Supplemental Discussion

EX-99 24 dex99.htm SUPPLEMENTAL DISCUSSION Supplemental Discussion

Exhibit 99

Supplemental Discussion of Pro forma Harrah’s Operating Company Results

On January 28, 2008, Harrah’s Entertainment was acquired by affiliates of Apollo Global Management, LLC (“Apollo”) and TPG Capital, LP (“TPG”) in an all cash transaction, hereinafter referred to as the “Merger,” A substantial portion of the financing of the Merger is comprised of bank and bond financing obtained by Harrah’s Operating Company, Inc. (“HOC”), a wholly-owned subsidiary of Harrah’s Entertainment. This financing is neither secured nor guaranteed by Harrah’s Entertainment’s other wholly-owned subsidiaries, including certain subsidiaries that own properties that are secured under $6.5 billion of commercial mortgage-backed securities (“CMBS”) financing. Therefore, we believe it is meaningful to provide pro forma information pertaining solely to the consolidated financial position and results of operations of HOC and its subsidiaries.

In connection with the CMBS financing for the Merger, HOC spun off to Harrah’s Entertainment the following casino properties and related operating assets: Harrah’s Las Vegas, Rio, Flamingo Las Vegas, Harrah’s Atlantic City, Showboat Atlantic City, Harrah’s Lake Tahoe, Harveys Lake Tahoe and Bill’s Lake Tahoe. We refer to this spin-off as the “CMBS Spin-Off.” On May 2008, Paris Las Vegas and Harrah’s Laughlin and their related operating assets were spun out of HOC to Harrah’s Entertainment and became property secured under the CMBS loans, and Harrah’s Lake Tahoe, Harveys Lake Tahoe, Bill’s Lake Tahoe and Showboat Atlantic City and their related operating assets were transferred to HOC from Harrah’s Entertainment as contemplated under the debt agreements effective pursuant to the Merger. We refer to this spin-off and transfer as the “Post-Closing CMBS Transaction.”

We refer to the CMBS Spin-Off and the Post-Closing CMBS Transaction as the “CMBS Transactions.”

Additionally, in connection with the CMBS Transactions and the Merger, London Clubs and its subsidiaries, with the exception of the subsidiaries related to London Clubs South Africa operations, became subsidiaries of HOC. The South African subsidiaries became subsidiaries of HOC in second quarter 2008. We refer to these transfers collectively as “the London Clubs Transfer.”

OPERATING RESULTS AND DEVELOPMENT PLANS FOR HOC

The results of operations and other financial information included in this section are adjusted to reflect the pro forma effect of the CMBS Transactions as if they had occurred on January 1, 2007. Pro forma adjustments relate primarily to the removal of the historical results of the CMBS properties after giving effect to the Post-Closing CMBS Transaction and other direct subsidiaries of Harrah’s Entertainment and do not include acquisition and financing adjustments and allocations of certain unallocated corporate costs that are being allocated to each group subsequent to the Merger. We believe that this is the most meaningful way to comment on HOC’s results of operations.

Overall HOC Results

The following tables represent HOC’s pro forma condensed combined balance sheet as of June 30, 2008, and its pro forma condensed combined statements of operations for the three month periods ended June 30, 2008 and 2007, taking into consideration the CMBS Transactions and the London Clubs Transfer. Additionally, the statement of operations for the six months ended June 30, 2008, presents HOC’s results combined for the successor and predecessor periods.

Harrah’s Operating Company, Inc. (Successor)

Unaudited Condensed Pro Forma Combined Balance Sheet

As of June 30, 2008


(In millions)	Harrah’s Entertainment ⁽¹⁾		HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts ⁽²⁾			HOC⁽³⁾
ASSETS
Current assets
Cash and cash equivalents	$	1,248.6	$	(429.1	)	$	819.5
Receivables, net of allowance for doubtful accounts		399.7		(93.3	)		306.4
Deferred income taxes		137.5		(27.9	)		109.6
Prepayments and other		265.0		(79.4	)		185.6
Inventories		72.0		(18.0	)		54.0

Total current assets		2,122.8		(647.7	)		1,475.1


Land, buildings, riverboats and equipment, net of accumulated depreciation		18,272.2		(5,667.5	)		12,604.7
Assets held for sale		3.8		—			3.8
Goodwill and intangible assets		15,704.0		(3,539.9	)		12,164.1
Deferred costs and other		1,305.5		(386.4	)		919.1

	$	37,408.3	$	(10,241.5	)	$	27,166.8


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	476.3	$	(133.4	)	$	342.9
Accrued expenses		1,689.0		(292.6	)		1,396.4
Current portion of long-term debt		83.1		(0.2	)		82.9

Total current liabilities		2,248.4		(426.2	)		1,822.2
Long-term debt		23,931.0		(6,500.3	)		17,430.7
Liabilities held for sale		0.7		—			0.7
Deferred credits and other		422.7		(19.7	)		403.0
Deferred income taxes		4,709.5		(1,417.1	)		3,292.4

		31,312.3		(8,363.3	)		22,949.0


Minority interests		61.3		(5.3	)		56.0
Preferred stock		2,123.9		(2,123.9	)		—
Stockholders’ equity		3,910.8		251.0			4,161.8

	$	37,408.3	$	(10,241.5	)	$	27,166.8

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the removal of (i) the financial information of subsidiaries of Harrah’s Entertainment that are not a component of HOC, namely, captive insurance companies and the CMBS properties, and (ii) account balances at Harrah’s Entertainment.

(3)	Represents the financial information of HOC.

