EX-12 9 a2072513zex-12.txt EXHIBIT 12 EXHIBIT 12 HARRAH'S ENTERTAINMENT, INC. COMPUTATION OF RATIOS (IN THOUSANDS, EXCEPT RATIO AMOUNTS)
2001(A) 2000(B) 1999(C) 1998(D) 1997(E) ---------- ---------- ---------- ---------- ---------- RETURN ON REVENUES-CONTINUING Income (loss) before extraordinary losses........................... $ 208,990 $ (11,344) $ 219,503 $ 121,717 $ 107,522 Revenues(f)........................ 3,709,040 3,329,796 2,894,125 1,907,892 1,561,707 Return........................... 5.6% (0.3)% 7.6% 6.4% 6.9% RETURN ON AVERAGE INVESTED CAPITAL Income (loss) before extraordinary losses........................... $ 208,990 $ (11,344) $ 219,503 $ 121,717 $ 107,522 Add: Interest expense after tax.... 159,236 141,394 121,846 72,707 48,233 ---------- ---------- ---------- ---------- ---------- $ 368,226 $ 130,050 $ 341,349 $ 194,424 $ 155,755 ========== ========== ========== ========== ========== Average invested capital........... $5,035,044 $4,488,288 $4,231,789 $2,426,028 $1,815,869 ========== ========== ========== ========== ========== Return........................... 7.3% 2.9% 8.1% 8.0% 8.6% ========== ========== ========== ========== ========== RETURN ON AVERAGE EQUITY Income (loss) before extraordinary losses........................... $ 208,990 $ (11,344) $ 219,503 $ 121,717 $ 107,522 Average equity..................... 1,347,257 1,431,255 1,416,591 793,492 722,298 Return........................... 15.5% (0.8)% 15.5% 15.3% 14.9% RATIO OF EARNINGS TO FIXED CHARGES(G) Income (loss) before extraordinary losses........................... $ 208,990 $ (11,344) $ 219,503 $ 121,717 $ 107,522 Add: Provision for income taxes....... 126,737 15,415 128,914 74,600 68,746 Interest expense................. 255,801 227,139 193,407 117,270 79,071 Interest included in rental expense........................ 21,226 15,819 10,801 9,718 7,692 Amortization of capitalized interest....................... 1,422 1,595 1,359 1,444 606 (Income) loss from equity investments.................... (148) 314,958 33,042 4,709 (473) Adjustment to include 100% of non-consolidated, majority-owned affiliate(h).... -- -- -- 12,254 -- ---------- ---------- ---------- ---------- ---------- Earnings as defined................ $ 614,028 $ 563,582 $ 587,026 $ 341,712 $ 263,164 ========== ========== ========== ========== ========== Fixed charges: Interest expense................. $ 255,801 $ 227,139 $ 193,407 $ 117,270 $ 79,071 Capitalized interest............. 9,309 7,960 13,118 2,526 6,860 Interest included in rental expense........................ 21,226 15,819 10,801 9,718 7,692 Adjustment to include 100% of non-consolidated, majority-owned affiliate(h).... -- -- -- 12,071 -- ---------- ---------- ---------- ---------- ---------- Total fixed charges................ $ 286,336 $ 250,918 $ 217,326 $ 141,585 $ 93,623 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges........................ 2.1 2.2 2.7 2.4 2.8 ========== ========== ========== ========== ==========
EXHIBIT 12 (CONTINUED) HARRAH'S ENTERTAINMENT, INC. COMPUTATION OF RATIOS (IN THOUSANDS, EXCEPT RATIO AMOUNTS)
2001(A) 2000(B) 1999(C) 1998(D) 1997(E) ---------- ---------- ---------- ---------- ---------- COMPUTATION OF PROPERTY EBITDA(I) Income from operations............. $ 580,965 $ 282,738 $ 481,037 $ 287,846 $ 213,532 Add/(less): Depreciation and amortization.... 285,773 236,082 193,599 142,879 110,982 Write-downs, reserves and recoveries..................... 22,498 226,106 2,235 7,474 13,806 Project opening costs............ 13,136 8,258 2,276 8,103 17,631 Corporate expense................ 52,746 50,472 42,748 37,890 27,155 Headquarters relocation and reorganization costs........... -- 2,983 10,274 -- -- Equity in (income) losses of non- consolidated affiliates........ (148) 57,935 43,467 14,989 11,053 Venture restructuring costs...... 2,524 400 (322) 6,013 6,944 Amortization of intangible assets......................... 25,288 21,540 17,617 7,450 1,839 ---------- ---------- ---------- ---------- ---------- Property EBITDA.................... $ 982,782 $ 886,514 $ 792,931 $ 512,644 $ 402,942 ========== ========== ========== ========== ==========
