-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B7iom8eq8dmbV730ptUD7XsQt7CiuzFtg54M4waoXPBS3rGOExwpJ7qPAHLt+UJs xmWT59tWnXjM+d/Q6VDV/w== 0001047469-04-016350.txt : 20040507 0001047469-04-016350.hdr.sgml : 20040507 20040507125033 ACCESSION NUMBER: 0001047469-04-016350 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARRAHS ENTERTAINMENT INC CENTRAL INDEX KEY: 0000858339 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 621411755 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10410 FILM NUMBER: 04787932 BUSINESS ADDRESS: STREET 1: ONE HARRAHS COURT CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7024076000 MAIL ADDRESS: STREET 1: ONE HARRAHS COURT CITY: LAS VEGAS STATE: NV ZIP: 89119 FORMER COMPANY: FORMER CONFORMED NAME: PROMUS COMPANIES INC DATE OF NAME CHANGE: 19920703 10-Q 1 a2135651z10-q.htm FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2004
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-10410

HARRAH'S ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)

I.R.S. No. 62-1411755
(I.R.S. Employer Identification No.)

One Harrah's Court
Las Vegas, Nevada 89119
(Current address of principal executive offices)

(702) 407-6000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

At April 30, 2004, there were 112,813,976 shares of the Company's Common Stock outstanding.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited Consolidated Condensed Financial Statements of Harrah's Entertainment, Inc., a Delaware corporation, have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for complete financial statements in conformity with generally accepted accounting principles in the United States. The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of operating results. Results of operations for interim periods are not necessarily indicative of a full year of operations. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our 2003 Annual Report to Stockholders.

HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

			March 31, 2004			Dec. 31, 2003
(In thousands, except share amounts)
ASSETS
Current assets
	Cash and cash equivalents		$	357,121		$	409,942
	Receivables, less allowance for doubtful accounts of $51,475 and $51,466			95,202			90,991
	Deferred income taxes			70,014			68,323
	Income tax receivable			15,846			36,166
	Prepayments and other			59,823			55,929
	Inventories			20,385			23,286

		Total current assets		618,391			684,637

Land, buildings, riverboats and equipment				5,923,390			5,797,185
Less: accumulated depreciation				(1,741,313	)		(1,701,290	)

				4,182,077			4,095,895
Assets held for sale (Note 1)				211,865			210,311
Goodwill (Notes 3 and 4)				922,542			907,506
Intangible assets (Notes 3 and 4)				353,470			315,019
Investments in and advances to nonconsolidated affiliates				8,485			8,001
Escrow deposit for pending acquisition (Note 4)				75,000			75,000
Deferred costs and other				290,371			282,475

			$	6,662,201		$	6,578,844

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable		$	123,106		$	117,941
	Accrued expenses			535,245			463,389
	Current portion of long-term debt (Note 6)			1,652			1,632

		Total current liabilities		660,003			582,962
Liabilities held for sale (Note 1)				10,769			10,873
Long-term debt (Note 6)				3,580,095			3,671,889
Deferred credits and other				198,496			194,017
Deferred income taxes				329,499			330,674

				4,778,862			4,790,415

Minority interests				31,803			49,989

Commitments and contingencies (Notes 4, 6, 8 and 9)
Stockholders' equity (Notes 2 and 5)
	Common stock, $0.10 par value, authorized—360,000,000 shares, outstanding—112,428,804 and 110,889,294 shares (net of 35,118,197 and 35,078,478 shares held in treasury)			11,243			11,089
	Capital surplus			1,341,093			1,277,903
	Retained earnings			513,563			466,662
	Accumulated other comprehensive income			209			151
	Deferred compensation related to restricted stock			(14,572	)		(17,365	)

				1,851,536			1,738,440

			$	6,662,201		$	6,578,844

See accompanying Notes to Consolidated Condensed Financial Statements.

HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

			First Quarter Ended March 31,
			2004			2003
(In thousands, except per share amounts)
Revenues:
	Casino		$	1,000,564		$	939,774
	Food and beverage			162,954			157,500
	Rooms			95,569			83,595
	Management fees			14,543			16,819
	Other			49,429			45,371
	Less: casino promotional allowances			(213,893	)		(184,130	)

		Total revenues		1,109,166			1,058,929

Operating expenses:
	Direct
		Casino		512,713			474,230
		Food and beverage		64,005			61,954
		Rooms		16,722			16,652
	Property general, administrative and other			228,256			222,456
	Depreciation and amortization			78,072			78,528
	Write-downs, reserves and recoveries			3,399			851
	Project opening costs			2,435			467
	Corporate expense			14,730			12,104
	(Income)/losses on interests in nonconsolidated affiliates			(434	)		62
	Amortization of intangible assets			1,236			1,199

		Total operating expenses		921,134			868,503

Income from operations				188,032			190,426
Interest expense, net of interest capitalized				(58,246	)		(58,874	)
Other income, including interest income				2,241			685

Income from continuing operations before income taxes and minority interests				132,027			132,237
Provision for income taxes				(48,206	)		(48,814	)
Minority interests				(2,090	)		(3,160	)

Income from continuing operations				81,731			80,263
Discontinued operations, net of income tax expense of $440				—			817

Net income			$	81,731		$	81,080

Earnings per share—basic
	Income from continuing operations		$	0.74		$	0.74
	Discontinued operations, net			—			0.01

		Net income	$	0.74		$	0.75

Earnings per share—diluted
	Income from continuing operations		$	0.73		$	0.73
	Discontinued operations, net			—			0.01

		Net income	$	0.73		$	0.74

Dividends declared per share			$	0.30		$	—

Weighted average common shares outstanding				110,703			108,489
	Additional shares based on average market price for period applicable to:
		Restricted stock		461			450
		Stock options		1,450			1,127

Weighted average common and common equivalent shares outstanding				112,614			110,066

See accompanying Notes to Consolidated Condensed Financial Statements.

HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

				First Quarter Ended March 31,
				2004			2003
(In thousands)
Cash flows from operating activities
	Net income			$	81,731		$	81,080
	Adjustments to reconcile net income to cash flows from operating activities:
		Earnings from discontinued operations, before income taxes			—			(1,257	)
		Depreciation and amortization			84,372			84,781
		Write-downs, reserves and recoveries			3,399			851
		Other noncash items			6,711			2,649
		Deferred income taxes			(2,897	)		2,396
		Minority interests' share of net income			2,090			3,160
		(Income)/losses on interests in nonconsolidated affiliates			(434	)		62
		Net losses/(gains) from asset sales			669			(114	)
		Net change in long-term accounts			77,926			5,283
		Net change in working capital accounts			17,108			36,814

			Cash flows provided by operating activities		270,675			215,705

Cash flows from investing activities
	Land, buildings, riverboats and equipment additions				(164,999	)		(87,393	)
	Payment for business acquired				(39,687	)		—
	Purchase of minority interest in subsidiary				(37,898	)		—
	(Decrease)/increase in construction payables				(111	)		7,236
	Proceeds from other asset sales				967			141
	Investments in and advances to nonconsolidated affiliates				—			(56	)
	Other				(2,455	)		(2,252	)

			Cash flows used in investing activities		(244,183	)		(82,324	)

Cash flows from financing activities
	Borrowings under lending agreements				354,207			473,775
	Repayments under lending agreements				(452,007	)		(622,939	)
	Net short-term repayments				—			(21,000	)
	Scheduled debt retirements				(301	)		(314	)
	Dividends paid				(33,489	)		—
	Minority interests' distributions, net of contributions				(3,069	)		(1,367	)
	Proceeds from exercises of stock options				51,901			4,326
	Purchases of treasury stock				—			(8,120	)
	Other				161			780

			Cash flows used in financing activities		(82,597	)		(174,859	)

Cash flows provided by/(used in) assets held for sale					3,284			(24,900	)

Net decrease in cash and cash equivalents					(52,821	)		(66,378	)
Cash and cash equivalents, beginning of period					409,942			396,366

Cash and cash equivalents, end of period				$	357,121		$	329,988

See accompanying Notes to Consolidated Condensed Financial Statements.

HARRAH'S ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

		First Quarter Ended March 31,
		2004		2003
(In thousands)
Net income		$	81,731	$	81,080

Other comprehensive income:
	Unrealized gains on available-for-sale securities, net of tax provision of $19		—		35
	Foreign currency translation adjustments, net of tax provision of $31		58		—

			58		35

Comprehensive income		$	81,789	$	81,115

See accompanying Notes to Consolidated Condensed Financial Statements.

HARRAH'S ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)

Note 1—Basis of Presentation and Organization

Harrah's Entertainment, Inc. ("Harrah's Entertainment", the "Company", "we", "our" or "us", and including our subsidiaries where the context requires) is a Delaware corporation. As of March 31, 2004, we operate 25 casinos in 12 states under the Harrah's, Rio, Showboat, and Harveys brand names, including eleven land-based casinos, ten riverboat or dockside casinos and four casinos on Indian reservations. We view each property as an operating segment and aggregate all operating segments into one reporting segment.

During 2003, we sold properties in Central City, Colorado, and Vicksburg, Mississippi. The operating results of those properties, including the losses recorded on the sales, are presented in our Consolidated Condensed Financial Statements for 2003 as discontinued operations.

In conjunction with our plans to acquire Horseshoe Gaming Holding Corp. ("Horseshoe Gaming") (see Note 4), in January 2004, we announced an agreement to sell Harrah's Shreveport to avoid overexposure in that market. The sale is subject to regulatory approval and is expected to close in second quarter 2004. We have classified this property in Assets/Liabilities held for sale on our Consolidated Condensed Balance Sheets and ceased depreciating its assets in September 2003. Since the Horseshoe Gaming acquisition will give us a continued presence in the Shreveport-Bossier City market, Harrah's Shreveport's operating results have not been classified as discontinued operations.

Note 2—Stock-Based Employee Compensation

As allowed under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," we apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations to account for our employee stock-based compensation plans and, accordingly, do not recognize compensation expense. Furthermore, no stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

In March 2004, the Financial Accounting Standards Board ("FASB") issued Exposure Draft, "Share-Based Payment—an amendment of FASB Statements No. 123 and 95." This proposed standard, which would be effective for fiscal years beginning after December 15, 2004, would require that we recognize an expense for our equity-based compensation programs, including stock options. We are currently evaluating the provisions of this proposed standard to determine its impact on our future financial statements.

SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure," an amendment of SFAS No. 123, requires that companies provide disclosure regarding the pro forma impact of the provisions of SFAS No. 123 in interim financial statements. The following table illustrates

the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS Statement No. 123 to stock-based employee compensation.

		First Quarter Ended
		March 31, 2004			March 31, 2003
(In thousands, except earnings per share)
Net income, as reported		$	81,731		$	81,080
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(5,628	)		(3,664	)

Pro forma net income		$	76,103		$	77,416

Earnings per share:
	Basic—as reported	$	0.74		$	0.75
	Basic—pro forma		0.69			0.71
	Diluted—as reported		0.73			0.74
	Diluted—pro forma		0.68			0.70

Note 3—Goodwill and Other Intangible Assets

The following table sets forth information concerning our goodwill as of March 31, 2004.

(In thousands)
Balance at December 31, 2003		$	907,506
	Additions or adjustments		15,036
	Impairment losses		—

Balance at March 31, 2004		$	922,542

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets.

			March 31, 2004						December 31, 2003
			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
(In thousands)
Amortizing intangible assets:
	Contract rights		$	63,590	$	7,289	$	56,301	$	63,590	$	6,572	$	57,018
	Customer relationships			13,100		5,542		7,558		13,100		5,023		8,077

			$	76,690	$	12,831		63,859	$	76,690	$	11,595		65,095

Nonamortizing intangible assets:
	Trademarks							186,311						146,624
	Gaming rights							103,300						103,300

								289,611						249,924

		Total					$	353,470					$	315,019

The aggregate amortization expense for the three months ended March 31, 2004, for those assets that will continue to be amortized under the provisions of SFAS No. 142 was $1.2 million. Estimated

annual amortization expense for those assets for the years ending December 31, 2004, 2005, 2006, 2007 and 2008 is $4.9 million, $4.8 million, $4.5 million, $3.8 million and $3.5 million, respectively.