Harrah’s Operating Company, Inc. (Successor)

Unaudited Condensed Pro Forma Combined Statement of Operations

For the Three Months Ended

June 30, 2008


(In millions)	Harrah’s Entertainment ⁽¹⁾			HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts ⁽²⁾			HOC⁽³⁾
Revenues
Casino	$	2,057.5		$	(429.3	)	$	1,628.2
Food and beverage		431.3			(161.2	)		270.1
Rooms		335.9			(142.7	)		193.2
Management fees		17.1			—			17.1
Other		168.7			(33.1	)		135.6
Less: casino promotional allowances		(408.4	)		113.2			(295.2	)

Net revenues		2,602.1			(653.1	)		1,949.0

Operating expenses
Direct
Casino		1,131.0			(202.0	)		929.0
Food and beverage		183.7			(78.4	)		105.3
Rooms		64.1			(28.0	)		36.1
Property general, administrative and other		577.3			(135.4	)		441.9
Depreciation and amortization		176.2			(43.8	)		132.4
Write-downs, reserves and recoveries		50.1			(18.9	)		31.2
Project opening costs		7.2			(0.5	)		6.7
Corporate expense		36.6			(7.8	)		28.8
Merger and integration costs		5.1			—			5.1
Income on interests in nonconsolidated affiliates		(0.5	)		—			(0.5	)
Amortization of intangible assets		48.2			(16.0	)		32.2

Total operating expenses		2,279.0			(530.8	)		1,748.2

Income from operations		323.1			(122.3	)		200.8
Interest expense, net of interest capitalized		(468.0	)		73.1			(394.9	)
Other income, including interest income		3.8			4.1			7.9

Loss before income taxes and minority interests		(141.1	)		(45.1	)		(186.2	)
Benefit for income taxes		43.5			21.5			65.0
Minority interests		(0.4	)		1.8			1.4

Loss from continuing operations	$	(98.0	)	$	(21.8	)	$	(119.8	)

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the financial information of (i) all subsidiaries of Harrah’s Entertainment that are not a component of HOC, namely, captive insurance companies and the CMBS properties, and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the financial information of HOC.

Harrah’s Operating Company, Inc. (Predecessor)

Unaudited Condensed Pro Forma Combined Statement of Operations

For the Three Months Ended

June 30, 2007


(In millions)	Harrah’s Entertainment⁽¹⁾			HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts⁽²⁾			Historical HOC⁽³⁾			CMBS Transactions⁽⁴⁾			London Clubs Transfer⁽⁵⁾			HOC Restructured
Revenues
Casino	$	2,200.7		$	(53.8	)	$	2,146.9		$	(435.5	)	$	53.8		$	1,765.2
Food and beverage		429.7			(5.5	)		424.2			(159.0	)		5.5			270.7
Rooms		348.0			(0.9	)		347.1			(145.1	)		0.9			202.9
Management fees		21.3			(0.2	)		21.1			—			0.2			21.3
Other		174.8			(1.1	)		173.7			(61.2	)		0.6			113.1
Less: casino promotional allowances		(472.8	)		2.3			(470.5	)		122.6			(2.3	)		(350.2	)

Net revenues		2,701.7			(59.2	)		2,642.5			(678.2	)		58.7			2,023.0

Operating expenses
Direct
Casino		1,162.6			(45.6	)		1,117.0			(202.3	)		45.6			960.3
Food and beverage		188.3			(2.4	)		185.9			(77.7	)		2.4			110.6
Rooms		68.7			—			68.7			(30.1	)		—			38.6
Property general, administrative and other		568.2			(34.9	)		533.3			(156.8	)		10.4			386.9
Depreciation and amortization		204.3			(2.4	)		201.9			(51.7	)		2.4			152.6
Write-downs, reserves and recoveries		(20.8	)		—			(20.8	)		(2.6	)		—			(23.4	)
Project opening costs		8.3			(5.5	)		2.8			(1.6	)		5.5			6.7
Corporate expense		26.6			—			26.6			(7.3	)		—			19.3
Merger and integration costs		3.5			—			3.5			—			—			3.5
Income on interests in nonconsolidated affiliates		(3.8	)		3.1			(0.7	)		—			(3.1	)		(3.8	)
Amortization of intangible assets		17.9			—			17.9			(0.2	)		—			17.7

Total operating expenses		2,223.8			(87.7	)		2,136.1			(530.3	)		63.2			1,669.0

Income/(loss) from operations		477.9			28.5			506.4			(147.9	)		(4.5	)		354.0
Interest expense, net of interest capitalized		(176.6	)		3.4			(173.2	)		—			(3.4	)		(176.6	)
Other income, including interest income		15.6			(0.1	)		15.5			0.6			0.2			16.3

Income/(loss) before income taxes and minority interests		316.9			31.8			348.7			(147.3	)		(7.7	)		193.7
(Provision)/benefit for income taxes		(116.3	)		1.2			(115.1	)		50.5			(1.6	)		(66.2	)
Minority interests		(5.1	)		—			(5.1	)		2.0			—			(3.1	)

Income/(loss) from continuing operations	$	195.5		$	33.0		$	228.5		$	(94.8	)	$	(9.3	)	$	124.4

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the historical financial information of (i) all subsidiaries of Harrah’s Entertainment that have historically not been a component of HOC, namely, captive insurance companies and London Clubs and its subsidiaries; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the historical financial information of HOC.

(4)

Reflects the removal of the historical operating results of the CMBS properties, pursuant to the CMBS Transactions in which certain properties and operations of HOC were spun-off into a separate borrowing structure and held side-by-side with HOC under Harrah’s Entertainment. The historical operating expenses of HOC include unallocated costs attributable to services that have been performed by HOC on behalf of the CMBS properties. These costs are primarily related to corporate functions such as accounting, tax, treasury, payroll and benefits administration, risk management, legal, and information management and technology. The CMBS transactions reflect the push-down of corporate expense of $7.3 million that was unallocated at June 30, 2007. Following the Merger, many of these services will continue to be provided by HOC pursuant to a shared services agreement with the CMBS properties.