------------------------ (a) 2001 includes $22.5 million on pretax charges for write-downs, reserves and recoveries and $26.2 million of income from dispositions of nonstrategic assets and the settlement of a contingency related to a former affiliate. 2001 also includes the financial results of Harveys Casino Resorts from its July 31, 2001, date of acquisition. (b) 2000 includes $220.0 million in pretax reserves for receivables not expected to be recovered from JCC Holding Company and its subsidiary, Jazz Casino Company, LLC, $6.1 million in pretax charges for other write-downs, reserves and recoveries and $39.4 million in pretax write-offs and reserves for our investment in, loans to and net estimated exposure under letters of credit issued on behalf of National Airlines, Inc. 2000 also includes the financial results of Players International, Inc. from its March 22, 2000, date of acquisition. (c) 1999 includes $2.2 million in pretax charges for write-downs, reserves and recoveries and $59.8 million of gains from sales of our equity interests in nonconsolidated affiliates. 1999 also includes the financial results of Rio Hotel & Casino, Inc. from its January 1, 1999, date of acquisition. (d) 1998 includes $7.5 million in pretax charges for write-downs and reserves and a $13.2 million gain on the sale of equity interests in a nonconsolidated restaurant subsidiary. 1998 also includes the financial results of Showboat, Inc. from its June 1, 1998, date of acquisition. (e) 1997 includes $13.8 million in pretax charges for write-downs and reserves and a $37.4 million gain on the sale of equity in a New Zealand subsidiary. (f) Revenues for years 1997 through 2000 have been restated to reflect the impact of implementing new accounting guidance issued in and effective for first quarter 2001, which requires the cost of the cash-back component of the Company's Total Rewards program to be treated as a reduction of revenues. Previously, these costs had been treated as a casino expense. (g) As discussed in Note 12 to the Consolidated Financial Statements in the 2001 Harrah's Entertainment Annual Report, the Company has guaranteed certain third-party loans in connection with its casino development activities. The above ratio computation excludes estimated 2 EXHIBIT 12 (CONTINUED) fixed charges associated with these guarantees as follows: 2001, $4.4 million; 2000, $5.7 million; 1999, $6.2 million; 1998, $7.9 million; and 1997, $7.8 million. (h) For purposes of computing this ratio, "earnings" consist of income before income taxes plus fixed charges (excluding capitalized interest) and minority interests (relating to subsidiaries whose fixed charges are included in the computation), excluding equity in undistributed earnings of less than 50% owned investments. "Fixed charges" include interest whether expensed or capitalized, amortization of debt expense, discount or premium related to indebtedness and such portion of rental expense that we deem to be representative of interest. As required by the rules which govern the computation of this ratio, both earnings and fixed charges are adjusted where appropriate to include the financial results for the company's nonconsolidated majority-owned subsidiaries. Accordingly, 1998 has been adjusted to include the financial results and fixed charges of the East Chicago partnership from its June 1, 1998, date of acquisition. (i) EBITDA consists of earnings before interest, taxes, depreciation and amortization. Property EBITDA consists of operating profit before depreciation and amortization, write-downs, reserves and recoveries and project opening costs. Property EBITDA is a supplemental financial measure used by management, as well as industry analysts, to evaluate our operations. However, property EBITDA should not be construed as an alternative to Income from operations (as an indicator of our operating performance) or to cash flows from operating activities (as a measure of liquidity) as determined in accordance with generally accepted accounting principles and presented in the accompanying Consolidated Financial Statements. All companies do not calculate EBITDA in the same manner. As a result, property EBITDA as presented by our Company may not be comparable to similarly titled measures presented by other companies. 3