Note 4—Acquisitions

Binion's Horseshoe Hotel and Casino

In March 2004, we acquired certain intellectual property assets, including the rights to the Horseshoe brand in Nevada and to the World Series of Poker brand and tournament, from Horseshoe Club Operating Company ("Horseshoe Club"). MTR Gaming Group, Inc. ("MTR Gaming") acquired the assets of the Binion's Horseshoe Hotel and Casino ("Binion's Horseshoe") in Las Vegas, Nevada, including the right to use the name "Binion's" at the property, from Horseshoe Club. We will operate Binion's Horseshoe jointly with a subsidiary of MTR Gaming for one year, with options to extend the agreement for two additional years. The property, which had been closed since January 2004, reopened April 1, 2004. Operating results for Binion's Horseshoe will be consolidated with our results as long as the operating agreement is in effect.

We paid approximately $39.7 million for the intellectual property assets, including assumption and subsequent payment of certain liabilities of Binion's Horseshoe (which included certain amounts payable to a principal of Horseshoe Gaming) and approximately $2.4 million of acquisition costs. The purchase price allocation is in process and will be completed by the end of 2004. It is anticipated that the intangible assets acquired in this transaction will be deemed to have indefinite lives and will, therefore, not be amortized. We financed the acquisition with funds from various sources, including cash flows from operations and borrowings from established debt programs.

Harrah's Shreveport and Louisiana Downs—Buyout of Minority Partners

In first quarter 2004, we paid approximately $37.5 million to the minority owners of the company that owns Louisiana Downs and Harrah's Shreveport to purchase their ownership interest in that company. The excess of the cost to purchase the minority ownership above the capital balances was assigned to goodwill. As a result of this transaction, Harrah's Shreveport and Louisiana Downs are wholly-owned by the Company.

Horseshoe Gaming

On September 11, 2003, we announced that we had signed a definitive agreement to acquire Horseshoe Gaming for $1.45 billion, including assumption of debt. A $75 million escrow payment was made in 2003, and under certain circumstances, this amount will be forfeited if the acquisition does not close. We expect to finance the acquisition through working capital, existing credit facilities and/or, depending on market conditions, the issuance of new debt. The purchase includes casinos in Hammond, Indiana; Tunica, Mississippi; and Bossier City, Louisiana. We also announced that we have an agreement to sell our Harrah's brand casino in Shreveport to avoid overexposure in that market. After consideration of the sale of Harrah's Shreveport, the Horseshoe Gaming acquisition will add a net 107,100 square feet of casino space and approximately 4,360 slot machines and 140 table games to our existing portfolio. Taken together with our acquisition of intellectual property rights from Horseshoe Club Operating Company, this acquisition will give Harrah's Entertainment rights to the Horseshoe brand in all of the United States. The acquisition, which is subject to regulatory approvals, is expected to close in mid-2004.

Note 5—Stockholders' Equity

In addition to its common stock, Harrah's Entertainment has the following classes of stock authorized but unissued:

Preferred stock, $100 par value, 150,000 shares authorized
Special stock, $1.125 par value, 5,000,000 shares authorized—
Series A Special Stock, 2,000,000 shares designated

In November 2002, our Board of Directors authorized the purchase of up to three million shares of the Company's stock in the open market. These repurchases are funded through available cash and borrowings from our Credit Agreement (see Note 6). During 2003, 500,000 shares were purchased at an average price of $35.87, leaving 2.5 million shares available for purchase pursuant to the authorization, which expires December 31, 2004. No shares have been repurchased in 2004.

In February 2004, the Company declared a cash dividend of 30 cents per share, payable on February 25, 2004, to shareholders of record as of the close of business on February 11, 2004. Quarterly cash dividends of 30 cents per share were also declared and paid in the third and fourth quarters of 2003. Subsequent to the end of first quarter, we declared a regular quarterly cash dividend of 30 cents per share, payable on May 26, 2004, to shareholders of record as of the close of business on May 12, 2004.

Note 6—Debt

Credit Agreement

Our current credit facilities (the "Credit Agreement") provide for up to $1.9625 billion in borrowings. The Credit Agreement matures on April 23, 2008, and consists of a five-year revolving credit facility for up to $1.0625 billion and a five-year term reducing facility for up to $900 million. The Credit Agreement contains a provision that would allow an increase in the borrowing capacity to $2 billion, if mutually acceptable to the Company and the lenders. Interest on the Credit Agreement is based on our debt ratings and leverage ratio and is subject to change. As of March 31, 2004, the Credit Agreement bore interest based upon 105 basis points over LIBOR and bore a facility fee for borrowed and unborrowed amounts of 25 basis points. At our option, we may borrow at the prime rate under the Credit Agreement. As of March 31, 2004, $900.0 million in borrowings was outstanding under the Credit Agreement with an additional $66.5 million committed to back letters of credit. After consideration of these borrowings, $996.0 million of additional borrowing capacity was available to the Company as of March 31, 2004.

Interest Rate Swap Agreements

The Company uses interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. We account for these interest rate swaps in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and all amendments thereto. SFAS No. 133 requires that all derivative instruments be recognized in the financial statements at fair value. Any changes in fair value are recorded in the income statement or in other comprehensive income, depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction and the effectiveness of the hedge. The differences to be paid or received under the terms of interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of interest rate swap agreements will have a corresponding effect on future cash flows.

Interest rate swap agreements contain a credit risk that the counterparties may be unable to meet the terms of the agreements. We minimize that risk by evaluating the creditworthiness of our

counterparties, which are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties.

As of March 31, 2004, we were a party to four interest rate swaps for a total notional amount of $500 million. These interest rate swaps serve to manage the mix of our debt between fixed and variable rate instruments by effectively converting fixed rates associated with long-term debt obligations to floating rates. The major terms of the interest rate swaps are as follows.

Effective Date	Type of Hedge	Fixed Rate Received		Variable Rate Paid		Notional Amount (In millions)		Maturity Date
Dec. 29, 2003	Fair Value	7.875	%	6.968	%	$	50	Dec. 15, 2005
Dec. 29, 2003	Fair Value	7.875	%	6.972	%		150	Dec. 15, 2005
Jan. 30, 2004	Fair Value	7.125	%	5.399	%		200	June 1, 2007
Feb. 2, 2004	Fair Value	7.875	%	6.975	%		100	Dec. 15, 2005

The Company's interest rate swaps qualify for the "shortcut" method allowed under SFAS No. 133, which allows for an assumption of no ineffectiveness. As such, there is no income statement impact from changes in the fair value of the hedging instruments. The net effect of the above swaps reduced our first quarter 2004 interest expense by $1.2 million.

Registration of 5.375% Senior Notes

During December 2003, we issued $500 million of 5.375% Senior Notes due in 2013 in a Rule 144A private placement. We agreed to offer to exchange the 5.375% Senior Notes issued in the private placement offering with the fully registered 5.375% Senior Notes within 210 days of issuance. Should we fail to complete the registration and related exchange offer for the 5.375% Senior Notes, the interest rate will increase by up to 0.5% per annum. However, we expect to complete the exchange offer within the required time period.

Commercial Paper

To provide the Company with cost-effective borrowing flexibility, we have a $200 million commercial paper program that is used to borrow funds for general corporate purposes. At March 31, 2004, there were no borrowings under this program.

Debt Repurchase Program

In July 2003, our Board of Directors authorized the Company to retire, from time to time through cash purchases, portions of our outstanding debt in open market purchases, privately negotiated transactions or otherwise. These repurchases will be funded through available cash from operations, borrowings from our Credit Agreement and our 5.375% Senior Notes. Such repurchases will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. As of December 31, 2003, $159.5 million of our 7.875% Senior Subordinated Notes had been retired under this authorization. No additional debt was retired in first quarter 2004.

Note 7—Supplemental Cash Flow Disclosures

Cash Paid for Interest and Taxes

The following table reconciles our interest expense, net of interest capitalized, per the Consolidated Condensed Statements of Income, to cash paid for interest:

			First Quarter Ended
			March 31, 2004			March 31, 2003
(In thousands)
Interest expense, net of interest capitalized			$	58,246		$	58,874
Adjustments to reconcile to cash paid for interest:
	Net change in accruals			(9,829	)		(8,557	)
	Amortization of deferred finance charges			(1,619	)		(1,387	)
	Net amortization of discounts and premiums			(251	)		(281	)

		Cash paid for interest, net of amount capitalized	$	46,547		$	48,649

		Cash refunds of income taxes, net of payments	$	(16,191	)	$	(29,393	)

Note 8—Commitments and Contingent Liabilities

Contractual Commitments

We continue to pursue additional casino development opportunities that may require, individually and in the aggregate, significant commitments of capital, up-front payments to third parties, guarantees by the Company of third-party debt and development completion guarantees.

The agreements under which we manage casinos on Indian lands contain provisions required by law which provide that a minimum monthly payment be made to the tribe. That obligation has priority over scheduled payments of borrowings for development costs and over the management fee earned and paid to the manager. In the event that insufficient cash flow is generated by the operations of the Indian-owned properties to fund this payment, we must pay the shortfall to the tribe. Subject to certain limitations as to time, such advances, if any, would be repaid to us in future periods in which operations generate cash flow in excess of the required minimum payment. These commitments will terminate upon the occurrence of certain defined events, including termination of the management contract. As of March 31, 2004, our aggregate monthly commitment for the minimum guaranteed payment pursuant to these contracts for the four managed Indian-owned facilities now open, which extend for periods of up to 92 months from March 31, 2004, is $1.2 million. The maximum exposure for the minimum guaranteed payments to the tribes is unlikely to exceed $102.7 million including our exposure related to the extension of an agreement that was approved in April 2004.

We may guarantee all or part of the debt incurred by Indian tribes, with which we have entered into management contracts, to fund development of casinos on the Indian lands. For all existing guarantees of Indian debt, we have obtained a first lien on certain personal property (tangible and intangible) of the casino enterprise. There can be no assurance, however, that the value of such property would satisfy our obligations in the event these guarantees were enforced. Additionally, we have received limited waivers from the Indian tribes of their sovereign immunity to allow us to pursue our rights under the contracts between the parties and to enforce collection efforts as to any assets in which a security interest is taken. The aggregate outstanding balance as of March 31, 2004, of Indian debt that we have guaranteed was $122.0 million. The outstanding balance of all of our debt guarantees, including Indian debt guarantees, at March 31, 2004, was $129.1 million. Our maximum obligation under all of our debt guarantees is $152.1 million. Our obligations under these debt guarantees extend through January 2008.

Some of our guarantees of the debt for casinos on Indian lands were modified during 2003, resulting in the requirement under FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," to recognize a liability for the estimated fair value of those guarantees. Liabilities, representing the fair value of our guarantees, and corresponding assets, representing the portion of our management fee receivable attributable to our agreements to provide the related guarantees, were recorded and are being amortized over the lives of the related agreements. We estimate the fair value of the obligations by considering what premium would have been required by us or by an unrelated party. The amounts recognized represent the present value of the premium in interest rates and fees that would have been charged to the tribes if we had not provided the guarantees. The unamortized balance of the liability for the guarantees and of the related assets at March 31, 2004, was $6.6 million.

In March 2004, we entered into an agreement with the State of Louisiana whereby we extended our guarantee of an annual payment obligation of JCC, our wholly-owned subsidiary, of $60 million owed to the State of Louisiana. The guarantee was extended for one year to end March 31, 2007.

Excluding the guarantees discussed above, as of March 31, 2004, we had commitments and contingencies of $313.4 million, including construction-related commitments.

An additional payment based on a multiple of the calculated annual savings of gaming taxes may be due to Iowa West, the entity that holds the pari-mutuel and gaming license for the Bluffs Run Casino in Council Bluffs, Iowa, and with whom we have a management agreement to operate that property. Any additional payment that may be due to Iowa West could be material and would increase goodwill related to our acquisition of Harveys. (See discussion in Management's Discussion And Analysis of Financial Condition And Results of Operation, OPERATING RESULTS AND DEVELOPMENT PLANS, North Central Results, Iowa.) We are currently unable to estimate the amount of this contingency and anticipate engaging in discussions with Iowa West concerning this payment.