(5)	Reflects the inclusion of the London Clubs operating results pursuant to the London Clubs Transfer, in which London Clubs and its subsidiaries became subsidiaries of HOC.

Harrah’s Operating Company, Inc. (Successor)

Unaudited Condensed Pro Forma Combined Statement of Operations

For the Period from January 28, 2008

Through June 30, 2008


(In millions)	Harrah’s Entertainment ⁽¹⁾			HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts ⁽²⁾			HOC⁽³⁾
Revenues
Casino	$	3,523.1		$	(727.9	)	$	2,795.2
Food and beverage		732.6			(274.0	)		458.6
Rooms		577.5			(246.6	)		330.9
Management fees		29.2			—			29.2
Other		280.5			(50.7	)		229.8
Less: casino promotional allowances		(700.3	)		196.0			(504.3	)

Net revenues		4,442.6			(1,103.2	)		3,339.4

Operating expenses
Direct
Casino		1,907.7			(339.6	)		1,568.1
Food and beverage		308.0			(130.2	)		177.8
Rooms		114.5			(52.1	)		62.4
Property general, administrative and other		987.2			(236.0	)		751.2
Depreciation and amortization		300.4			(74.1	)		226.3
Write-downs, reserves and recoveries		(108.7	)		(27.5	)		(136.2	)
Project opening costs		10.0			(1.0	)		9.0
Corporate expense		61.3			9.0			70.3
Merger and integration costs		22.1			—			22.1
Income on interests in nonconsolidated affiliates		(1.3	)		—			(1.3	)
Amortization of intangible assets		80.5			(27.6	)		52.9

Total operating expenses		3,681.7			(879.1	)		2,802.6

Income from operations		760.9			(224.1	)		536.8
Interest expense, net of interest capitalized		(935.9	)		162.3			(773.6	)
Losses on early extinguishments of debt		(211.3	)		—			(211.3	)
Other income, including interest income		11.5			—			11.5

(Loss)/income from continuing operations before income taxes and minority interests		(374.8	)		(61.8	)		(436.6	)
Benefit for income taxes		101.7			35.4			137.1
Minority interests		1.0			3.1			4.1

(Loss)/income from continuing operations	$	(272.1	)	$	(23.3	)	$	(295.4	)

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the financial information of (i) all subsidiaries of Harrah’s Entertainment that are not a component of HOC, namely, captive insurance companies and the CMBS properties, and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the financial information of HOC.

Harrah’s Operating Company, Inc. (Predecessor)

Unaudited Condensed Pro Forma Combined Statement of Operations

For the Period from January 1, 2008

Through January 27, 2008


(In millions)	Harrah’s Entertainment⁽¹⁾			HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts⁽²⁾			Historical HOC⁽³⁾			CMBS Transactions⁽⁴⁾			London Clubs Transfer⁽⁵⁾			HOC Restructured
Revenues
Casino	$	614.6		$	(29.5	)	$	585.1		$	(116.4	)	$	29.5		$	498.2
Food and beverage		118.4			(4.7	)		113.7			(41.1	)		4.7			77.3
Rooms		96.4			(0.4	)		96.0			(40.4	)		0.4			56.0
Management fees		5.0			(0.1	)		4.9			—			0.1			5.0
Other		42.7			(1.4	)		41.3			(14.4	)		1.1			28.0
Less: casino promotional allowances		(117.0	)		1.8			(115.2	)		30.0			(1.8	)		(87.0	)

Net revenues		760.1			(34.3	)		725.8			(182.3	)		34.0			577.5

Operating expenses
Direct
Casino		340.6			(24.5	)		316.1			(55.4	)		24.5			285.2
Food and beverage		50.5			(1.8	)		48.7			(20.2	)		1.8			30.3
Rooms		19.6			(0.2	)		19.4			(8.9	)		0.2			10.7
Property general, administrative and other		178.2			(2.0	)		176.2			(42.0	)		7.5			141.7
Depreciation and amortization		63.5			(1.6	)		61.9			(16.0	)		1.6			47.5
Write-downs, reserves and recoveries		4.7			—			4.7			(4.5	)		—			0.2
Project opening costs		0.7			(0.7	)		—			—			0.7			0.7
Corporate expense		8.5			—			8.5			(34.7	)		—			(26.2	)
Merger and integration costs		125.6			—			125.6			—			—			125.6
Income on interests in nonconsolidated affiliates		(0.5	)		—			(0.5	)		—			—			(0.5	)
Amortization of intangible assets		5.5			(0.2	)		5.3			—			0.2			5.5

Total operating expenses		796.9			(31.0	)		765.9			(181.7	)		36.5			620.7

Loss from operations		(36.8	)		(3.3	)		(40.1	)		(0.6	)		(2.5	)		(43.2	)
Interest expense, net of interest capitalized		(89.7	)		—			(89.7	)		—			—			(89.7	)
Losses on early extinguishments of debt		—			—			—			—			—			—
Other income, including interest income		1.1			(3.3	)		(2.2	)		4.0			3.3			5.1

(Loss)/income from continuing operations before income taxes and minority interests		(125.4	)		(6.6	)		(132.0	)		3.4			0.8			(127.8	)
Benefit for income taxes		26.0			(4.1	)		21.9			(1.2	)		0.9			21.6
Minority interests		(1.6	)		0.9			(0.7	)		0.2			(0.9	)		(1.4	)

Loss from continuing operations	$	(101.0	)	$	(9.8	)	$	(110.8	)	$	2.4		$	0.8		$	(107.6	)

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the historical financial information of (i) all subsidiaries of Harrah’s Entertainment that have historically not been a component of HOC, namely, captive insurance companies and London Clubs and its subsidiaries; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the historical financial information of HOC.

