Harrah's Takes $10 Million Charge

Harrah's Entertainment, which had four of its casinos in Mississippi and Louisiana knocked out of commission by Gulf Coast hurricanes, said Thursday it would take a $10 million charge against its third quarter earnings due to lost business.

The company also announced that it believes insurance payments for its damaged casinos will equal the book value for each casino damaged by Hurricanes Katrina and Rita. Book value is the difference between a property's assets and liabilities.

Harrah's spokesman Alberto Lopez said the company is still assessing the damages suffered by Harrah's New Orleans and the Grand Casinos in Gulfport and Biloxi, Miss., from Hurricane Katrina on Aug. 29. The Grand Casinos are believed to be complete losses; the casino barge in Biloxi was imploded to remove it from where it had come to rest on U.S. Highway 90.

Two weeks ago, damage inflicted by Hurricane Rita shut down Harrah's Lake Charles.

"We're still trying to figure out the best way to proceed going forward," Lopez said. "We're really still assessing the damages to our properties."

Earlier this week, following a vote by Mississippi lawmakers to move casinos in the Gulf Coast communities off water and onto land, Harrah's said the company would begin planning to replace its Biloxi property but was unsure of what it would do with the Gulfport location.

Harrah's said it was unsure when it would be able to reopen Harrah's New Orleans and it was still unclear when it could resume construction on a 450-room hotel that was being built next to the casino. The company said increased demands for construction labor and materials in the market, as well as increased construction time, could drive up costs of the project.

In Lake Charles, Harrah's said the hurricane damaged the floating casino extensively. But he said the extent of the loss and how long the property will be closed remain unclear.

While Harrah's is negotiating with insurance companies and claims adjusters over property losses, it could take well into 2006 to determine what business interruption insurance will cover.

"That always takes much longer to determine," Lopez said. "We can't determine yet how long it will take to rebuild."

Shares in Harrah's Entertainment fell 53 cents, or 0.35 percent, Thursday to close at $63.07 on the New York Stock Exchange.

Also in Mississippi, a state senator held up the land-based casino bill from reaching the governor's desk for signature because he wanted to ensure gaming companies will continue to pay tideland leases to local governments.

"We had hoped the governor would have signed the bill yesterday," Lopez said. "We think it's important to rebuild and get our employees back to work."

Deutsche Bank gaming analyst Marc Falcone, in a note to investors, said the governor's signature on the Mississippi legislation would likely result in most major operators in the region committing to rebuild.

"However, we believe that the outcomes of insurance negotiations could also impact decisions to rebuild," Falcone said. "It is currently unknown if operators who had multiple casinos in the area (Harrah's and Penn National Gaming) would choose to rebuild one facility or two."