Severance Agreements

As of March 31, 2004, we have severance agreements with 29 of our senior executives, which provide for payments to the executives in the event of their termination after a change in control, as defined. These agreements provide, among other things, for a compensation payment of 1.5 to 3.0 times the executive's average annual compensation, as defined, as well as for accelerated payment or accelerated vesting of any compensation or awards payable to the executive under any of our incentive plans. The estimated amount, computed as of March 31, 2004, that would be payable under the agreements to these executives based on the compensation payments and stock awards aggregated approximately $113.6 million. The estimated amount that would be payable to these executives does not include an estimate for the tax gross-up payment, provided for in the agreements, that would be payable to the executive if the executive becomes entitled to severance payments which are subject to federal excise tax imposed on the executive.

Self-Insurance

We are self-insured for various levels of general liability, workers' compensation and employee medical coverage. We also have stop loss coverage to protect against unexpected claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of incurred but not reported claims.

Note 9—Litigation

We are involved in various inquiries, administrative proceedings and litigation relating to contracts, sales of property and other matters arising in the normal course of business. While any proceeding or litigation has an element of uncertainty, we believe that the final outcome of these matters will not have a material adverse effect upon our consolidated financial position or our results of operations.

Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion and analysis of the financial position and operating results of Harrah's Entertainment, Inc. (referred to in this discussion, together with its consolidated subsidiaries where appropriate, as "Harrah's Entertainment", the "Company", "we", "our" and "us") for first quarter 2004 and 2003, updates, and should be read in conjunction with, Management's Discussion and Analysis of Financial Condition and Results of Operations presented in our 2003 Annual Report.

ACQUISITIONS

Binion's Horseshoe Hotel and Casino

Horseshoe Gaming

In September 2003, we announced that we had signed a definitive agreement to acquire Horseshoe Gaming Holding Corporation ("Horseshoe Gaming") for $1.45 billion, including assumption of debt. A $75 million escrow payment was made in 2003, and under certain circumstances, this amount will be forfeited if the acquisition does not close. We expect to finance the acquisition through working capital, existing credit facilities and/or, depending on market conditions, the issuance of new debt. The purchase includes casinos in Hammond, Indiana; Tunica, Mississippi; and Bossier City, Louisiana. We also announced that we have an agreement to sell our Harrah's brand casino in Shreveport to avoid overexposure in that market. After consideration of the sale of Harrah's Shreveport, the Horseshoe Gaming acquisition will add a net 107,100 square feet of casino space and approximately 4,360 slot machines and 140 table games to our existing portfolio. Taken together with our acquisition of intellectual property rights from Horseshoe Club Operating Company, this acquisition will give Harrah's Entertainment rights to the Horseshoe brand in all of the United States. The acquisition, which is subject to regulatory approvals, is expected to close in mid-2004.

The sale of Harrah's Shreveport is subject to regulatory approval and is expected to close in second quarter 2004. We have classified this property in Assets/Liabilities held for sale on our Consolidated Condensed Balance Sheets and ceased depreciating its assets in September 2003. Since the Horseshoe Gaming acquisition will give us a continued presence in the Shreveport-Bossier City market, Harrah's Shreveport's operating results have not been classified as discontinued operations.

OPERATING RESULTS AND DEVELOPMENT PLANS

Overall

		First Quarter
		First Quarter						Percentage Increase/ (Decrease)
		2004			2003			Percentage Increase/ (Decrease)
(In millions, except earnings per share)
Casino revenues		$	1,000.6		$	939.8		6.5	%
Total revenues			1,109.2			1,058.9		4.8	%
Income from operations			188.0			190.4		(1.3	)%
Income from continuing operations			81.7			80.3		1.7	%
Net income			81.7			81.1		0.7	%
Earnings per share—diluted
	From continuing operations		0.73			0.73		0.0	%
	Net income		0.73			0.74		(1.4	)%
Operating margin			16.9	%		18.0	%	(1.1	)pts

First quarter 2004 revenues increased 4.8% over first quarter 2003 driven by record revenues at our Southern Nevada properties and our South Central properties, including Louisiana Downs, where slot machines were introduced in the second quarter of 2003. Income from continuing operations was 1.7% above first quarter last year despite lower results in several of our markets, which were affected by higher gaming taxes and marketing costs during the quarter.

The executive officers of our Company review operating results, assess performance and make decisions related to the allocation of resources on a property-by-property basis. We, therefore, believe that each property is an operating segment and that it is appropriate to aggregate and present the operations of our Company as one reportable segment. In order to provide more detail in a more understandable manner than would be possible on a consolidated basis, our properties have been grouped as follows to facilitate discussion of our operating results:

West		East		North Central		South Central		Managed/Other
Harrah's Reno Harrah's/Harveys Lake Tahoe Bill's Harrah's Las Vegas Rio Harrah's Laughlin		Harrah's Atlantic City Showboat Atlantic City		Harrah's Joliet Harrah's East Chicago Harrah's North Kansas City Harrah's Council Bluffs Bluffs Run Harrah's St. Louis Harrah's Metropolis		Harrah's Shreveport Harrah's Lake Charles Harrah's Tunica Harrah's New Orleans Harrah's Louisiana Downs		Harrah's Ak-Chin Harrah's Cherokee Harrah's Prairie Band Harrah's Rincon

West Results

	First Quarter
	First Quarter						Percentage Increase/ (Decrease)
	2004			2003			Percentage Increase/ (Decrease)
(In millions)
Casino revenues	$	247.4		$	220.6		12.1	%
Total revenues		364.1			332.4		9.5	%
Income from operations		74.1			56.9		30.2	%
Operating margin		20.4	%		17.1	%	3.3	pts

Our West properties posted record first quarter revenues and income from operations in 2004, driven by results from our Southern Nevada properties where strong cross-market play at our two Las Vegas properties and room pricing trends in Las Vegas helped Southern Nevada revenues increase by 13.3% over 2003 levels. Income from operations for our Southern Nevada properties was 45.7% higher than in first quarter 2003 as a result of the higher revenues and improved operating margins. Revenues in Northern Nevada were 1.2% higher than in the first quarter last year, but income from operations was 27.5% below first quarter 2003, due to increased marketing expenses to stimulate demand in response to increased competition from Native American gaming facilities in Northern California.

East Results

	First Quarter
	First Quarter						Percentage Increase/ (Decrease)
	2004			2003			Percentage Increase/ (Decrease)
(In millions)
Casino revenues	$	197.4		$	186.6		5.8	%
Total revenues		181.8			178.4		1.9	%
Income from operations		44.6			43.6		2.3	%
Operating margin		24.5	%		24.4	%	0.1	pts

Despite new competition in Atlantic City, the strong performance of our Showboat property led to improved combined results for our two East properties. First quarter 2004 revenues for our Atlantic City properties were 1.9% higher than first quarter 2003, and income from operations was 2.3% higher. Results at Showboat were aided by a new hotel tower that opened in second quarter 2003 and 450 slot machines that were added in third quarter 2003. Harrah's Atlantic City has been more directly affected than Showboat by the first new competitor in the Atlantic City market in more than a decade, but marketing programs to address the aggressive customer acquisition campaign of the new competitor are having some success.

North Central Results

	First Quarter
	First Quarter						Percentage Increase/ (Decrease)
	2004			2003			Percentage Increase/ (Decrease)
(In millions)
Casino revenues	$	353.6		$	355.8		(0.6	)%
Total revenues		343.7			346.7		(0.9	)%
Income from operations		50.6			65.2		(22.4	)%
Operating margin		14.7	%		18.8	%	(4.1	)pts

Chicagoland/Illinois—Combined first quarter 2004 revenues at Harrah's Joliet, Harrah's East Chicago and Harrah's Metropolis fell 2.2% from last year's first quarter revenues. Combined income from operations was 31.3% below first quarter last year due primarily to increases in state gaming and admission taxes, increased marketing costs and a retroactive real estate tax assessment for our East Chicago property.

A $27 million renovation project designed to enhance the amenities and update the facilities at Harrah's East Chicago will be completed in second quarter 2004. As of March 31, 2004, $11.9 million had been spent on this project.

Missouri—First quarter revenues at our Missouri properties decreased 1.0%, and income from operations was 14.3% below last year's first quarter. Gains at our St. Louis property, driven by our Total Rewards program and improvements made to the slot floor, were more than offset by declines at

our North Kansas City property where recent capital improvements by two competitors impacted results.

Construction is underway on an $80 million expansion of Harrah's St. Louis, which will include a second hotel tower, redesign of the hotel lobby, new valet parking areas, the addition of parking garage express ramps and the expansion of two restaurants and other amenities. A new restaurant and nightclub opened in April and the hotel tower and remaining amenities are due to open in third quarter 2004. As of March 31, 2004, $51.3 million had been spent on this project.

A $107 million expansion and property enhancement project at Harrah's North Kansas City will break ground in second quarter 2004. This project, which will add a 206-room hotel addition, new restaurants and other amenities, is expected to be completed by the end of 2005.

Iowa—Revenues for first quarter 2004 from our Iowa properties were 3.4% higher than first quarter 2003 revenues, but income from operations was 6.0% below first quarter 2003 due, in part, to higher gaming taxes at our Bluffs Run property where gaming taxes increased in accordance with a predetermined rate increase.

Casinos at racetracks in Iowa historically have been taxed at a higher rate (36% in 2004) than the casinos on riverboats operating in Iowa (20%). The Iowa Supreme Court issued an opinion in June 2002 that this disparity was unconstitutional. The State appealed the Iowa Supreme Court's decision to the United States Supreme Court and in June 2003, the United States Supreme Court overturned the ruling and remanded the case back to the Iowa Supreme Court for further consideration. In February 2004, the Iowa Supreme Court ruled that the disparity violates the Iowa Constitution, a ruling the State appealed to the United States Supreme Court in April 2004.

In April 2004, the Iowa legislature passed legislation to effectively settle the issues regarding the gaming tax rates. The new legislation provides for a tax rate of 22% for both riverboats and racetracks effective July 1, 2004. However, racetracks have the option to conduct table games and video games that simulate table games by paying a $10 million fee to the State and a gaming tax rate of 24%. 20% of the $10 million fee could be used to offset wagering taxes for each of the five fiscal years beginning July 1, 2008. Also, for the period July 1, 2002, to June 30, 2004, racetracks will make a lump sum non-refundable payment to the State to enable the State to receive a total amount of taxes for that period based on a 24% tax rate. We estimate that Bluffs Run will pay approximately $10 million for this lump sum payment. During that period we had paid taxes at the 20% rate for Bluffs Run, following the State's instructions. However, given the uncertainty of this situation, we continued to accrue gaming taxes at the higher rate (32%-36%) and have accrued approximately $18.0 million, after consideration of the lump sum payment, in state gaming taxes that we may not have to pay. Accruals related to Iowa gaming taxes will be adjusted in second quarter 2004.

An additional payment based on a multiple of the calculated annual savings may be due to Iowa West Racing Association ("Iowa West"), the entity holding the pari-mutuel and gaming license for the Bluffs Run Casino and with whom we have a management agreement to operate that property. Any additional payment that may be due to Iowa West could be material and would increase goodwill attributed to the Bluffs Run property. We are currently unable to estimate the amount of this contingency and anticipate engaging in discussions with Iowa West concerning this payment.

South Central Results

	First Quarter
	First Quarter						Percentage Increase/ (Decrease)
	2004			2003			Percentage Increase/ (Decrease)
(In millions)
Casino revenues	$	202.1		$	176.7		14.4	%
Total revenues		201.9			180.1		12.1	%
Income from operations		30.7			30.0		2.3	%
Operating margin		15.2	%		16.7	%	(1.5	)pts

Combined first quarter 2004 revenues from our South Central properties were 12.1% higher than in first quarter 2003 and income from operations was 2.3% higher than last year's first quarter. The increase in revenues was aided by 900 slot machines put into service in second quarter 2003 at Louisiana Downs and higher revenues from Harrah's New Orleans and Harrah's Lake Charles.

