harrah's entertainment 09/25/08_db_presentation_final
TRANSCRIPT
Harrah’s Entertainment, Inc.
September 2008
Strictly Confidential and Proprietary – Do Not Reproduce
2
Forward Looking Statements
Certain information in this presentation may be considered forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. This information is based on the Company's current expectations and actual results could vary materially depending on risks and uncertainties that may affect the Company's operations, markets, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, industry and economic conditions, competitive, legal, governmental and technological factors. There is no assurance that the Company's expectations will be realized. The Company assumes no obligation to update any forward-looking information contained in this presentation should circumstances change, except as otherwise required by securities and other applicable laws.
Market data and other statistical information used throughout this presentation are based on independent industry publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates which are derived from our review of internal surveys, as well as the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness.
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Corporate Structure
All Material Operating
Subsidiaries
Harrah’s Operating Company, Inc.
(“HOC”)
$2.0 bn Revolver (Undrawn)$7.3 bn Term Loan B Facility$6.8 bn New Senior Notes/Bridge$4.6 bn Existing Senior Unsecured Notes
$6.5 bn CMBS Debt CMBS Borrowers
Subsidiary Pledgors under New Credit Facility and Guarantors under Senior Unsecured Bridge Facility / Notes
HOC Borrowing Structure
Harrah’s Entertainment, Inc.
Guarantor of new and existing HOC DebtGuarantor of leases for PropCo debt
LTM through of 6/30/08• Includes captive insurance subsidiaries.• Includes 10 casino clubs in the UK, 2 in Egypt and 1 in South Africa.
PropCo Borrowing Structure
Underlying Properties Underlying Properties
Imperial PalaceBill’s Gamblin’ Hall
& SaloonBally's Las VegasCaesars PalaceHarrah's Lake TahoeBill's Lake TahoeHarveys Lake TahoeBally's Atlantic City
LTM Revenue: $2.7 bnLTM Adjusted EBITDA: $0.8 bn
LTM Revenue: $8.0 bnLTM Adjusted EBITDA: $1.9 bn
LTM Revenue: $10.7 bnLTM Adjusted EBITDA: $2.7 bn
Caesars Atlantic CityShowboat Atlantic CityHarrah’s Chester (PA)Harrah's New Orleans (LA)Harrah's Louisiana Downs (LA)Horseshoe Bossier City (LA)Horseshoe Tunica (MS)Grand Tunica (MS)Grand Biloxi (MS)
Sheraton Tunica (MS)Harrah's Council Bluffs (IA)Horseshoe Council Bluffs /
Bluffs Run (IA)Harrah's North Kansas City (MO)Harrah's St. Louis (MO)Harrah's Joliet (IL)Harrah's Metropolis (IL)Horseshoe Hammond (IN)
Caesars IndianaHarrah's RenoHarrah’s Ak-ChinHarrah’s RinconHarrah’s CherokeeCasino WindsorConrad Punta Del EsteLondon Clubs (2)125 acres of developable
land in Las Vegas175 acres of land in Macau
Harrah's Las VegasRioFlamingo Las VegasParis Las VegasHarrah's Atlantic CityHarrah's Laughlin
Other (1)
Business & Market Overviews
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Las Vegas, 33%
Atlantic City, 23%
Mississippi / Louisiana, 14%
Illinois / Indiana, 12%
Iowa / Missouri, 7%
Other Nevada, 6%
Managed / Intl / Other, 5%
Las Vegas, 41%
Atlantic City, 22%
Mississippi / Louisiana, 12%
Illinois / Indiana, 9%
Iowa / Missouri, 8%
Other Nevada, 5%
Managed / Intl / Other, 3%
One of the world’s largest and most diversified gaming companies
– #1 or #2 market share in almost every major market in the U.S.
– 51 casinos in six countries (1)
– Approximately 40,000 hotel rooms and suites, 3 million square feet of casino gaming space, and 2 million square feet of convention center space (1)
Industry leading loyalty program (Total Rewards) with over 40 million members
(1) As of June 30, 2008, HOC and its subsidiaries own or manage 45 of the Harrah’s Entertainment casinos.(2) Property EBITDA excludes corporate overhead, normalizations and pro forma cost savings. HOC LTM Net Revenue of $8.0 billion and Property EBITDA of $1.8 billion.