(4)

Reflects the removal of the historical operating results of the CMBS properties, pursuant to the CMBS spin-off in which certain properties and operations of HOC were spun-off into a separate borrowing structure and held side-by-side with HOC under Harrah’s Entertainment. The historical operating expenses of HOC include unallocated costs attributable to services that have been performed by HOC on behalf of the CMBS properties. These costs are primarily related to corporate functions such as accounting, tax, treasury, payroll and benefits administration, risk management, legal, and information management and technology. The CMBS transactions reflect the push-down of corporate expense of $34.7 million that was unallocated at January 27, 2008. Following the Merger, many of these services will continue to be provided by HOC pursuant to a shared services agreement with the CMBS properties.

(5)	Reflects the inclusion of the London Clubs operating results pursuant to the London Clubs Transfer, in which London Clubs and its subsidiaries became subsidiaries of HOC.

Harrah’s Operating Company, Inc. (Predecessor)

Unaudited Condensed Pro Forma Combined Statement of Operations

For the Six Months Ended

June 30, 2007


(In millions)	Harrah’s Entertainment⁽¹⁾			HET Parent and Other Harrah’s Entertainment Subsidiaries and Accounts⁽²⁾			Historical HOC⁽³⁾			CMBS Transactions⁽⁴⁾			London Clubs Transfer⁽⁵⁾			HOC Restructured
Revenues
Casino	$	4,353.0		$	(109.4	)	$	4,243.6		$	(864.4	)	$	109.4		$	3,488.6
Food and beverage		854.0			(12.2	)		841.8			(315.9	)		12.2			538.1
Rooms		694.4			(1.2	)		693.2			(292.1	)		1.2			402.3
Management fees		43.7			(0.3	)		43.4			—			0.3			43.7
Other		340.3			(3.9	)		336.4			(117.6	)		2.5			221.3
Less: casino promotional allowances		(928.0	)		4.9			(923.1	)		244.7			(4.9	)		(683.3	)

Net revenues		5,357.4			(122.1	)		5,235.3			(1,345.3	)		120.7			4,010.7

Operating expenses
Direct
Casino		2,248.9			(86.0	)		2,162.9			(399.6	)		86.0			1,849.3
Food and beverage		359.4			(8.4	)		351.0			(153.2	)		8.4			206.2
Rooms		134.1			(0.6	)		133.5			(60.8	)		0.6			73.3
Property general, administrative and other		1,202.6			(46.5	)		1,156.1			(305.2	)		18.1			869.0
Depreciation and amortization		394.6			(4.7	)		389.9			(99.1	)		4.7			295.5
Write-downs, reserves and recoveries		(28.3	)		—			(28.3	)		(3.5	)		—			(31.8	)
Project opening costs		17.2			(8.9	)		8.3			(2.1	)		8.9			15.1
Corporate expense		60.1			(0.1	)		60.0			(19.0	)		—			41.0
Merger and integration costs		7.6			—			7.6			—			—			7.6
Income on interests in nonconsolidated affiliates		(3.6	)		1.4			(2.2	)		—			(1.4	)		(3.6	)
Amortization of intangible assets		35.7			—			35.7			(0.3	)		—			35.4

Total operating expenses		4,428.3			(153.8	)		4,274.5			(1,042.8	)		125.3			3,357.0

Income from operations		929.1			31.7			960.8			(302.5	)		(4.6	)		653.7
Interest expense, net of interest capitalized		(362.4	)		5.1			(357.3	)		—			(5.1	)		(362.4	)
Losses on early extinguishments of debt		—			—			—			—			—			—
Other income, including interest income		23.8			(0.3	)		23.5			1.4			0.4			25.3

Income from continuing operations before income taxes and minority interests		590.5			36.5			627.0			(301.1	)		(9.3	)		316.6
Provision for income taxes		(216.6	)		1.5			(215.1	)		104.0			(1.3	)		(112.4	)
Minority interests		(11.2	)		—			(11.2	)		3.4			—			(7.8	)

Income/(loss) from continuing operations	$	362.7		$	38.0		$	400.7		$	(193.7	)	$	(10.6	)	$	196.4

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the financial information of (i) all subsidiaries of Harrah’s Entertainment that have historically not been a component of HOC, namely, captive insurance companies and London Clubs and its subsidiaries; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the historical financial information of HOC.

(4)

Reflects the removal of the historical operating results of the CMBS properties, pursuant to the CMBS Transactions in which certain properties and operations of HOC were spun-off into a separate borrowing structure and held side-by-side with HOC under Harrah’s Entertainment. The historical operating expenses of HOC include unallocated costs attributable to services that have been performed by HOC on behalf of the CMBS properties. These costs are primarily related to corporate functions such as accounting, tax, treasury, payroll and benefits administration, risk management, legal, and information management and technology. The CMBS transactions reflect the push-down of corporate expense of $19.0 million that was unallocated at June 30, 2007. Following the Merger, many of these services will continue to be provided by HOC pursuant to a shared services agreement with the CMBS properties.

(5)	Reflects the inclusion of the London Clubs operating results pursuant to the London Clubs Transfer, in which London Clubs and its subsidiaries became subsidiaries of HOC.