The new permanent facility at Louisiana Downs opened in second quarter 2004 with approximately 1,400 slot machines, completing Phase II of the approximately $110 million renovation and expansion plan that began after our acquisition of that property in December 2002. As of March 31, 2004, approximately $69.8 million had been spent on this project.

Construction will begin in second quarter 2004 on a 450-room, $142 million hotel at Harrah's New Orleans, which currently has no hotel rooms. The hotel is expected to open in mid-2006.

Managed Casinos and Other

Our managed and other results were lower than in first quarter 2003 due to lower fee structures at some of our managed casinos where management agreements have been extended.

Construction began in January 2004 on a $60 million expansion of Harrah's Cherokee Smoky Mountains Casino in Cherokee, North Carolina, that will add a 15-story, hotel tower with approximately 320 rooms, which is scheduled for completion in second quarter 2005. We have executed a contract extension for management of the Cherokee property until November 2011, which was approved by the National Indian Gaming Commission in April 2004.

A $165 million expansion of the Harrah's Rincon property began in December 2003. The expansion will add a 21-story hotel tower with approximately 460 rooms, a spa, a new hotel lobby, additional meeting space, additional casino space and a 1,200-space parking structure. The expansion is scheduled for completion by the end of 2004.

Construction is underway on a $55 million expansion project at Harrah's Prairie Band. The expansion will include the addition of approximately 200 hotel rooms, a 12,000-square-foot convention center and a new restaurant. The project is expected to be completed in late 2004.

Construction costs of Indian casinos and hotels have been funded by the tribes or by the tribes' debt, some of which we guarantee. See DEBT AND LIQUIDITY for further discussion of our guarantees of debt related to Indian projects.

Other Factors Affecting Net Income

	First Quarter
	First Quarter						Percentage Increase/ (Decrease)
	2004			2003			Percentage Increase/ (Decrease)
(In millions)
(Income)/expense
Development costs	$	3.3		$	2.8		17.9	%
Corporate expense		14.7			12.1		21.5	%
Interest expense, net		58.2			58.9		(1.2	)%
Other income		(2.2	)		(0.7	)	N/M
Effective tax rate		36.5	%		36.9	%	(0.4	)pts
Minority interests	$	2.1		$	3.2		(34.4	)%
Discontinued operations, net of income taxes		—			(0.8	)	N/M

N/M: = Not Meaningful

Development costs for first quarter 2004 were higher than in first quarter last year due to increased development activities in many jurisdictions, including the United Kingdom, considering allowing development and operation of casinos or casino-like operations.

Corporate expense increased 21.5% in first quarter 2004 from the prior year due to costs associated with the Company's compliance with Section 404 of the Sarbanes-Oxley Act and accelerated depreciation on some corporate assets.

Interest expense decreased in first quarter 2004 from 2003 due to a slightly lower average debt balance in 2004 and savings due to our interest rate swap agreements. For our fixed-rate debt subject to interest rate swap agreements, the average interest rate received was 7.6% at March 31, 2004, compared to 6.3% average interest rate paid on the swaps. The average interest rate on our variable-rate debt, excluding the impact of our swap agreements, was 2.2% at March 31, 2004 and 2003. A change in interest rates will impact our financial results. For example, assuming a constant outstanding balance for our variable-rate debt for the next twelve months, a hypothetical 1% change in corresponding interest rates would change interest expense for the next twelve months by approximately $14.0 million, or $3.5 million per quarter. Our variable-rate debt, including $500 million of fixed-rate debt for which we have entered into interest rate swap agreements, represents approximately 39% of our total debt, while our fixed-rate debt is approximately 61% of our total debt. (For discussion of our interest rate swap agreements, see DEBT AND LIQUIDITY, Interest Rate Swap Agreements.)

Other income was higher in first quarter 2004 than in first quarter last year due primarily to higher interest income in 2004 on the cash surrender value of life insurance policies.

The effective tax rates for both periods are higher than the federal statutory rate due primarily to state income taxes. Our effective tax rate was lower in first quarter 2004 than in first quarter last year due to the mix of taxable income among the various states, but it was the same as the 2003 full year rate.

Minority interests reflect minority owners' shares of income at joint venture casinos, which decreased in 2004 from the prior year as a result of lower earnings from a joint venture property.

Discontinued operations in 2003 reflect the results of Harveys Wagon Wheel Hotel/Casino in Central City, Colorado, and Harrah's Vicksburg in Vicksburg, Mississippi, both of which were sold in 2003.

CAPITAL SPENDING AND DEVELOPMENT

In addition to the specific development and expansion projects discussed in the OPERATING RESULTS AND DEVELOPMENT PLANS section, we perform on-going refurbishment and maintenance at our casino entertainment facilities to maintain our quality standards. We also continue to pursue development and acquisition opportunities for additional casino entertainment facilities that meet our strategic and return on investment criteria. Prior to the receipt of necessary regulatory approvals, the costs of pursuing development projects are expensed as incurred. Construction-related costs incurred after the receipt of necessary approvals are capitalized and depreciated over the estimated useful life of the resulting asset. Project opening costs are expensed as incurred.

Our planned development projects, if they go forward, will require, individually and in the aggregate, significant capital commitments and, if completed, may result in significant additional revenues. The commitment of capital, the timing of completion and the commencement of operations of casino entertainment development projects are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate political and regulatory bodies. Cash needed to finance projects currently under development as well as additional projects pursued is expected to be made available from operating cash flows, bank borrowings (see DEBT AND LIQUIDITY), joint venture partners, specific project financing, guarantees of third-party debt and, if necessary, additional debt and/or equity offerings. Our capital spending for the first three months of 2004 totaled approximately $167.5 million. Estimated total capital expenditures for 2004 are expected to be between $500 million and $580 million, excluding estimated expenditures for our announced acquisition of Horseshoe Gaming or for development opportunities that we have not yet identified.

DEBT AND LIQUIDITY

We generate substantial cash flows from operating activities, as reflected on the Consolidated Condensed Statements of Cash Flows. These cash flows reflect the impact on our consolidated operations of the success of our marketing and merchandizing programs, our strategic acquisitions, on-going cost containment focus and favorable variable interest rates. For the first three months of 2004 and 2003, we reported cash flows from operating activities of $270.7 and $215.7 million, respectively.

We use the cash flows generated by the Company to fund reinvestment in existing properties for both refurbishment and expansion projects, pursue additional growth opportunities via strategic acquisitions of existing companies or properties and new development opportunities and return capital to our shareholders in the form of stock repurchase programs and dividends. When necessary, we supplement the cash flows generated by our operations with funds provided by financing activities to balance our cash requirements.

Our cash and cash equivalents totaled approximately $357.1 million at March 31, 2004, compared to $330.0 million at March 31, 2003.

Credit Agreement

Credit Agreement with an additional $66.5 million committed to back letters of credit. After consideration of these borrowings, $996.0 million of additional borrowing capacity was available to the Company as of March 31, 2004.

The majority of our debt is due in the year 2005 and beyond. Payments of short-term debt obligations and other commitments are expected to be made from operating cash flows. Long-term obligations are expected to be paid through operating cash flows, refinancing of debt, joint venture partners or, if necessary, additional debt and/or equity offerings.

Interest Rate Swap Agreements

The Company may use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. We account for these interest rate swaps in accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", and all amendments thereto. SFAS No. 133 requires that all derivative instruments be recognized in the financial statements at fair value. Any changes in fair value are recorded in the income statement or in other comprehensive income, depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction and the effectiveness of the hedge. The differences to be paid or received under the terms of interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of interest rate swap agreements will have a corresponding effect on future cash flows.

Interest rate swap agreements contain a credit risk that the counterparties may be unable to meet the terms of the agreements. We minimize that risk by evaluating the creditworthiness of our counterparties, which are limited to major banks and financial institutions, and we do not anticipate nonperformance by the counterparties.

Effective Date	Notional Amount (In millions)		Fixed Rate Received		Variable Rate Paid		Next Reset Date	Maturity Date
Dec. 29, 2003	$	50	7.875	%	6.968	%	June 15, 2004	Dec. 15, 2005
Dec. 29, 2003		150	7.875	%	6.972	%	June 15, 2004	Dec. 15, 2005
Jan. 30, 2004		200	7.125	%	5.399	%	June 1, 2004	June 1, 2007
Feb. 2, 2004		100	7.875	%	6.975	%	June 15, 2004	Dec. 15, 2005

Registration of 5.375% Senior Notes

Commercial Paper

Debt Repurchase Program

Equity Repurchase Program

In November 2002, our Board of Directors authorized the purchase of up to three million shares of the Company's stock in the open market. These repurchases are funded through available cash and borrowings from our Credit Agreement. During 2003, 500,000 shares were purchased at an average price of $35.87, leaving 2.5 million shares available for purchase pursuant to this authorization, which expires December 31, 2004. No shares have been repurchased in 2004.

Cash Dividends

Guarantees of Third-Party Debt and Other Obligations and Commitments

As of March 31, 2004, there were no material additions to or changes in our contractual obligations and other commitments, which were disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations presented in our 2003 Annual Report on Form 10-K, except that during first quarter 2004, our guarantee of an annual payment obligation of Jazz Casino Company, LLC, our wholly-owned subsidiary, of $60 million was extended for one year through March 31, 2007, our purchase orders obligations increased by approximately $21.8 million and our debt decreased by $91.8 million.

The agreements pursuant to which we manage casinos on Indian lands contain provisions required by law that provide that a minimum monthly payment be made to the tribe. That obligation has priority over scheduled repayments of borrowings for development costs and over the management fee earned and paid to the manager. In the event that insufficient cash flow is generated by the operations to fund this payment, we must pay the shortfall to the tribe. Subject to certain limitations as to time, such advances, if any, would be repaid to us in future periods in which operations generate cash flow in excess of the required minimum payment. These commitments will terminate upon the occurrence of certain defined events, including termination of the management contract. Our aggregate monthly commitment for the minimum guaranteed payments, pursuant to these contracts for the four managed Indian-owned facilities now open, which extend for periods of up to 92 months from March 31, 2004, is

$1.2 million. Each of these casinos currently generates sufficient cash flows to cover all of its obligations, including its debt service.

We may guarantee all or part of the debt incurred by Indian tribes, with which we have entered management contracts, to fund development of casinos on the Indian lands. For all existing guarantees of Indian debt, we have obtained a first lien on certain personal property (tangible and intangible) of the casino enterprise. There can be no assurance, however, that the value of such property would satisfy our obligations in the event these guarantees were enforced. Additionally, we have received limited waivers from the Indian tribes of their sovereign immunity to allow us to pursue our rights under the contracts between the parties and to enforce collection efforts as to any assets in which a security interest is taken. The aggregate outstanding balance of such debt as of March 31, 2004, was $122.0 million.

Some of our guarantees of the debt for casinos on Indian lands were modified during 2003, resulting in the requirement under Financial Accounting Standards Board ("FASB") Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," to recognize a liability for the estimated fair value of those guarantees. Liabilities, representing the fair value of our guarantees, and corresponding assets, representing the portion of our management fee receivable attributable to our agreements to provide the related guarantees, were recorded and are being amortized over the lives of the related agreements. We estimate the fair value of the obligations by considering what premium would have been required by us or by an unrelated party. The amounts recognized represent the present value of the premium in interest rates and fees that would have been charged to the tribes if we had not provided the guarantees. The unamortized balance of the liability for the guarantees and of the related assets at March 31, 2004, was $6.6 million.

An additional payment based on a multiple of the calculated annual savings of gaming taxes may be due to Iowa West, the entity that holds the pari-mutuel and gaming license for the Bluffs Run Casino in Council Bluffs, Iowa, and with whom we have a management agreement to operate that property. Any additional payment that may be due to Iowa West could be material and would increase goodwill related to our acquisition of Harveys. (See discussion in OPERATING RESULTS AND DEVELOPMENT PLANS, North Central Results, Iowa.) We are currently unable to estimate the amount of this contingency and anticipate engaging in discussions with Iowa West concerning this payment.