LTM 6/30/08 Net Revenue ($10.7 Billion)(2) LTM 6/30/08 Property EBITDA ($2.7 Billion)(2)
Company SnapshotA Portfolio of Winning Brands
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Differentiated Business Strategy
• Focuses on organizational restructuring, teleservices reorganization and procurement savings
• Substantial progress against $164M savings goal
• Ongoing rationalization of property labor and marketing costs
Increase Profitability
• Stable, predictable revenue• High operating margins• Low maintenance capex• Growth capex channeled to highest return uses
Maximize Cash Flow
• Leverage scale and Total Rewards program to generate same store gaming revenue growth and cross-market play
- Hub and spoke network of properties- Highly scalable existing infrastructure- Application of centralized marketing to new properties/operations
• Pursue targeted investments in proven markets
Drive Profitable Sales Growth
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Highly Strategic Las Vegas Market Position…Harrah’s has the #2 Market Share in Las Vegas, With 8 Properties
28% of the Strip’s revenue and 25% of the Strip’s positions160 contiguous acres on the east side of the Strip combined with 170 acres on the west side
– 125 acres of developable landHarrah’s controls three of the “4 Corners” at the intersection of Flamingo and Las Vegas Blvd
Las Vegas Property Map
* Denotes property either under development or planned for development.
*
The WynnGolf Club
Universityof Nevada –Las Vegas
McCarranInt’l
Airport
FashionShow Mall
15
Tropicana Ave
Flamingo Rd
Spring Mountain Rd
E. Desert Inn RdW. Desert Inn Rd
The S
trip
604
Fontainebleau*
Echelon*
Circus Circus
New Frontier Montreux*
Treasure Island
Venetian
Mirage
Caesar’sRio
Palms Bellagio
Cosmopolitan*
City Center*
Monte Carlo
Mandalay Bay
Luxor
Excaliber
New York New YorkTropicana Ave
To Downtown Stratosphere
Harmon Blvd
The WynnGolf Club
Universityof Nevada –Las Vegas
McCarranInt’l
Airport
FashionShow Mall
1515
Tropicana Ave
Flamingo Rd
Spring Mountain Rd
E. Desert Inn RdW. Desert Inn Rd
The S
trip
604
Fontainebleau*
Echelon*
Circus Circus
New Frontier Montreux*
Treasure Island
Venetian
Mirage
Caesar’sRio
Palms Bellagio
Cosmopolitan*
City Center*
Monte Carlo
Mandalay Bay
Luxor
Excaliber
New York New York
Fontainebleau*
Echelon*
Circus Circus
Plaza*
Treasure Island
Venetian
Mirage
CaesarsRio
Palms Bellagio
Cosmopolitan*
City Center*
Monte Carlo
Mandalay Bay
Luxor
Excaliber
New York New York
Sahara
Riviera
Encore*
LV Hilton
Convention Center
Wynn
Palazzo*
Barbary Coast
FlamingoSands Expo
Royale Imperial Palace
Harrah’s
Bally’s
Paris
Tropicana
MGM Grand
Hooters
**
Hard Rock
Aladdin/Planet Hollywood
Sahara
Riviera
Encore*
LV Hilton
Convention Center
Wynn
Palazzo*
Bill’s Gamblin’ Hall
FlamingoSands Expo
Imperial Palace
Harrah’s
Bally’s
Paris
Tropicana
MGM Grand
Hooters
**
Hard Rock
Planet HollywoodTropicana Ave
To Downtown Stratosphere
Harmon Blvd
PropCoHOC Harrah’s Undeveloped Land
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… Drives Market Outperformance
Caesars Palace
Harrah’s Las Vegas
Bally’s Las Vegas
Paris Las Vegas
21042,500Bill’s Gamblin’Hall & Saloon
2,64075,000Imperial Palace
3,50076,800Flamingo Las Vegas
20,480
2,920
2,810
2,530
2,520
3,350
Rooms & Suites
85,000Paris Las Vegas
66,400Bally’s Las Vegas
90,300Harrah’s Las Vegas
TOTAL
Rio Hotel & Casino
Caesars Palace
PropertyCasino Space
(sq. ft.)
672,900
107,000
129,900
($ in millions)
Rio Hotel & Casino
$3,542HET Las Vegas LTM Net Revenues$1,123HET Las Vegas LTM EBITDA
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Atlantic City Snapshot
Harrah’s Atlantic City
Showboat Atlantic City
Bally’s Atlantic City
Caesars Atlantic City
--92,000Harrah’s Chester (PA)
5,840
1,330
1,630
1,140
1,740
Rooms & Suites
124,200Showboat Atlantic City
160,800Harrah’s Atlantic City
TOTAL
Caesars Atlantic City
Bally’s Atlantic City
Property Casino Space (sq. ft.)
