he loss for the 2008 quarter was driven by a one-time, non-cash accounting charge of us$ 5.49 billion to write down the value of goodwill and other intangible assets. The write-off was caused by lower valuations for intangible gaming assets as the recession has reduced visitation and spending at hotels and casinos around the nation.
Quarterly revenue of us$ 2.28 billion was down 13.3 % while cash flow declined from us$ 622.8 million to us$ 478 million. The results were in line with preliminary estimates reported by Harrah’s on March 5.
Today’s earnings report detailed results by region and showed that among key markets for Harrah’s, Las Vegas was hardest hit by the recession. Harrah’s, with properties on and near the Las Vegas Strip such as the Rio, Paris Las Vegas and Caesars Palace, said revenue in Las Vegas in the fourth quarter fell 20.3 % to us$ 721.4 million and cash flow fell from us$ 284.6 million to us$ 189.6 million.
The difficult operating conditions in Las Vegas are expected to continue in the first quarter of 2009, with hotel-casinos lowering room rates amid weak demand. The Las Vegas Convention and Visitors Authority this week said 2.8 million people visited Las Vegas in January, down 11.9 % from January 2008.
Elsewhere around the country in the fourth quarter of 2008, Harrah’s said revenue fell 12.3 % in Atlantic City and was down 10.3 % in Louisiana and Mississippi; 4 % in Iowa and Missouri; 5.4 % in Illinois and Indiana and 22.4 % in the Nevada markets outside of Las Vegas of Reno, Lake Tahoe and Laughlin.
Harrah’s Chairman and Chief Executive Officer Gary Loveman said that despite the decline in revenue and cash flow caused by the recession in 2008, the company made significant progress in cutting costs and preparing itself for a rebound in the economy. "We reduced labor and marketing costs substantially and completed two of the largest capital projects in the company’s history, putting the bulk of our planned capital-spending activities behind us," he said in a statement.
He pointed out the company announced a delay in the completion of 660 more rooms at the new Octavius Tower at Caesars Palace, but noted that project can be finished in a matter of months once demand improves.
"We made this decision because the weak economy is expected to continue to impact demand for rooms in the Las Vegas market over the next several months even as additional supply is added by other operators," he said. The company reported strong bookings for the new convention center being developed at Caesars Palace and said it will open this summer.
"As we move into a year likely to present continuing economic challenges, we are focused on the need to remain flexible in our staffing and marketing requirements and to be nimble in responding to changes in customer and competitor behavior," Loveman said.
He said Harrah’s has been encouraged by the results of an efficiency-management process pioneered by Toyota called LEAN operations management that the company launched as a pilot at several properties and will roll out company-wide this year.
He noted that in December, Harrah’s completed a debt-exchange deal that reduced overall debt by us$ 1.16 billion and that the company is in the midst of another debt-reduction and maturity-extension program involving us$ 2.8 billion in notes. The December deal resulted in a one-time gain for the 2008 fourth quarter of us$ 946 million for the extinguishment of debt.
Also today, Bloomberg News reported Harrah’s owners Apollo Management LP and TPG Inc. are buying Harrah’s debt to protect themselves in the event of a Harrah’s bankruptcy. Sources told Bloomberg that Apollo and TPG, which bought Harrah’s for us$ 30.7 billion last year, have bought about us$ 2 billion of the notes and by buying such debt may be able to maintain control of the company in a bankruptcy proceeding.