Harrah’s Operating Company, Inc. (Successor)

Unaudited Condensed Pro Forma Combined Statement of Cash Flows

For the Period from January 28, 2008

Through June 30, 2008


(In millions)	Historical Harrah’s Entertainment ⁽¹⁾			CMBS and Other Harrah’s Entertainment Subsidiaries and Accounts ⁽²⁾			HOC⁽³⁾
Cash flows provided by operating activities	$	728.5		$	(449.9	)	$	278.6


Cash flows from investing activities
Land, buildings, riverboats and equipment additions		(670.3	)		92.5			(577.8	)
Insurance proceeds for hurricane losses from asset recovery		181.4			—			181.4
Payment for Merger		(17,490.2	)		17,490.2			—
Investments in and advances to nonconsolidated affiliates		(5.9	)		—			(5.9	)
Proceeds from other asset sales		3.6			—			3.6
Increase/(decrease) in construction payables		49.1			(6.9	)		42.2
Other		(24.2	)		3.0			(21.2	)

Cash flows used in investing activities		(17,956.5	)		17,578.8			(377.7	)


Cash flows from financing activities
Proceeds from issuance of long-term debt, net of issue costs		19,844.5			(6,332.0	)		13,512.5
Repayments under lending agreements		(5,815.5	)		(0.2	)		(5,815.7	)
Early extinguishments of debt		(1,873.6	)		—			(1,873.6	)
Premiums paid on early extinguishments of debt		(238.0	)		—			(238.0	)
Scheduled debt retirements		(6.5	)		—			(6.5	)
Equity contribution from buyout		6,007.0			(6,007.0	)		—
Minority interests’ contributions, net		(1.2	)		2.9			1.7
Proceeds from the exercises of stock options		—			2.4			2.4
Excess tax benefit from stock equity plans		(50.5	)		77.5			27.0
Other		0.1			0.1			0.2
Transfers from affiliates		—			(5,124.4	)		(5,124.4	)

Cash flows provided by financing activities		17,866.3			(17,380.7	)		485.6


Cash flows from discontinued operations
Cash flows from operating activities		(0.6	)		—			(0.6	)
Cash flows from investing activities		—			—			—

Cash flows used in discontinued operations		(0.6	)		—			(0.6	)

Net increase in cash and cash equivalents		637.7			(251.8	)		385.9
Cash and cash equivalents, beginning of period		610.9			(177.3	)		433.6

Cash and cash equivalents, end of period	$	1,248.6		$	(429.1	)	$	819.5

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the financial information of (i) all subsidiaries of Harrah’s Entertainment that are not a component of HOC; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the financial information of HOC.

Harrah’s Operating Company, Inc. (Predecessor)

Unaudited Condensed Pro Forma Combined Statement of Cash Flows

For the Period from January 1, 2008

Through January 27, 2008


(In millions)	Harrah’s Entertainment⁽¹⁾			Other Harrah’s Entertainment Subsidiaries and Accounts⁽²⁾			Historical HOC⁽³⁾			CMBS Spin-Off⁽⁴⁾			London Clubs Transfer⁽⁵⁾			HOC Restructured
Cash flows provided by/(used in) operating activities	$	7.2		$	(69.3	)	$	(62.1	)	$	(1.7	)	$	14.0		$	(49.8	)

Cash flows from investing activities
Land, buildings, riverboats and equipment additions		(117.4	)		18.3			(99.1	)		26.6			(11.1	)		(83.6	)
Payments for businesses acquired, net of cash acquired		0.1			(0.1	)		—			—			0.1			0.1
Proceeds from other asset sales		3.1			—			3.1			(3.0	)		—			0.1
(Decrease)/increase in construction payables		(8.2	)		—			(8.2	)		10.9			—			2.7
Other		(1.7	)		—			(1.7	)		0.5			—			(1.2	)

Cash flows (used in)/provided by investing activities		(124.1	)		18.2			(105.9	)		35.0			(11.0	)		(81.9	)

Cash flows from financing activities
Proceeds from issuance of long-term debt, net of issue costs		11,316.3			—			11,316.3			—			—			11,316.3
Repayments under lending agreements		(11,288.8	)		0.2			(11,288.6	)		—			—			(11,288.6	)
Early extinguishments of debt		(87.7	)		—			(87.7	)		—			—			(87.7	)
Minority interests’ distributions, net of contributions		(1.6	)		—			(1.6	)		—			—			(1.6	)
Proceeds from exercises of stock options		2.4			(2.4	)		—			—			—			—
Excess tax benefit from stock equity plans		77.5			(77.5	)		—			—			—			—
Transfers (to)/from affiliates		—			112.2			112.2			10.2			10.9			133.3
Other		(0.8	)		—			(0.8	)		—			—			(0.8	)

Cash flows provided by/(used in) financing activities		17.3			32.5			49.8			10.2			10.9			70.9

Cash flows from discontinued operations
Cash flows from operating activities		0.5			—			0.5			—			—			0.5
Cash flows from investing activities		—			—			—			—			—			—

Cash flows provided by discontinued operations		0.5			—			0.5			—			—			0.5

Net (decrease)/increase in cash and cash equivalents		(99.1	)		(18.6	)		(117.7	)		43.5			13.9			(60.3	)
Cash and cash equivalents, beginning of period		710.0			(137.2	)		572.8			(132.7	)		53.8			493.9

Cash and cash equivalents, end of period	$	610.9		$	(155.8	)	$	455.1		$	(89.2	)	$	67.7		$	433.6

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the historical financial information of (i) all subsidiaries of Harrah’s Entertainment that have historically not been a component of HOC, namely, captive insurance companies and London Clubs and its subsidiaries; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the historical financial information of HOC.

(4)

Reflects the removal of the historical operating results of the CMBS properties, pursuant to the CMBS Transfers in which certain properties and operations of HOC were spun-off into a separate borrowing structure and held side-by-side with HOC under Harrah’s Entertainment. The historical operating expenses of HOC include unallocated costs attributable to services that have been performed by HOC on behalf of the CMBS properties. These costs are primarily related to corporate functions such as accounting, tax, treasury, payroll and benefits administration, risk management, legal, and information management and technology. Following the Merger, many of these services will continue to be provided by HOC pursuant to a shared services agreement with the CMBS properties.

(5)	Reflects the inclusion of the London Clubs operating results pursuant to the London Clubs Transfer, in which London Clubs and its subsidiaries became subsidiaries of HOC.

