HARRAH’S
Jamie Robson, Jonathan Kroenke,
Corby Thompson, Manddie Chen
Background
• The biggest casino brand in America.
• First opened on Oct. 30th, 1937.
• Name change on Nov. 23rd, 2010.
Operations
• Operates fifty-two casinos in U.S. and 5 countries. • Additions: hotel, restaurants, and non-gaming entertainment. Harrah’s
Revenue By Segment
Revenue
Casino
Rooms
Food & Beverage
Other
Major Players in Industry
Caesars
MGM Resorts International
Las Vegas Sands
Wynn Resorts
Remaining 260
The Resort Casino
Industry
• Over past 5 years, Caesars has been dealt a bad hand
• Recession
• Rapid Decline In Revenue
• Caused by reduction in consumer spending
• Hurricane Sandy
• Preparing to file bankruptcy
• Losses every year since 2009
• Largest and most indebted casino
• Projections were wrong
Financial
Performance
• Leverage
• Debt
• Credit Rating
• If needed to borrow • Profitability
• Cash Flow
• Sources and uses of cash
• Balance Sheet
Ratios
• Valuation
• RevPar
Financial
Considerations
•
•
•
•
Wynn Ba1
Las Vegas Sands Ba2
MGM Resorts Intl. B2
Caesars Entertainment
Caa2
Credit Rating
Cash Flow
40
20
0
-20
-40
-60
-80
-100
Growth
Comparison
CZR
Industry
120
100
80
60
40
20
0
-20
-40
-60
Profitability
CZR
Industry
80
70
60
50
40
CZR
Industry
30
20
10
0
-10
LT Debt to Equity
-20
Leverage
Total Debt to Equity
160
140
120
100
80
CZR
Industry
60
40
20
0
-20
ROA
ROE
-40
Management
Effectiveness
ROI
12
10
8
6
CZR
Industry
4
2
0
Financial Strength
30
25
20
15
CZR
Industry
10
5
0
Price to Earnings
-5
Valuation
Price to Sales
Horizontal Analysis
&
Vertical Analysis
Both analysis performed on following Statements:
1.Consolidated Balance Sheet
2.Consolidated Statement of Operations
3.Consolidated Statement of Comprehensive Loss
Horizontal Analysis
IBIS World Industry
Report
•
•
•
Utilized Horizontal Analysis to first Check Accounts With High Inherent Risk and compare to industry averages.
Due to cash and revenues having high inherent risk in our industry we selected this account for further analysis.
The difference between the industry average and Caesar’s was immaterial helping to ease our skeptical minds.
Vertical Analysis
IBIS World Industry
Report
•
•
Depreciation: Note that depreciation expense is extremely similar between our
Vertical Analysis and the IBIS world Industry report.
Industry Profit: The difference in this case is material and significant. So what happened? • According to Caesar’s 2013 10K, the fair market value of assets is calculated using estimates of variable measurement such as: EBITDA, revenues, cash flows, and other market factors to calculate the NPV of the future cash flows. The FMV is then set equal to the NPV of the future cash flows.
• Remember your finance class anyone? If these change the FMV of the asset can change drastically. I.E. if
Revenues than cashflows and finally NPVasset .
• Add on to this fact that Caesar’s tests for impairment at least annually.
• And Voila, straight from Caesar’s 10k, The 2013 impairment charges were driven by charges totaling
$2,444.5 million in the Atlantic Coast region due to the
The
Impairment continued weakness in visitation
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