747,800
145,000
225,800
($ in millions)
Note: LTM as of 6/30/08.
$2,402HET Atlantic City LTM Net Revenues
$595HET Atlantic City LTM EBITDA
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The Leader in Regional Markets
Caesars Indiana Grand Casino Biloxi Grand Casino Tunica
37%
32%
37%
Harrah’s Market Share(1)
$789
$223
$234
$332
LTM EBITDA
$2,105
$4,034
$3,267
2007 Market Revenues
15
4
4
7
Properties
5,650
1,140
960
3,550
Rooms & Suites
$3,535
$799
$1,288
$1,508
LTM Net Revenues
286,900Iowa / Missouri(4)
TOTAL
Illinois / Indiana(3)
Louisiana / Mississippi(2)
MarketCasino Space
(sq. ft.)
903,300
188,900
427,500
($ in millions)
Note: LTM as of 6/30/08. All properties included in HOC.Source of market revenues and Harrah’s market share: State gaming commission and control boards.(1) Market Share based on year ending Dec.2007(2) Louisiana / Mississippi market defined as Shreveport – Bossier City, LA, New Orleans, LA, Gulfcoast and Tunica, MS. (3) Illinois / Indiana market defined as Chicagoland and Southern Illinois and Indiana. (4) Iowa / Missouri market defined as Council Bluffs, IA, St. Louis, MO, and Kansas City, MO.
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Growing International PresenceLondon Clubs International
Properties in London, Egypt and South Africa
Total Casino Space: 143,200 sq. ft.
Total Hotel Rooms & Suites: 190
Macau Orient Golf Course18-hole golf course on 175 acres in Cotai
Acquired in September 2007
Casino Windsor, Ontario (1)
Casino Space:100,000 sq. ft.
Hotel Rooms & Suites: 340
Conrad Punta Del Este Resort & Casino, UruguayOnly Las Vegas style resort and casino in Uruguay
Total Casino Space: 44,500 sq. ft.
– 510 slot machines, 50 table games
Total Hotel Rooms & Suites: 300
The Golden Nugget – London
Fifty – London
Emerald Safari – South Africa
175 Acres on Cotai Strip in Macau
MACAU ORIENT GOLF (OWNED BY HARRAH’S)
MACAU STUDIO CITY
BORDER CROSSING
RESERVOIR
TBD
MACAU DOME
GALAXY
FOUR SEASONS
FAR EAST
VENETIAN
FAIRMONT RAFFLES
HILTON CONRAD
SHERATONST. REGIS
CITY OF DREAMS
Nature preserve
(1) HOC owns a 50% interest in Windsor Casino Limited, which manages the property.
Investment For Growth
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Harrah’s Atlantic City ExpansionProject Overview
New Waterfront hotel tower, connected to existing BayviewTowerNumber of Hotel Rooms: 851Number of Suites: 109Amentities: – Elizabeth Arden Red Door Spa; – The Pool (80,000 gallon pool under 90ft. glass dome w/82
degree temp); – Daytime pool with cabanas and club atmosphere at night;– The Waterfront Shops (7 unique shops);– Taste of the Shore Food Court (4 eateries), Waterfront
Buffet, new Reflections Cafe and McCormick & Schmick’s(located on existing property)
Official opening ceremony March 6, 2008
Gaming Revenue YoY Growth %
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08
HET Rest MKT
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Horseshoe Hammond ExpansionProject Overview
Riverboat casino on Indiana side of Lake MichiganCasino Space: 48,300 sq. ft.Slot Machines: 1,940Table Games: 60 Expanded casino space of 108,000 sq. ft. will include +3,200 slots and 94 table games including 40 poker tablesOfficially opened July 29, 2008
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Caesars Palace Las Vegas ExpansionProject Overview
New hotel tower and convention space on Flamingo Road next to existing Augustus TowerNumber of hotel rooms: 662Number of suites: 68New convention space: 110,000 s.f.3 Pool Villas; 3 new poolsRenovate buffet, Race & Sports Book, miscellaneous restaurants, casino spaceHotel and convention space scheduled to open Summer 2009
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Harrah’s KansasProject Overview
Awarded sole gaming contract in southcentral Kansas– Subject to completion of background investigations and
licensing requirements$485M resort casino
– 2,000 slots, 50 tables, WSOP Poker Room– 175 hotel rooms, including 30 suites and 5 pool villas– 30,000 square feet of convention space– 5 restaurants, including celebrity concepts – 18 hole championship golf course
JV with local real estate developersAttractive project due to proximity to Wichita and limited competition in area
– Project located within 20 minute drive of Wichita city center– Also within driving distance of Oklahoma City
Opening expected in August 2010
Investment Strengths
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Market Leader with Unparalleled ScaleHarrah’s is the world’s largest and most diversified gaming company
– 51 casinos across 6 countries (1)
– #1 or #2 share in almost every major domestic market
Unparalleled Scale and Diversification Drives Growth and StabilityNote: Joint venture interest in Canadian property not directly owned.(1) HOC owns or manages 45 casinos.