Harrah’s Operating Company, Inc. (Predecessor)

Unaudited Condensed Pro Forma Combined Statement of Cash Flows

For the Six Months Ended

June 30, 2007


(In millions)	Harrah’s Entertainment⁽¹⁾			Other Harrah’s Entertainment Subsidiaries and Accounts⁽²⁾			Historical HOC⁽³⁾			CMBS Transactions⁽⁴⁾			London Clubs Transfer⁽⁵⁾			HOC Restructured
Cash flows provided by/(used in) operating activities	$	649.9		$	594.3		$	1,244.2		$	(441.9	)	$	(601.4	)	$	200.9

Cash flows from investing activities
Land, buildings, riverboats and equipment additions		(765.8	)		32.8			(733.0	)		226.1			(32.8	)		(539.7	)
Insurance proceeds for hurricane losses from asset recovery		42.0			—			42.0			—			—			42.0
Payment for businesses acquired, net of cash acquired		(119.2	)		4.0			(115.2	)		—			(4.0	)		(119.2	)
Investments in and advances to nonconsolidated affiliates		5.9			(7.6	)		(1.7	)		—			7.6			5.9
Proceeds from other asset sales		94.6			—			94.6			(2.2	)		—			92.4
(Decrease)/increase in construction payables		(21.0	)		—			(21.0	)		(15.6	)		—			(36.6	)
Other		(68.5	)		—			(68.5	)		2.1			—			(66.4	)

Cash flows (used in)/provided by investing activities		(832.0	)		29.2			(802.8	)		210.4			(29.2	)		(621.6	)

Cash flows from financing activities
Proceeds from issuance of long-term debt, net of issue costs		14,373.0			(40.3	)		14,332.7			—			40.3			14,373.0
Repayments under lending agreements		(13,246.2	)		1.0			(13,245.2	)		—			(1.0	)		(13,246.2	)
Scheduled debt retirements		(1,001.7	)		—			(1,001.7	)		—			—			(1,001.7	)
Dividends paid		(149.2	)		—			(149.2	)		—			—			(149.2	)
Proceeds from exercises of stock options		43.5			—			43.5			—			—			43.5
Excess tax benefit from stock equity plans		26.3			—			26.3			—			—			26.3
Minority interests’ distributions, net		(7.2	)		—			(7.2	)		3.9			—			(3.3	)
Other		(3.7	)		—			(3.7	)		—			—			(3.7	)
Transfers (to)/from affiliates		—			(606.1	)		(606.1	)		230.2			606.1			230.2

Cash flows provided by/(used in) financing activities		34.8			(645.4	)		(610.6	)		234.1			645.4			268.9

Cash flows from discontinued operations
Cash flows from operating activities		68.9			—			68.9			—			—			68.9
Cash flows from investing activities		(0.2	)		—			(0.2	)		—			—			(0.2	)

Cash flows provided by discontinued operations		68.7			—			68.7			—			—			68.7

Net (decrease)/increase in cash and cash equivalents		(78.6	)		(21.9	)		(100.5	)		2.6			14.8			(83.1	)
Cash and cash equivalents, beginning of period		799.6			(89.7	)		709.9			(158.2	)		23.7			575.4

Cash and cash equivalents, end of period	$	721.0		$	(111.6	)	$	609.4		$	(155.6	)	$	38.5		$	492.3

(1)	Represents the financial information of Harrah’s Entertainment.

(2)	Represents the historical financial information of (i) all subsidiaries of Harrah’s Entertainment that have historically not been a component of HOC, namely, captive insurance companies and London Clubs and its subsidiaries; and (ii) accounts at Harrah’s Entertainment.

(3)	Represents the historical financial information of HOC.

(4)

(5)	Reflects the inclusion of the London Clubs operating results pursuant to the London Clubs Transfer, in which London Clubs and its subsidiaries became subsidiaries of HOC.

In accordance with Generally Accepted Accounting Principles, we have separated our historical financial results for the Successor period and the Predecessor period; however, we have also combined the Successor and Predecessor periods results for the six months ended June 30, 2008, in the presentations below because we believe that it enables a meaningful presentation and comparison of results.

Overall Summary Statement of Operations Information for HOC


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	1,628.2		$	1,765.2		(7.8	)%
Net revenues		1,949.0			2,023.0		(3.7	)%
Income from operations		200.8			354.0		(43.3	)%
(Loss)/income from continuing operations		(119.8	)		124.4		N/M
Operating margin		10.3	%		17.5	%	(7.2	) pts


*Year-to-Date Results*	Successor			Predecessor
(In millions)	Period Jan. 28, 2008 through June 30, 2008			Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	2,795.2		$	498.2		$	3,293.4		$	3,488.6		(5.6	)%
Net revenues		3,339.4			577.5			3,916.9			4,010.7		(2.3	)%
Income/(loss) from operations		536.8			(43.2	)		493.6			653.7		(24.5	)%
(Loss)/income from continuing operations		(295.4	)		(107.6	)		(403.0	)		196.4		N/M
Operating margin		16.1	%		(7.5	)%		12.6	%		16.3	%	(3.7	)pts

N/M=Not Meaningful

Revenues for the second quarter of 2008 were 3.7% lower than second quarter 2007 due primarily to turbulent economic conditions in the United States that have impacted customer visitation and spend per trip at our casinos. Second quarter income from continuing operations was further impacted by higher interest expense due to higher debt levels.

For the six months ended June 30, 2008, revenues were 2.3% lower than in the same period last year, driven by declines in the Las Vegas market due to lower customer spend per trip and fewer hotel rooms available at Caesars Palace, the impact of a smoking ban in Illinois, and heavy rains and flooding affecting visitor volumes at our properties in the midwest. Income from continuing operations was also impacted by expense incurred in connection with the Merger, primarily related to the accelerated vesting of employee stock options, stock appreciation rights (“SARs”), and restricted stock, higher interest expense and losses on the early extinguishments of debt, partially offset by proceeds from the settlement of insurance claims related to hurricane damage in 2005.