EFFECTS OF CURRENT ECONOMIC AND POLITICAL CONDITIONS

Competitive Pressures

Many casino operators are reinvesting in existing markets in an effort to attract new customers, thereby increasing competition in those markets. As companies have completed expansion projects, supply has sometimes grown at a faster pace than demand in certain markets and competition has increased significantly. Furthermore, several operators, including Harrah's Entertainment, have announced plans for additional developments or expansions in some markets.

Some states are considering legislation enabling the development and operation of casinos or casino-like operations.

Although, historically, the short-term effect of such competitive developments on our Company generally has been negative, we are not able to determine the long-term impact, whether favorable or unfavorable, that development and expansion trends and events will have on current or future markets. We believe that the geographic diversity of our operations; our focus on multi-market customer relationships; our service training, our rewards and customer loyalty programs; and our continuing efforts to establish our brands as premier brands upon which we have built strong customer loyalty

have well-positioned us to face the challenges present within our industry. We utilize the unique capabilities of WINet, a sophisticated nationwide customer database, and Total Rewards, a nationwide loyalty program that allows our customers to earn cash, comps and other benefits for playing at our casinos. We believe these sophisticated marketing tools provide us with competitive advantages, particularly with players who visit more than one market.

Political Uncertainties

The casino entertainment industry is subject to political and regulatory uncertainty. From time to time, individual jurisdictions have also considered legislation or referendums that could adversely impact our operations. The likelihood or outcome of similar legislation and referendums in the future is difficult to predict.

The casino entertainment industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate. From time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the administration of such laws, that would affect the industry. It is not possible to determine with certainty the scope or likelihood of possible future changes in tax laws or in the administration of such laws. If adopted, such changes could have a material adverse effect on our financial results.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

We prepare our Consolidated Condensed Financial Statements in conformity with accounting principles generally accepted in the United States. Certain of our accounting policies, including the estimated lives assigned to our assets, the determination of bad debt, asset impairment, fair value of guarantees and self-insurance reserves, the purchase price allocations made in connection with our acquisitions and the calculation of our income tax liabilities, require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from our estimates. For a discussion of our significant accounting policies and estimates, please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements presented in our 2003 Annual Report on Form 10-K. There were no newly identified significant accounting estimates in first quarter 2004, nor were there any material changes to the critical accounting policies and estimates discussed in our 2003 Annual Report.

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which addresses consolidation by business enterprises where equity investors do not bear the residual economic risks and rewards. Companies were required to apply the provisions of FIN 46 prospectively for all variable interest entities created after January 31, 2003. In December 2003, the FASB issued a revision to FIN 46 to clarify some of the provisions of the original interpretation and to exempt certain entities from its requirements. The additional guidance explains how to identify variable interest entities and how an enterprise should assess its interest in an entity to decide whether to consolidate that entity. Application of revised FIN 46 was required for public companies with interests in "special-purpose entities" for periods ending after December 15, 2003. Application for public entities for all other types of entities is required in financial statements for periods ending after March 15, 2004. The adoption of FIN 46 did not have a significant impact on our results of operations or financial position.

In March 2004, the FASB issued Exposure Draft, "Share-Based Payment—an amendment of FASB Statements No. 123 and 95." This proposed standard, which would be effective for fiscal years beginning after December 15, 2004, would require that we recognize an expense for our equity-based compensation programs, including stock options. We are currently evaluating the provisions of this proposed standard to determine its impact on our future financial statements.

PRIVATE SECURITIES LITIGATION REFORM ACT

This quarterly report on Form 10-Q contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as "may," "will," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "continue" or "pursue," or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings and future financial results. We have based these forward-looking statements on our current expectations and projections about future events.

We caution the reader that forward-looking statements involve risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission:

•: the effect of economic, credit and capital market conditions on the economy in general, and on gaming and hotel companies in particular;
•: construction factors, including delays, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;
•: the effects of environmental and structural building conditions relating to the Company's properties;
•: our ability to complete acquisitions and to timely and cost-effectively integrate into our operations the companies that we acquire, including with respect to our previously announced acquisition of Horseshoe Gaming Holding Corp.;
•: access to available and feasible financing;
•: changes in laws (including increased tax rates), regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies;
•: litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation;
•: ability of our customer-tracking, customer loyalty and yield-management programs to continue to increase customer loyalty and same-store sales;
•: our ability to recoup costs of capital investments through higher revenues;
•: acts of war or terrorist incidents;
•: abnormal gaming holds; and
•: the effects of competition, including locations of competitors and operating and market competition.

Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our debt. We attempt to limit our exposure to interest rate risk by managing the mix of our debt between fixed-rate and variable-rate obligations. Of our approximately $3.6 billion total debt at March 31, 2004, $1.4 billion, including $500 million of fixed-rate debt for which we have entered into interest rate swap agreements, is subject to variable interest rates. For our fixed-rate debt subject to interest rate swap agreements, the average interest rate received was 7.6% at March 31, 2004, compared to 6.3% average interest rate paid on the swaps. The average interest rate on our variable-rate debt, excluding the impact of our swap agreements, was 2.2% at March 31, 2004. Assuming a constant outstanding balance for our variable rate debt for the next twelve months, a hypothetical 1% change in interest rates would change interest expense for the next twelve months by approximately $14.0 million.

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. We do not purchase or hold any derivative financial instruments for trading purposes.

Although we own a business in a foreign country, which began operating in first quarter 2004, that operation is not material to our consolidated financial position, results of operations or cash flows. Additionally, foreign currency translation gains and losses were not material to our results of operations for first quarter 2004. Accordingly, the Company is not currently subject to material foreign currency exchange rate risk from the effects that exchange rate movements of foreign currencies would have on our future operating results or cash flows.

From time to time, we hold investments in various available-for-sale equity securities; however, our exposure to price risk arising from the ownership of these investments is not material to our consolidated financial position, results of operations or cash flows.

Item 4. Controls and Procedures

(a): Evaluation of disclosure controls and procedures.

Our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q. Based on such evaluation, they have concluded that as of such date, our disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms.

(b): Changes in internal controls.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of evaluation by our principal executive officer and principal financial officer.

PART II—OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the quarter ended March 31, 2004. At the Annual Meeting of Stockholders of Harrah's Entertainment, Inc. held on April 29, 2004, the following matters set forth in the Company's Proxy Statement dated March 4, 2004, which was filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, were voted upon with the results indicated below.

(1): The nominees listed below were elected directors for a three-year term ending at the 2007 Annual Meeting with the respective votes set forth opposite their names:

	FOR	WITHHELD
Ralph Horn	94,354,753	6,107,028
Gary W. Loveman	98,605,939	1,855,842
Philip G. Satre	98,687,052	1,774,729
Boake A. Sells	95,355,193	5,106,588

(2): A proposal to adopt the 2004 Equity Incentive Plan was approved, with 74,227,506 votes cast FOR, 14,301,382 votes cast AGAINST, and 669,568 abstentions.
(3): A proposal to adopt the 2005 Senior Executive Incentive Plan was approved, with 89,518,120 votes cast FOR, 10,242,773 votes cast AGAINST, and 701,888 abstentions.
(4): A proposal to adopt a shareholder proposal concerning political contributions was not approved, with 8,543,216 votes cast FOR, 74,992,942 votes cast AGAINST, and 5,662,296 abstentions.
(5): A proposal to ratify the appointment of Deloitte & Touche LLP to serve as independent auditors of the Company for the 2004 calendar year was approved, with 94,492,694 votes cast FOR, 5,368,633 votes cast AGAINST, and 601,454 abstentions.

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

*EX—10.1		Form of Interest Rate Swap Agreements with BNP Paribas, JPMorgan Chase Bank, and The Royal Bank of Scotland, PLC.
*EX—31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
*EX—31.2		Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
*EX—32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
*EX—32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.

*

Filed herewith.

(b)

The following reports on Form 8-K were filed by the Company during first quarter 2004 and thereafter through April 30, 2004.

(i): Form 8-K filed January 23, 2004, (i) reporting the entering of a definitive agreement whereby Boyd Gaming Corporation will acquire all of the outstanding limited and general partnership interests of Red River Entertainment of Shreveport Partnership in

Commendam, subject to regulatory approval, and (ii) announcing the entering of a definitive agreement to acquire Binion's Horseshoe Hotel & Casino, subject to regulatory approval.

(ii): Form 8-K filed February 4, 2004 reporting the declaration of a cash dividend.
(iii): Form 8-K filed February 4, 2004 furnishing our press release reporting fourth quarter and full year results for 2003.
(iv): Form 8-K filed March 22, 2004 reporting the completion of the sale of Binion's Horseshoe Hotel & Casino to Speakeasy Gaming of Fremont, Inc.
(v): Form 8-K filed April 21, 2004 furnishing our press release reporting first quarter earnings.
(vi): Form 8-K filed April 30, 2004 reporting the declaration of a cash dividend.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Harrah's Entertainment, Inc.
May 7, 2004		By:		/s/ ANTHONY D. MCDUFFIE Anthony D. McDuffie Vice President, Controller and Chief Accounting Officer

EXHIBIT INDEX

Exhibit No.		Description		Sequential Page No.
EX—10.1		Form of Interest Rate Swap Agreements with BNP Paribas, JPMorgan Chase Bank, and The Royal Bank of Scotland, PLC.
EX—31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
EX—31.2		Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
EX—32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.
EX—32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

HARRAH'S ENTERTAINMENT, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
HARRAH'S ENTERTAINMENT, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
HARRAH'S ENTERTAINMENT, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
HARRAH'S ENTERTAINMENT, INC. CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
HARRAH'S ENTERTAINMENT, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 31, 2004 (UNAUDITED)

Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations

ACQUISITIONS
OPERATING RESULTS AND DEVELOPMENT PLANS
CAPITAL SPENDING AND DEVELOPMENT
DEBT AND LIQUIDITY
EFFECTS OF CURRENT ECONOMIC AND POLITICAL CONDITIONS
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
RECENTLY ISSUED ACCOUNTING STANDARDS
PRIVATE SECURITIES LITIGATION REFORM ACT

Item 3. Quantitative and Qualitative Disclosure About Market Risk

PART II—OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

Item 6. Exhibits and Reports on Form 8-K

SIGNATURE
EXHIBIT INDEX
EX-10.1 2 a2135651zex-10_1.htm EXHIBIT 10.1
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Exhibit 10.1

ISDA

International Swaps and Derivatives Association, Inc.

2002 MASTER AGREEMENT

dated as of December 30, 2003

[Name]
("Party A")

and

HARRAH'S OPERATING COMPANY, INC.
("Party B")

have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this 2002 Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties or otherwise effective for the purpose of confirming or evidencing those Transactions. This 2002 Master Agreement and the Schedule are together referred to as this "Master Agreement".

Accordingly, the parties agree as follows:—

1. Interpretation

(a) Definitions. The terms defined in Section 14 and elsewhere in this Master Agreement will have the meanings therein specified for the purpose of this Master Agreement.

(b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement, such Confirmation will prevail for the purpose of the relevant Transaction.

(c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions.

2. Obligations

(a) General Conditions.

(i): Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement.
(ii): Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.

compensation in respect of that obligation or deferred obligation, as the case may be, pursuant to Section or (2), as appropriate. The fair market value of any obligation referred to in clause (b) above will be determined as of the originally scheduled date for delivery, in good faith and using commercially reasonable procedures, by the party obliged to make the determination under section 6(e) or, if each party is so obliged, it will be the average of the Termination Currency Equivalents of the fair market values so determined by both parties.

