EX-12.1 3 a2163797zex-12_1.htm EXHIBIT 12.1
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Exhibit 12.1


HARRAH'S ENTERTAINMENT, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)

 
   Six Months
Ended June 30,
(Unaudited)
   Year Ended December 31,
  
 
   2005(a)
   2004
   2004(b)
   2003(c)
   2002(d)
   2001(e)
   2000(f)
  
Ratio of Earnings to Fixed Charges (g)                                            
Income/(loss) from continuing operations   $ 177,640   $ 158,974   $ 329,525   $ 261,064   $ 282,212   $ 173,788   $ (46,428 )
Add:                                            
  Provision for income taxes     108,876     92,332     190,641     155,568     174,445     107,747     (3,478 )
  Interest expense     168,546     117,100     271,802     234,419     240,220     255,801     227,130  
  Interest included in rental expense     12,830     10,064     22,942     19,931     24,130     17,816     12,813  
  Amortization of capitalized interest     1,458     300     555     624     702     880     1,053  
  Loss/(income) from equity investments     164     (367 )   879     871     (4,388 )   (426 )   317,103  
   
 
 
 
 
 
 
 
Earnings as defined   $ 469,514   $ 378,403   $ 816,344   $ 672,477   $ 717,321   $ 555,606   $ 508,193  
   
 
 
 
 
 
 
 

Fixed charges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Interest expense   $ 168,546   $ 117,100   $ 271,802   $ 234,419   $ 240,220   $ 255,801   $ 227,130  
  Capitalized interest     4,215     2,019     4,085     2,349     3,537     9,309     7,960  
  Interest included in rental expense     12,830     10,064     22,942     19,931     24,130     17,816     12,813  
   
 
 
 
 
 
 
 
Total fixed charges   $ 185,591   $ 129,183   $ 298,829   $ 256,699   $ 267,887   $ 282,926   $ 247,903  
   
 
 
 
 
 
 
 
  Ratio of earnings to fixed charges     2.5     2.9     2.7     2.6     2.7     2.0     2.0  
   
 
 
 
 
 
 
 
(a)
The first six months of 2005 include $25.1 million in pretax charges for write-downs, reserves and recoveries, $20.7 million in pretax charges related to our acquisition of Caesars Entertainment, Inc., and $2.2 million in pretax charges for premiums paid for, and write-offs associated with, debt retired before maturity. 2005 also includes the financial results of Caesars Entertainment, Inc., from its June 13, 2005, date of acquisition.

(b)
2004 includes $9.6 million in pretax charges for write-downs, reserves and recoveries and $2.3 million in pretax charges related to our acquisition of Caesars Entertainment, Inc. 2004 also includes the financial results of Horseshoe Gaming Holding Corporation from its July 1, 2004, date of acquisition.

(c)
2003 includes $10.5 million in pretax charges for write-downs, reserves and recoveries and $19.1 million in pretax charges for premiums paid for, and write-offs associated with, debt retired before maturity. 2003 results have been reclassified to reflect Harrah's East Chicago and Harrah's Tunica as discontinued operations.

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(d)
2002 includes $4.5 million in pretax charges for write-downs, reserves and recoveries, a $6.1 million pretax charge for our exposure under a letter of credit issued on behalf of National Airlines, Inc., and a charge of $91.2 million, net of tax benefits of $2.8 million, related to a change in accounting principle. 2002 also includes the financial results of Jazz Casino Company LLC from the date of our acquisition of a majority ownership interest on June 7, 2002. 2002 results have been reclassified to reflect Harrah's East Chicago and Harrah's Tunica as discontinued operations.

(e)
2001 includes $17.2 million in pretax charges for write-downs, reserves and recoveries and $26.2 million of pretax income from dispositions of nonstrategic assets and the settlement of a contingency related to a former affiliate. 2001 also includes the financial results of Harveys Casino Resorts from its July 31, 2001, date of acquisition. 2001 results have been reclassified to reflect Harrah's East Chicago and Harrah's Tunica as discontinued operations.

(f)
2000 includes $220.0 million in pretax reserves for receivables not expected to be recovered from JCC Holding Company and its subsidiary, Jazz Casino Company LLC, $6.1 million in pretax charges for other write-downs, reserves and recoveries, and $39.4 million in pretax write-offs and reserves for our investment in, loans to and net estimated exposure under letters of credit issued on behalf of National Airlines, Inc. 2000 also includes the financial results of Players International, Inc., from its March 22, 2000, date of acquisition. 2000 results have been reclassified to reflect Harrah's East Chicago and Harrah's Tunica as discontinued operations.

(g)
For purposes of computing this ratio, "earnings" consist of income before income taxes plus fixed charges (excluding capitalized interest) and minority interests (relating to subsidiaries whose fixed charges are included in the computation), excluding equity in undistributed earnings of less-than-50%-owned investments. "Fixed charges" include interest whether expensed or capitalized, amortization of debt expense, discount or premium related to indebtedness and such portion of rental expense that we deem to be representative of interest. As required by the rules which govern the computation of this ratio, both earnings and fixed charges are adjusted where appropriate to include the financial results for the Company's nonconsolidated majority-owned subsidiaries. As discussed in Note 12 to the Consolidated Financial Statements in the 2004 Harrah's Entertainment Annual Report, the Company has guaranteed certain third-party loans in connection with its casino development activities. The above ratio computations for the fiscal years presented exclude estimated fixed charges associated with these guarantees as follows: 2004, $6.7 million; 2003, $9.5 million; 2002, $7.0 million; 2001, $4.4 million; and 2000, $5.7 million.

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HARRAH'S ENTERTAINMENT, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In thousands, except ratio amounts)