The executive officers of HOC 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 our operations as one reportable segment. In order to provide more detail than would be possible on a consolidated basis, our properties have been grouped as follows to facilitate discussion of our operating results:


Las Vegas	Atlantic City	Louisiana/Mississippi	Iowa/Missouri
Caesars Palace	Bally’s Atlantic City	Harrah’s New Orleans	Harrah’s St. Louis
Bally’s Las Vegas	Caesars Atlantic City	Harrah’s Louisiana Downs	Harrah’s North Kansas City
Imperial Palace	Showboat Atlantic City	Horseshoe Bossier City	Harrah’s Council Bluffs
Bill’s Gamblin’ Hall	Harrah’s Chester⁽¹⁾	Grand Biloxi	Horseshoe Council Bluffs/
		Harrah’s Tunica⁽²⁾	Bluffs Run
		Horseshoe Tunica
		Sheraton Tunica


Illinois/Indiana	Other Nevada	Managed/International/Other
Horseshoe Southern Indiana⁽³⁾	Harrah’s Reno	Harrah’s Ak-Chin⁽⁴⁾
Harrah’s Joliet⁽¹⁾	Harrah’s Lake Tahoe	Harrah’s Cherokee⁽⁴⁾
Harrah’s Metropolis	Harveys Lake Tahoe	Harrah’s Prairie Band (through 6/30/07)⁽⁴⁾
Horseshoe Hammond	Bill’s Lake Tahoe	Harrah’s Rincon⁽⁴⁾
		Conrad Punta del Este⁽¹⁾
		Caesars Windsor⁽⁵⁾
		London Clubs International⁽⁶⁾

⁽¹⁾	Not wholly-owned by Harrah’s Entertainment.

⁽²⁾	Re-branded from Grand Casino Tunica in May 2008.

⁽³⁾	Re-branded from Caesars Indiana in July 2008.

⁽⁴⁾	Managed, not owned.

⁽⁵⁾	We have a 50 percent interest in Windsor Casino Limited, which manages this property. The province of Ontario owns the complex. The property was re-branded from Casino Windsor in June 2008.

⁽⁶⁾	Operates 10 casino clubs in the United Kingdom, 2 in Egypt and 1 in South Africa.

Included in income from operations for each grouping are project opening costs and write-downs, reserves and recoveries. Project opening costs include costs incurred in connection with the integration of acquired properties into Harrah’s Entertainment’s systems and technology and costs incurred in connection with expansion and renovation projects at various properties. Write-downs, reserves and recoveries include various pretax charges to record asset impairments, contingent liability reserves, project write-offs, demolition costs, recoveries of previously recorded charges and other non-routine transactions.

Las Vegas Results


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	188.3		$	221.6		(15.0	)%
Net revenues		380.9			412.2		(7.6	)%
Income from operations		83.8			109.8		(23.7	)%
Operating margin		22.0	%		26.6	%	(4.6	) pts


*Year-to-Date Results*	Successor			Predecessor
(In millions)	Period Jan. 28, 2008 through June 30, 2008			Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	314.3		$	67.7		$	382.0		$	424.0		(9.9	)%
Net revenues		641.4			118.5			759.9			805.8		(5.7	)%
Income from operations		140.3			29.7			170.0			210.8		(19.4	)%
Operating margin		21.9	%		25.1	%		22.4	%		26.2	%	(3.8	) pts

The declines in revenues and income from operations in the second quarter and first six months of 2008 reflect lower visitation and spend per trip as our customers reacted to high travel costs and other economic concerns and declines in the number of hotel rooms available at Caesars Palace due to re-modeling.

In July 2007, we announced plans for an expansion and renovation of Caesars Palace Las Vegas, which is expected to cost approximately $1.3 billion and will include a 650-room hotel tower, including 75 luxury suites, additional meeting space, a remodeled and expanded pool area and other renovations and improvements. As of June 30, 2008, $346.6 million had been spent on this project. This expansion is scheduled for completion in phases in 2009 and 2010. In August 2007, Harrah’s Entertainment and AEG, a leading sports and entertainment developer and operator, announced plans to enter into a 50/50 joint venture to develop a 20,000-seat arena, which is expected to commence operations in 2011. This development is subject to completion of definitive documents and other customary conditions.

Atlantic City Results


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	453.8		$	490.8		(7.5	)%
Net revenues		460.4			471.0		(2.3	)%
Income from operations		51.3			63.5		(19.2	)%
Operating margin		11.1	%		13.5	%	(2.4	) pts


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	778.7		$	128.7		$	907.4		$	938.4		(3.3	)%
Net revenues		780.9			125.8			906.7			900.3		0.7	%
Income from operations		96.4			8.0			104.4			115.4		(9.5	)%
Operating margin		12.3	%		6.4	%		11.5	%		12.8	%	(1.3	)pts

Combined second quarter 2008 revenues and income from operations for the Atlantic City region were lower than in last year’s second quarter due to reduced visitor volume and higher advertising costs.

For the six months ended June 30, 2008, Atlantic City regional revenues were slightly higher than in the first six months of 2007 due to the inclusion of Harrah’s Chester, which offset revenue declines at other properties in the region. Harrah’s Chester opened for simulcasting and live harness racing on September 10, 2006 and for slots play on January 22, 2007. Regional income from operations was slightly lower than in the prior year six-month period. The Atlantic City market continues to be affected by the opening of three competitor slot parlors in eastern Pennsylvania and one in Yonkers, New York, and smoking restrictions in Atlantic City.