"Waiting Period" means:—

(a): in respect of an event or circumstance under Section 5(b)(i), other than in the case of Section 5(b)(i)(2) where the relevant payment, delivery or compliance is actually required on the relevant day (in which case no Waiting period will apply), a period of three Local Business Days (or days that would have been Local Business Days but for the occurrence of that event or circumstance) following the occurrence of that event or circumstance; and
(b): in respect of an event or circumstance under Section 5(b)(ii), other than in the case of Section 5(b)(ii)(2) where the relevant payment, delivery or compliance is actually required on the relevant day (in which case no Waiting Period will apply), a period of three Local Business Days (or days that would have been Local Business Days but for the occurrence of that event or circumstance) following the occurrence of that event or circumstance.

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.

[NAME] (Name of Party)			HARRAH'S OPERATING COMPANY, INC. (Name of Party)
By:			By:

SCHEDULE
to the 2002 MASTER
AGREEMENT
dated as of December 30, 2003
between

[Name]
("Party A")

and

HARRAH'S OPERATING COMPANY, INC.
("Party B")
established as a corporation under the Laws of Delaware

PART I
Termination Provisions

(1): "Specified Entity" means, in relation to Party A, for the purpose of:

Section 5(a)(v), none;

Section 5(a)(vi), none;

Section 5(a)(vii), none; and

Section 5(b)(v), none;

and, in relation to Party B, for the purpose of:

Section 5(a)(v), any Affiliate of Party B;

Section 5(a)(vi), Parent or any of its Significant Subsidiaries (as such terms are defined in the Credit Agreement referred to in Part 5(6) hereof);

Section 5(a)(vii), Parent or any of its Significant Subsidiaries (as such terms are defined in the Credit Agreement); and

Section 5(b)(v), none.

(2)

"Specified Transaction" will have the meaning specified in Section 14 of this Agreement.

(3)

The "Cross-Default" provisions of Section 5(a)(vi) will apply to Party A, any applicable Specified Entity of Party B and Party B, and for such purpose:

(a)

"Specified Indebtedness" will have the meaning specified in Section 14 of this Agreement, except that such term shall not include obligations in respect of deposits received in the ordinary course of a party's banking business.

(b)

"Threshold Amount" means, with respect to Party A, an amount equal to three percent of the shareholders' equity of Party A; and with respect to Party B, and any applicable Specified Entity of Party B USD 100,000,000, or the equivalent thereof in any other currency or currencies. For purposes of this definition, any Specified Indebtedness denominated in a currency other than the currency in which the Threshold Amount is expressed shall be converted into the currency in which the Threshold Amount is expressed at the exchange rate therefor reasonably chosen by the other party.

(c)

Section 5(a)(vi) of this Agreement will be deemed to be amended as follows:

a.: The phrase ", or becoming capable at such time of being declared," shall be deleted from Section 5(a)(vi)(l); and
b.: Section 5(a)(vi)(2) shall be deleted in its entirety.

(4): The "Credit Event Upon Merger" provisions of Section 5(b)(v) will apply to Party A and Party B; provided, however, that if the applicable party has long term, unsecured and unsubordinated indebtedness or deposits which is or are publicly rated (such rating, a "Credit Rating") by Moody's Investor Services, Inc. ("Moody's"), Standard and Poors Ratings Group ("S&P") or any other internationally recognized rating agency (a "Rating Agency"), then the words "materially weaker" in line 6 of Section 5(b)(v) shall mean that the Credit Rating of such party (or, if applicable, the Credit Support Provider of such party) shall be rated lower than Baa3 by Moody's, or lower than BBB- by S&P or, in the event that there is no Credit Rating by either Moody's or S&P applicable to such party (or, if applicable, the Credit Support Provider of such party) but such party's long-term indebtedness or deposits is or are rated by a Rating Agency, lower than a rating equivalent to the foregoing by such Rating Agency.
(5): The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or Party B.
(6): "Termination Currency" will have the meaning set forth in Section 14 of this Agreement.
(6): Additional Termination Event will not apply.

PART 2
Tax Representations

(A): Payer Tax Representation. For the purpose of Section 3(e) of this Agreement:-Party A and Party B each makes the following representation:-

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representation made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, except that it will not be a breach of this representation where reliance is placed on sub-clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.

(B)

Payee Tax Representation. For the purpose of Section 3(f) of this Agreement:

(i): Party A and Party B each represent, respectively, that it is a United States Person for U.S. federal income tax purposes and either (a) is a financial institution or (b) is not acting as an agent for a person that is not a United States Person for U.S. federal income tax purposes.
(ii): Party B represents in respect of each Transaction where Party A's Office for the Transaction is not located in the United States of America:

Party B is folly eligible for the benefits of the "Business Profits" or "Industrial and Commercial Profits" provision, as the case may be, the "Interest" provision and the "Other Income" provision (if any) of the income tax treaty (if any), in effect between the jurisdiction of Party A's Office for the Transaction and the United States of America with respect to any payment described in such provisions and received or to be received by it in connection with this Agreement and no such payment is attributable to a trade or business carried on by it through a permanent establishment in the jurisdiction through which Party A has entered the relevant Transaction.

PART 3
Agreement to Deliver Documents

For the purpose of Sections 4(a)(i) and 4(a)(ii) of this Agreement, each party agrees to deliver the following documents:

(a): Tax forms, documents or certificates to be delivered are:

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, Party B agrees to deliver a complete and accurate United States Internal Revenue Service Form W-9 (or any applicable successor form), in a manner reasonably satisfactory to Party A, (I) upon execution of this Agreement; (II) promptly upon reasonable demand of Party A, and (III) promptly upon learning that any such form previously filed by Party B has become obsolete or incorrect (and each such form is hereby identified for purposes of Section 3(d) of this Agreement).

(b): Other documents to be delivered are:

Party required to deliver document	Form/Document/Certificate	Date by which to be delivered	Covered by Section 3(d) Representation

Party B	Annual Report of Party B and of its Credit Support Provider (as applicable) containing consolidated financial statements certified by independent certified public accountants and prepared in accordance with accounting principles that are generally accepted in the country or countries in which Party B and its Credit Support Provider (as applicable) is organized	Upon request	Yes
Party B	Unaudited consolidated financial statements of Party B and of its Credit Support Provider (as applicable) for a fiscal quarter prepared in accordance with accounting principles that are generally accepted in the country or countries in which Party B and its Credit Support Provider (as applicable) is organized	Upon request	Yes
Party B	Guaranty (as defined in Part 4(6) of this Schedule)	Upon execution and delivery of this Agreement	No
Party B	Opinion of counsel satisfactory to Party A substantially in the form of Exhibit I hereto	Upon execution and delivery of this Agreement	No
Party B	Opinion of counsel to Guarantor satisfactory to Party A substantially in the form of Exhibit II hereto	Upon execution and delivery of this Agreement	No
Party B	Certified copies of all corporate authorizations and any other documents with respect to the execution, delivery and performance of this Agreement	Upon execution and delivery of this Agreement	Yes

Party A and Party B

Certificate of authority and specimen signatures of individuals executing this Agreement, Confirmations and each Credit Support Document (as applicable)

Upon execution and delivery of this Agreement and thereafter upon request of the other party

Yes

PART 4
Miscellaneous

(1): Addresses for Notices. For the purpose of Section 12(a) of this Agreement:

Address for notice or communications to Party A:

Any notice relating to a particular Transaction shall be delivered to the address or facsimile number specified in the Confirmation of such Transaction. Any notice delivered for purposes of Sections 5 and 6 of this Agreement shall be delivered to the following address:

Address:
Attention:
Facsimile No.:
Telephone No.:
Electronic Messaging System Details: N/A
with a copy to
Address:
Attention:
Facsimile:
Telephone:

Unless otherwise stated in a Confirmation, with respect to FX Transactions and Currency Option Transactions only, notices to Party A for the purpose of Section 12(a) of the Agreement shall be copied to the following addresses:

Payments in respect of FX Transactions and Currency Option Transactions shall be made in accordance with standing payment instructions provided by each party to the other, or as specified in a Confirmation.

(2): Process Agent. For the purpose of Section 13(c) of this Agreement:

Party A appoints as its Process Agent: Not applicable.

Party B appoints as its Process Agent: Not applicable.

(3): Offices. The provisions of Section 10(a) will apply to this Agreement.

(4): Multibranch Party. For the purpose of Section 10 of this Agreement:

Party A is a Multibranch Party and may enter into a Transaction through any of the following Offices:—

Party B is not a Multibranch Party.

(5): Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in a Confirmation in relation to the relevant Transaction.
(6): Credit Support Document. Details of any Credit Support Documents:

in relation to Party A: None

in relation to Party B: The Guaranty of the Credit Support Provider dated as of the date hereof in favor of Party A and in the form appended hereto shall constitute a "Credit Support Document" in relation to all of the obligations of Party B and for all purposes of this Agreement.

(7): Credit Support Provider.

Credit Support Provider means, in relation to Party A, not applicable.

Credit Support Provider means, in relation to Party B for all purposes hereof, Harrah's Entertainment, Inc. (the "Guarantor")

(8): Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).
(9): Netting of Payments. "Multiple Transaction Payment Netting" will apply for the purpose of Section 2(c) of this Agreement to all Transactions starting from the date of this Agreement.
(10): "Affiliate" will have the meaning specified in Section 14 of this Agreement.
(11): Absence of Litigation. For the purpose of Section 3(c) of this Agreement:

"Specified Entity" means, in relation to Party A, None

"Specified Entity" means, in relation to Party B, any Affiliate of Party B.

(12)

No Agency. The provisions of Section 3(g) of this Agreement will apply to this Agreement.

(13)

Additional Representation will apply. For the purpose of Section 3 of this Agreement, the following will each constitute an Additional Representation:

(h): Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction, it being understood that information and explanations related to the terms and conditions of a Transaction will not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected results of that Transaction.

(ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and

understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction.

(iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction.

(iv) Other Transactions. It understands and acknowledges that the other party may, either in connection with entering into a Transaction or from time to time thereafter, engage in open market transactions that are designed to hedge or reduce the risks incurred by it in connection with such Transaction and that the effect of such open market transactions may be to affect or reduce the value of such Transaction.

(14): Eligible Contract Participant. Each party represents to the other patty (which representation will be deemed to be repeated by each party on each date on which a Transaction is entered into) that it is an "eligible contract participant", as defined in the Commodity Futures Modernization Act of 2000.
(15): Recording of Conversations. Each party (i) consents to the recording of telephone conversations between the trading, marketing and other relevant personnel of the parties and their Affiliates in connection with this Agreement or any potential Transaction, (ii) agrees to obtain any necessary consent of, and give any necessary notice of such recording to, its relevant personnel and (iii) agrees, to the extent permitted by applicable law, that recordings may be submitted in evidence in any Proceedings.

PART 5
Other Provisions

(1): Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Agreement or any Credit Support Document. Each party (i) certifies that no representative, agent or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Agreement and provide for any Credit Support Document, as applicable, by, among other things, the mutual waivers and certifications in this Section.
(2): ISDA Definitions. Reference is hereby made to the 2000 ISDA Definitions (the "2000 Definitions") and the 1998 FX and Currency Option Definitions (the "FX Definitions") (collectively the "ISDA Definitions") each as published by the International Swaps and Derivatives Association, Inc., which are hereby incorporated by reference herein. Any terms used and not otherwise defined herein which are contained in the ISDA Definitions shall have the meaning set forth therein.
(3): Scope of Agreement. Notwithstanding anything contained in this Agreement to the contrary, any transaction (other than a repurchase transaction, reverse repurchase transaction, buy/sell-back transaction or securities lending transaction) which may otherwise constitute a "Specified Transaction" (without regard to the phrase "which is not a Transaction under this Agreement but" in the definition of "Specified Transaction") for purposes of this Agreement which has been or will be entered into between the parties shall constitute a "Transaction" which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless any Confirmation with respect to a Transaction entered into after the execution of this Agreement expressly provides otherwise.
(4): Inconsistency. In the event of any inconsistency between any of the following documents, the relevant document first listed below shall govern: (i) a Confirmation; (ii) the Schedule; (iii) the

ISDA Definitions; and (iv) the printed form of ISDA Master Agreement. In the event of any inconsistency between provisions contained in the 2000 Definitions and the FX Definitions, the FX Definitions shall prevail.