DetroitAtlantic City
New Orleans
BiloxiLakeCharles
Shreveport /Bossier City Vicksburg
Tunica
St. Louis
Kansas City
Council BluffsChicagoland
Black Hawk /Central City
Cripple Creek
Las Vegas
Laughlin
Reno / Lake Tahoe
#1#1
#1#1
#1#1
#1#1
#2#2
#2#2
#1#1
#1#1
#1#1#1#1
#1#1
#2#2
Chester
HOC PropertyHOC Property
Native American CasinoManaged by HOCNative American CasinoManaged by HOC
Major Gaming MarketMajor Gaming Market
#1 #1 Market Share#1#1 #1 Market Share
#2 #2 Market Share#2#2 #2 Market Share
PropCo PropertyPropCo Property
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Las Vegas Locals, 78%
Managed, 22%
Macau, 58%
, 42%
Macau, 63%
, 37%
Las Vegas Locals, 50%
Midwest / South, 31%
AC (Borgota ) (2), 19%
Las Vegas Strip, 82%
Detroit, 6%
AC (Borgota ) (2), 5%
Mississippi, 4%
Other, 3%
Las Vegas, 41%
Atlantic City, 22%
Mississippi / Louisiana, 12%
Illinois / Indiana, 9%
Iowa / Missouri, 8%
Other Nevada, 5%
Managed / Intl / Other, 3%
Most Diversified Gaming Operator
Source: Derived or extrapolated from public company filings and available third party analyst reports.(1) Represents HET consolidated.(2) Borgata is 50/50 owned by MGM/Boyd.(3) Based off 2007 operating income as reported.(4) Based off Adjusted EBITDAR.
LTM 6/30/08 EBITDA by Geography
Harrah’s (1) MGM Mirage Wynn
Station (3) Boyd Las Vegas Sands (4)
Las Vegas
Las Vegas
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Portfolio of Leading BrandsEach brand has a strong identity and enjoys powerful customer recognitionDiverse collection of brands appeals to wide range of customer preferences and encourages multiple visits
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LoyaltyBrand
Decision sciencecapabilities
Hydrogen
LoyaltyBrand
Decision sciencecapabilities
Hydrogen
Superior Business Model: Generating Same Store Gaming Revenue Growth and Cross-Market Play
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Strong and Predictable Free Cash Flow Generation
Stable and predictable revenues– Favorable business mix with over 70% of gross revenue driven by
casino operations– High operating margins– Profitability improvement program implemented in 2006
Reasonable capital expenditure requirements– Well-maintained asset base ($4.6 billion of total capex since 2004)– Capital expenditures channeled to highest return uses
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Substantial Land Value125 Undeveloped Las Vegas Acres 175 Acres on Cotai Strip in Macau
125 undeveloped Las Vegas acres surrounding the Strip Purchased Macau Orient Golf in September 2007
Purchase price: $578 million
Flamingo Road
Las Vegas B
lvd.
36.73 Acres
3.87 Acres
38.15(1)
Acres
48.21 Acres MACAU ORIENT GOLF
(OWNED BY HARRAH’S)
MACAU STUDIO
CITY
BORDER CROSSING
RESERVOIR
TBD
MACAU DOME
GALAXY
FOUR SEASONS
FAR EAST
VENETIAN
FAIRMONT
RAFFLES
HILTON CONRA
D
SHERATONST.
REGIS
CITY OF
DREAMS
Nature preserve
Illustrative IllustrativeValue / Acre ($mm) Value ($mm) (a)
$30 $3,75025 3,12520 2,50015 1,87510 1,250
(a) Based on 125 acres
(1) Total size of indicated plot is 38.15 acres, with 36.20 acres owned by Harrah’s.Note: Values shown for Las Vegas land are for illustrative purposes only and do not reflect any performed land value appraisals by the Company.
Harrah’s Entertainment, Inc.
September 2008