $1,221,240
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Operating profit
Riverboats $ 29,766 $ 35,518 $ 98,771 $ 96,861
Atlantic City 51,591 25,614 96,390 60,651
Northern Nevada 28,340 22,957 42,012 39,842
Southern Nevada 9,452 7,291 35,733 28,615
Managed and Other* 4,123 552 12,477 5,686
-------- -------- ---------- --------
Total $123,272 $ 91,932 $285,383 $231,655
-------- -------- ---------- --------
-------- -------- ---------- --------
EBITDA** before write
-downs and reserves
venture restructuring
costs, project opening
costs and gains on sales
of equity interest
Riverboats $ 39,935 $ 44,082 $129,757 $125,308
Atlantic City 61,754 31,098 118,641 76,127
Northern Nevada 34,014 28,452 58,855 56,070
Southern Nevada 17,536 13,872 60,370 46,199
Managed and Other (1,061) (4,229) (3,349) (12,478)
-------- -------- -------- --------
Total $152,178 $113,275 $364,274 $291,226
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
* Other operating income for the third quarter and first nine months of
1998 includes the amortization expense for the unallocated excess purchase
price over the value of the net assets acquired related to the Showboat,
Inc., acquisition, which closed on June 1, 1998.
** Earnings before interest, income taxes, depreciation, amortization,
project opening costs and write-downs and reserves
SOURCE Harrah's Entertainment Inc.