(5): Confirmations. For the avoidance of doubt, the parties agree that Confirmations need not follow the form recommended in the various ISDA Definitions but may be in such other form and be exchanged by such other means (including electronic messaging system) as may be acceptable to the parties. In the event that any Confirmation refers to, or purports to incorporate, any other master agreement or market terms, such reference or purported incorporation shall be disregarded, unless the parties have expressly agreed otherwise in an amending agreement described as such and complying with Section 9(b) of this Agreement (and notwithstanding Section l(b) of this Agreement in this respect Confirmations shall not prevail over this Agreement).
(6): Amendments to Section 5 Events of Default.

Section 5(a)(vii)—Bankruptcy. The reference to "15 days" in sub-paragraph (7) shall be deleted and replaced with "30 days" in relation to Party A only.

(7): Incorporation of 2002 Master Agreement Protocol. The definitions and provisions contained in the 2002 Master Agreement Protocol as published by the International Swaps and Derivatives Association, Inc. on July 15^th, 2003, are hereby incorporated herein and all Annexes will be deemed to apply hereto.
(8): Deletion of Section 6(f); Set-Off. Section 6(f) of this Agreement shall be deleted in its entirety.

Please confirm your agreement to the terms of the foregoing Schedule by signing below.

[NAME]			HARRAH'S OPERATING COMPANY, INC.
By:			By:

SCHEDULE
to the
2002 MASTER AGREEMENT
dated as of , 2003
between

("Party A")

and

HARRAH'S OPERATING COMPANY, INC.
("Party B")

PART I
Termination Provisions

(1): "Specified Entity" means, in relation to Party A, for the purpose of:

Section 5(a)(v), any Affiliate of Party A;

Section 5(a)(vi), none;

Section 5(a)(vii), none; and

Section 5(b)(v), none;

and, in relation to Party B, for the purpose of:

Section 5(a)(v), any Affiliate of Party B;

Section 5(a)(vi), Parent or any of its Significant Subsidiaries (as such terms are defined in the Credit Agreement referred to in Part 5(6) hereof);

Section 5(a)(vii), Parent or any of its Significant Subsidiaries (as such terms are defined in the Credit Agreement); and

Section 5(b)(v), none.

(2)

"Specified Transaction" will have the meaning specified in Section 14 of this Agreement.

(3)

The "Cross-Default" provisions of Section 5(a)(vi) will apply to Party A, any applicable Specified Entity of Party B and Party B, and for such purpose:

(a)

(b)

(c)

Section 5(a)(vi) of this Agreement will be deemed to be amended as follows:

(i): The phrase ", or becoming capable at such time of being declared," shall be deleted from Section 5(a)(vi)(1); and
(ii): Section 5(a)(vi)(2) shall be deleted in its entirety.

(4)

The "Credit Event Upon Merger" provisions of Section 5(b)(v) will apply to Party A and Party B; provided, however, that if the applicable party has long term, unsecured and unsubordinated indebtedness or deposits which is or are publicly rated (such rating, a "Credit Rating") by Moody's Investor Services, Inc. ("Moody's"), Standard and Poors Ratings Group ("S&P") or any other

internationally recognized rating agency (a "Rating Agency"), then the words "materially weaker" in line 6 of Section 5(b)(v) shall mean that the Credit Rating of such party (or, if applicable, the Credit Support Provider of such party) shall be rated lower than Baa3 by Moody's, or lower than BBB- by S&P or, in the event that there is no Credit Rating by either Moody's or S&P applicable to such party (or, if applicable, the Credit Support Provider of such party) but such party's long-term indebtedness or deposits is or are rated by a Rating Agency, lower than a rating equivalent to the foregoing by such Rating Agency.

(5): The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or Party B.
(6): "Termination Currency" will have the meaning set forth in Section 14 of this Agreement.
(7): Additional Termination Event will not apply.

PART 2
Tax Representations

(A)

Tax Representations. For the purpose of Section 3(f) of this Agreement:

(i): Party A and Party B each represent, respectively, that it is a United States Person for U.S. federal income tax purposes and either (a) is a financial institution or (b) is not acting as an agent for a person that is not a United States Person for U.S. federal income tax purposes.
(ii): Party B represents in respect of each Transaction where Party A's Office for the Transaction is not located in the United States of America:

Party B is fully eligible for the benefits of the "Business Profits" or "Industrial and Commercial Profits" provision, as the case may be, the "Interest" provision and the "Other Income" provision (if any) of the income tax treaty (if any), in effect between the jurisdiction of Party A's Office for the Transaction and the United States of America with respect to any payment described in such provisions and received or to be received by it in connection with this Agreement and no such payment is attributable to a trade or business carried on by it through a permanent establishment in the jurisdiction through which Party A has entered the relevant Transaction.

PART 3
Agreement to Deliver Documents

For the purpose of Sections 4(a)(i) and 4(a)(ii) of this Agreement, each party agrees to deliver the following documents:

(a): Tax forms, documents or certificates to be delivered are:

(b): Other documents to be delivered are:

Party required to deliver document	Form/Document/Certificate	Date by which to be delivered	Covered by Section 3(d) Representation

Party B	Annual Report of Party B and of its Credit Support Provider (as applicable) containing consolidated financial statements certified by independent certified public accountants and prepared in accordance with accounting principles that are generally accepted in the country or countries in which Party B and its Credit Support Provider (as applicable) is organized	Upon request	Yes
Party B	Unaudited consolidated financial statements of Party B and of its Credit Support Provider (as applicable) for a fiscal quarter prepared in accordance with accounting principles that are generally accepted in the country or countries in which Party B and its Credit Support Provider (as applicable) is organized	Upon request	Yes
Party B	Guaranty (as defined in Part 4(6) of this Schedule)	Upon execution and delivery of this Agreement	No
Party B	Opinion of counsel satisfactory to Party A substantially in the form of Exhibit I hereto	Upon execution and delivery of this Agreement	No
Party B	Opinion of counsel to Guarantor satisfactory to Party A substantially in the form of Exhibit II hereto	Upon execution and delivery of this Agreement	No
Party B	Certified copies of all corporate authorizations and any other documents with respect to the execution, delivery and performance of this Agreement	Upon execution and delivery of this Agreement	Yes
Party A and Party B	Certificate of authority and specimen signatures of individuals executing this Agreement, Confirmations and each Credit Support Document (as applicable)	Upon execution and delivery of this Agreement and thereafter upon request of the other party	Yes

PART 4
Miscellaneous

(1): Addresses for Notices. For the purpose of Section 12(a) of this Agreement:

Address for notice or communications to Party A:

[Name]
[Address]
Facsimile No.:

Address for notice or communications to Party B:

Harrah's Operating Company, Inc.
c/o Harrah's Entertainment, Inc.
Attention: Charles L. Atwood, Senior Vice President,
Chief Financial Officer and Treasurer
One Harrah's Court
Las Vegas, Nevada 89119
Facsimile No.:
Telephone No.:

With a copy to:
Harrah's Operating Company, Inc.
c/o Harrah's Entertainment, Inc.
Attention: General Counsel
One Harrah's Court
Las Vegas, Nevada 89119
Facsimile No.:
Telephone No.:

(2): Process Agent. For the purpose of Section 13(c) of this Agreement:

Party A appoints as its Process Agent: Not applicable.

Party B appoints as its Process Agent: Not applicable.

(3): Offices. The provisions of Section 10(a) will apply to this Agreement.
(4): Multibranch Party. For the purpose of Section 10 of this Agreement:

Party A is a Multibranch Party and may act through any Office specified in a Confirmation.

Party B is not a Multibranch Party.

(5): Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in a Confirmation in relation to the relevant Transaction.
(6): Credit Support Document.

The Guaranty of the Credit Support Provider dated as of the date hereof in favor of Party A and in the form appended hereto shall constitute a "Credit Support Document" in relation to all of the obligations of Party B and for all purposes of this Agreement.

(7): Credit Support Provider.

Credit Support Provider means, in relation to Party A, not applicable.

Credit Support Provider means, in relation to Party B for all purposes hereof, Harrah's Entertainment, Inc. (the "Guarantor")

(8): Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).
(9): Netting of Payments. "Multiple Transaction Payment Netting" will apply for the purpose of Section 2(c) of this Agreement to all Transactions starting from the date of this Agreement.
(10): "Affiliate" will have the meaning specified in Section 14 of this Agreement.
(11): Absence of Litigation. For the purpose of Section 3(c) of this Agreement:

"Specified Entity" means, in relation to Party A, any Affiliate of Party A.

"Specified Entity" means, in relation to Party B, any Affiliate of Party B.

(12)

No Agency. The provisions of Section 3(g) of this Agreement will apply to this Agreement.

(13)

Additional Representation will apply. For the purpose of Section 3 of this Agreement, the following will each constitute an Additional Representation:

(h): Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction, it being understood that information and explanations related to the terms and conditions of a Transaction will not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected results of that Transaction.

(ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction.

(iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction.

(iv) Other Transactions. It understands and acknowledges that the other party may, either in connection with entering into a Transaction or from time to time thereafter, engage in open market transactions that are designed to hedge or reduce the risks incurred by it in connection with such Transaction and that the effect of such open market transactions may be to affect or reduce the value of such Transaction.

(14): Eligible Contract Participant. Each party represents to the other party (which representation will be deemed to be repeated by each party on each date on which a Transaction is entered into) that it is an "eligible contract participant", as defined in the Commodity Futures Modernization Act of 2000.

(15): Recording of Conversations. Each party (i) consents to the recording of telephone conversations between the trading, marketing and other relevant personnel of the parties and their Affiliates in connection with this Agreement or any potential Transaction, (ii) agrees to obtain any necessary consent of, and give any necessary notice of such recording to, its relevant personnel and (iii) agrees, to the extent permitted by applicable law, that recordings may be submitted in evidence in any Proceedings.

PART 5
Other Provisions

(1): Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Agreement or any Credit Support Document. Each party (i) certifies that no representative, agent or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Agreement and provide for any Credit Support Document, as applicable, by, among other things, the mutual waivers and certifications in this Section.
(2): ISDA Definitions. Reference is hereby made to the 2000 ISDA Definitions (the "2000 Definitions") and the 1998 FX and Currency Option Definitions (the "FX Definitions") (collectively the "ISDA Definitions") each as published by the International Swaps and Derivatives Association, Inc., which are hereby incorporated by reference herein. Any terms used and not otherwise defined herein which are contained in the ISDA Definitions shall have the meaning set forth therein.
(3): Scope of Agreement. Notwithstanding anything contained in this Agreement to the contrary, any transaction (other than a repurchase transaction, reverse repurchase transaction, buy/sell-back transaction or securities lending transaction) which may otherwise constitute a "Specified Transaction" (without regard to the phrase "which is not a Transaction under this Agreement but" in the definition of "Specified Transaction") for purposes of this Agreement which has been or will be entered into between the parties shall constitute a "Transaction" which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless any Confirmation with respect to a Transaction entered into after the execution of this Agreement expressly provides otherwise.
(4): Inconsistency. In the event of any inconsistency between any of the following documents, the relevant document first listed below shall govern: (i) a Confirmation; (ii) the Schedule; (iii) the ISDA Definitions; and (iv) the printed form of ISDA Master Agreement. In the event of any inconsistency between provisions contained in the 2000 Definitions and the FX Definitions, the FX Definitions shall prevail.
(5): Additional Event of Default. With respect to Party B, it shall constitute an Event of Default under this Agreement if there shall occur and be continuing 30 days following any applicable grace period any Event of Default under the Credit Agreement.

"Credit Agreement" means the Credit Agreement, dated as of April 23, 2003, among Party B, each of the Subsidiaries that becomes a borrower pursuant to Section 2.9 thereof, Harrah's Entertainment Inc., Bank of America, N.A. and the Lenders party thereto from time to time, Deutsche Bank Trust Company Americas, as Syndication Agent, Citicorp USA, Inc., Party A and Wells Fargo Bank, N.A. as Co-Documentation Agents, and Bank of America, N.A., as Administrative Agent, as amended, supplemented or otherwise modified from time to time; provided that if the obligations under the Credit Agreement are paid in full, the Credit Agreement is otherwise terminated or cancelled, or Party A shall for any reason cease to remain a party

thereto, Credit Agreement means the Credit Agreement as it existed immediately prior to such event. Capitalized terms defined therein and not otherwise defined herein shall have the meanings assigned in the Credit Agreement.

(6): Further Agreements of Party B. Party B agrees with Party A that Party B will comply with each of the covenants set forth in Articles 5 and 6 of the Credit Agreement.
(7): Further Representations of Party B. Party B represents and warrants to Party A (which representations will be deemed to be repeated by Party B on each date on which a Transaction is entered into) that each of the representations and warranties made by Party B in Article 4 of the Credit Agreement is true and correct and no Event of Default under the Credit Agreement has occurred and is continuing.
(8): Deletion of Section 6(f); Set-Off. Section 6(f) of this Agreement shall be deleted in its entirety.

Please confirm your agreement to the terms of the foregoing Schedule by signing below.

[NAME]			HARRAH'S OPERATING COMPANY, INC.
By:	Name: Title:		By:	Name: Title:

EXHIBIT I

FORM OF OPINION OF COUNSEL TO PARTY B

	Date:
[Name]
[Address]

Ladies and Gentlemen:

We are counsel to Harrah's Operating Company, Inc. a corporation (the "Counterparty"), and we are delivering this opinion in connection with the 2002 Master Agreement, dated as of , 2003 (as supplemented by the Confirmations relating to the Transactions entered into pursuant thereto, the "Agreement"), between the Counterparty and [Name] (the "Bank"). Terms defined in the Agreement are used herein as therein defined.

In that connection, we have examined the originals, or copies certified to our satisfaction, of the Agreement and such corporate records of the Counterparty, certificates of public officials and of officers of the Counterparty, and agreements, instruments, and documents, as we have deemed necessary as a basis for the opinions hereinafter expressed. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Counterparty, or its officers or of public officials. We have assumed the due execution and delivery of the Agreement by the Bank.

Based upon the foregoing, we are of the following opinion:

1. The Counterparty is a corporation duly organized, validly existing and in good standing under the laws of .

2. The Counterparty has the power to execute and deliver the Agreement and to perform its obligations under the Agreement and has taken all necessary action to authorize such execution and delivery and performance of such obligations.

3. The execution and delivery of the Agreement by the Counterparty and the Counterparty's performance of its obligations under the Agreement do not violate or conflict with any law, rule or regulation applicable to it, any provision of its charter or by-laws (or comparable constitutional documents), any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting the Counterparty or any of its assets.

4. All authorizations of and exemptions, actions or approvals by, and all notices to or filings with, any governmental or other authority that are required to have been obtained or made by the Counterparty with respect to the Agreement have been obtained or made and are in full force and effect and all conditions of any such authorizations, exemptions, actions or approvals have been complied with.

5. The Agreement constitutes the Counterparty's legal, valid and binding obligation enforceable against the Counterparty in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

6. To the best of our knowledge, after due inquiry, there is not pending or threatened against the Counterparty or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, government body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against the Counterparty of the Agreement or its ability to perform its obligations thereunder.

We are qualified to practice law in and do not purport to be expert on, or to express any opinion herein concerning, any law other than the laws of [, the Delaware General Corporation Law] [and the federal laws of the United States of America].

Very truly yours,

EXHIBIT II

FORM OF OPINION OF COUNSEL TO GUARANTOR

	Date:
[Name]
[Address]

Ladies and Gentlemen:

We are counsel to Harrah's Entertainment, Inc. a corporation (the "Guarantor") and we are delivering this opinion in connection with the Guaranty, dated as of , 2003 issued by the Guarantor in connection with the 2002 Master Agreement dated as of , 2003 between Harrah's Operating Company, Inc. and [Name] (the "Bank"). Terms defined in the Guaranty are used herein as therein defined.

In that connection, we have examined the originals, or copies certified to our satisfaction, of the Guaranty and such corporate records of the Guarantor, certificates of public officials and of officers of the Guarantor, and agreements, instruments, and documents, as we have deemed necessary as a basis for the opinions hereinafter expressed. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Guarantor, or its officers or of public officials.

Based upon the foregoing, we are of the following opinion:

1. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of .

2. The Guarantor has the power to execute and deliver the Guaranty and to perform its obligations under the Guaranty and has taken all necessary action to authorize such execution and delivery and performance of such obligations.

3. The execution and delivery of the Guaranty by the Guarantor and the Guarantor's performance of its obligations under the Guaranty do not violate or conflict with any law, rule or regulation applicable to it, any provision of its charter or by-laws (or comparable constitutional documents), any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting the Guarantor or any of its assets.

4. All authorizations of and exemptions, actions or approvals by, and all notices to or filings with, any governmental or other authority that are required to have been obtained or made by the Guarantor with respect to the Guaranty have been obtained or made and are in full force and effect and all conditions of any such authorizations, exemptions, actions or approvals have been complied with.

5. The Guaranty constitutes the Guarantor's legal, valid and binding obligation enforceable against the Guarantor in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

6. To the best of our knowledge, after due inquiry, there is not pending or threatened against the Guarantor or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, government body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against the Guarantor of the Guaranty or its ability to perform its obligations thereunder.

Very truly yours,

Exhibit III

GUARANTY

GUARANTY, dated as of , 2003, between Harrah's Entertainment, Inc. (the "Guarantor") and [Name] (the "Bank").

RECITALS

Harrah's Operating Company, Inc. (the "Counterparty") and the Bank are parties to a 2002 Master Agreement, dated as of , 2003 (the "Agreement"). The Agreement provides that the Counterparty is required to provide the Bank with a Guaranty duly executed by the Guarantor containing the terms and conditions set forth herein. Capitalized terms used herein not otherwise defined have the meanings assigned to them in the Agreement. Pursuant to the Agreement and as an inducement to the Bank to enter into the Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Bank and the Guarantor agree as follows:

1. Guaranty of Payment. The Guarantor, as primary obligor and not as surety only, hereby unconditionally guarantees the due and punctual payment (whether at stated maturity, upon acceleration, early termination or otherwise) of any amounts arising out of or in connection with the Agreement, including without limitation the obligation of the Counterparty to pay any Fixed Amounts or Floating Amounts, any settlement amounts due and owing pursuant to Section 6 of the Agreement and all expenses of collection, counsel fees and other expenses incurred by the Bank in connection with the enforcement of its rights under the Agreement (collectively, the "Guaranteed Obligations"). Upon any failure by the Counterparty to pay any of the Guaranteed Obligations, the Guarantor agrees that it will forthwith on demand pay, at the place and in the manner specified in the Agreement, such amounts which the Counterparty has failed to pay. This Guaranty is a guaranty of payment and not merely a guaranty of collection.

2. Guaranty Unconditional and Absolute. The obligations of the Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

(i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Counterparty or any other guarantor of any of the Guaranteed Obligations;

(ii) any release, exchange, non-perfection or invalidity of any direct or indirect security for any of the Guaranteed Obligations;

(iii) any modification or amendment of or supplement to the Agreement;

(iv) any change in the corporate existence (including its constitution, laws, rules, regulations or powers), structure or ownership of the Counterparty or the Guarantor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Counterparty or its assets, the Guarantor or any other guarantor of any of the Guaranteed Obligations;

(v) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Counterparty, the Bank or any other corporation or person, whether in connection herewith or in connection with any unrelated transaction; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(vi) any invalidity or unenforceability relating to or against the Counterparty or any other guarantor for any reason of the Agreement or any other guaranty agreement, or any provision of applicable law or regulation purporting to prohibit payment by the Counterparty of amounts to be paid by it under the Agreement or any of the Guaranteed Obligations or under any such guaranty agreement; or

(vii) any other act or omission to act or delay of any kind by the Counterparty, any other guarantor, the Bank or any other corporation or person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder.

3. Discharge Only Upon Payment In Full; Reinstatement in Certain Circumstances. The Guarantor's obligations hereunder constitute a guarantee of payment and not of collection merely and shall remain in full force and effect until the Guaranteed Obligations shall have been paid in full in accordance with the terms hereof and of the Agreement. If at any time any payment of any of the Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Counterparty or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had not been made.

4. Waiver by the Guarantor. The Guarantor irrevocably waives acceptance hereof, diligence, presentment, demand, protest, notice of dishonor and any notice not provided for herein, as well as any requirement that at any time any person exhaust any right or take any action against the Counterparty or its assets or any other guarantor or person.

5. Subrogation. Upon making any payment hereunder, the Guarantor shall be subrogated to the rights of the Bank against the Counterparty with respect to such payment; provided that the Guarantor shall not enforce any right or receive any payment by way of subrogation until all of the Guaranteed Obligations shall have been paid in full.

6. Stay of Acceleration Ineffective with respect to Guarantor. In the event that acceleration of the time for payment of any amount payable by the Counterparty under the Agreement is stayed upon the insolvency, bankruptcy or reorganization of the Counterparty, all such amounts otherwise subject to acceleration or required to be paid upon an early termination pursuant to the terms of the Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Bank.

7. Assignment; Successors and Assigns. The Guaranty shall be binding upon and inure to the benefit of the Guarantor and its successors and assigns and the Bank and its successors and assigns. The Guarantor may not transfer or assign its rights and obligations hereunder without the prior written consent of the Bank, and any such purported assignment without the written consent of the Bank will be void.

8. Amendments and Waivers. No provision of this Guaranty may be amended, supplemented or modified, nor any of the terms and conditions hereof or thereof waived, except by a written instrument executed by the Guarantor and the Bank.

9. Expenses and Taxes. Without limiting the generality of the Guarantor's obligations hereunder, the Guarantor agrees to pay to the Bank upon its request all reasonable costs and expenses, including fees and disbursements of counsel and taxes, incurred by the Bank in connection with the occurrence of any Event of Default under the Agreement and collection or other enforcement proceedings against any person or assets resulting therefrom, all of which shall be "Guaranteed Obligations" the payment of which is guaranteed hereunder. The Guarantor agrees that all amounts payable under this Guaranty shall be paid without set-off or counterclaim and free and clear of, and without deduction or withholding for or on account of any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature, now or hereafter imposed by any governmental or taxing authority to which the Guarantor is subject.

10. Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Guaranty.

11. Governing Law. This Guaranty shall be governed by and construed in accordance with the law of the State of New York.

12. Jurisdiction. With respect to any suit, action or proceedings relating to this Guaranty, the Guarantor irrevocably submits to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and hereby waives any objection which it may have at any time to the laying of venue of any suit, action or proceedings brought in any such court, waives any claim that such suit, action or proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such suit, action or proceedings, that such court does not have any jurisdiction over such party.

IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed as of the date first above written.

		HARRAH'S ENTERTAINMENT, INC.
		By:	Title:
		[NAME]
		By:	Title:

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Exhibit 10.1

EX-31.1 3 a2135651zex-31_1.htm EXHIBIT 31.1

Exhibit 31.1

I, Gary W. Loveman, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Harrah's Entertainment, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 7, 2004		By:		/s/ GARY W. LOVEMAN Gary W. Loveman President and Chief Executive Officer

EX-31.2 4 a2135651zex-31_2.htm EXHIBIT 31.2

Exhibit 31.2

I, Charles L. Atwood, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Harrah's Entertainment, Inc.;

2.

3.

4.

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 7, 2004		By:		/s/ CHARLES L. ATWOOD Charles L. Atwood Senior Vice President and Chief Financial Officer

EX-32.1 5 a2135651zex-32_1.htm EXHIBIT 32.1
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Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Harrah's Entertainment, Inc. (the "Company"), hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: May 7, 2004		/s/ GARY W. LOVEMAN Gary W. Loveman President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Certification of Chief Executive Officer
EX-32.2 6 a2135651zex-32_2.htm EXHIBIT 32.2
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Exhibit 32.2

Certification of Chief Financial Officer

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: May 7, 2004		/s/ CHARLES L. ATWOOD Charles L. Atwood Senior Vice President and Chief Financial Officer

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Certification of Chief Financial Officer
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