Louisiana/Mississippi Results


*Quarter Results*	Successor			Predecessor			Percentage
	Second Quarter						Increase/
(In millions)	2008			2007			(Decrease)
Casino revenues	$	343.4		$	369.7		(7.1	)%
Net revenues		368.2			389.0		(5.3	)%
Income from operations		46.1			93.6		(50.7	)%
Operating margin		12.5	%		24.1	%	(11.6	) pts


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 Through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	602.0		$	99.0		$	701.0		$	744.2		(5.8	)%
Net revenues		642.6			106.1			748.7			779.5		(4.0	)%
Income from operations		278.8			10.1			288.9			169.2		70.7	%
Operating margin		43.4	%		9.5	%		38.6	%		21.7	%	16.9	pts

N/M=Not Meaningful

Combined second quarter 2008 revenues from our properties in Louisiana and Mississippi were lower than in second quarter 2007, driven by lower visitor volume at our Tunica properties, due in part to disruptions related to the renovation and re-branding of Grand Casino Tunica. Income from operations declined from the prior year period as insurance proceeds of $37.0 million were received in second quarter 2007.

Combined revenues for the six months ended June 30, 2008, were 4.0% lower than in the six month period last year due to declines in visitation to the Tunica market and disruptions during the renovation at the former Grand Tunica. For the six months ended June 30, 2008 and 2007, income from operations includes insurance proceeds of $185.4 million and $55.7

million, respectively, that are in excess of the net book value of the impacted assets and costs and expenses that were reimbursed under our business interruption claims. All proceeds from claims related to the 2005 hurricanes have now been received. Insurance proceeds are included in Write-downs, reserves and recoveries in our Consolidated Condensed Statements of Operations.

In May 2008, Grand Casino Resort in Tunica, Mississippi, was re-branded to Harrah’s Tunica. In connection with the re-branding, renovations to the property costing approximately $45 million were completed. In conjunction with the renovation and re-branding project, a strategic alliance with Food Network star, Paula Deen, was formed, and a new Paula Deen Buffet also opened in May 2008.

We have decided to slow down construction of Margaritaville Casino & Resort in Biloxi, Mississippi, as we refine the design of that project and explore all of our alternatives related to the project and its financing. We are adjusting our plan for development to better align with the economic environment, market conditions on the Gulf Coast and the current financing environment. We license the Margaritaville name from an entity affiliated with the singer/songwriter Jimmy Buffett. As of June 30, 2008, $125.5 million had been spent on this project.

Iowa/Missouri Results


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	184.8		$	192.9		(4.2	)%
Net revenues		196.3			205.3		(4.4	)%
Income from operations		40.3			37.2		8.3	%
Operating margin		20.5	%		18.1	%	2.4	pts


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	319.0		$	52.5		$	371.5		$	384.0		(3.3	)%
Net revenues		339.3			55.8			395.1			407.0		(2.9	)%
Income from operations		71.0			7.7			78.7			70.3		11.9	%
Operating margin		20.9	%		13.8	%		19.9	%		17.3	%	2.6	pts

Combined second quarter 2008 total revenues at our Iowa and Missouri properties were lower than in last year’s second quarter, driven primarily by Harrah’s St. Louis, where the opening of a new facility by a competitor impacted results. Income from operations was higher than in the prior year second quarter due to cost savings and efficiencies, particularly at our Iowa facilities.

For the six months ended June 30, 2008, combined revenues at our Iowa and Missouri properties were 2.9% lower than in the same period last year. Strong results in Iowa and North Kansas City helped offset the impact of the revenue decline in St. Louis due to increased competition.

Illinois/Indiana Results


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	299.5		$	334.7		(10.5	)%
Net revenues		294.5			321.8		(8.5	)%
Income from operations		42.7			50.1		(14.8	)%
Operating margin		14.5	%		15.6	%	(1.1	)pts


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	510.2		$	86.9		$	597.1		$	671.5		(11.1	)%
Net revenues		502.6			85.5			588.1			646.2		(9.0	)%
Income from operations		69.8			8.7			78.5			101.2		(22.4	)%
Operating margin		13.9	%		10.2	%		13.3	%		15.7	%	(2.4	)pts

Second quarter 2008 combined revenues and income from operations were lower than in second quarter 2007 due reduced customer volumes and spend per trip resulting primarily from the imposition of a smoking ban in Illinois.

Combined revenues and income from operations for the six months ended June 30, 2008, were lower than in the same period last year due to heavy rains and flooding and the smoking ban in Illinois. Caesars Indiana was closed for four days in March 2008 due to flooding in the area.

In June 2008, the Illinois Supreme Court overturned an earlier ruling by a State court that had declared a 3% tax that was assessed on Harrah’s Joliet and three unrelated riverboats unconstitutional. Due to the uncertainty of the situation, we had continued to accrue and pay this tax while the matter was decided in the courts; therefore, this decision had no impact on the results of the operations of Harrah’s Joliet.

In July 2008, Caesars Indiana was re-branded to Horseshoe Southern Indiana. The re-branding and renovation project cost approximately $53.0 million.

In August 2008, construction was completed on the renovation and expansion of Horseshoe Hammond, which will include a two-level entertainment vessel including a 108,000-square-foot casino. The project cost approximately $485 million, $396.5 million of which had been spent as of June 30, 2008.

Other Nevada Results


*Quarter Results*	Successor			Predecessor			Percentage Increase/ (Decrease)
	Second Quarter
(In millions)	2008			2007
Casino revenues	$	76.6		$	86.0		(10.9	)%
Net revenues		96.6			108.0		(10.6	)%
Income from operations		4.9			10.6		(53.8	)%
Operating margin		5.1	%		9.8	%	(4.7	)pts


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Casino revenues	$	133.9		$	19.5		$	153.4		$	167.9		(8.6	)%
Net revenues		172.3			26.8			199.1			216.3		(8.0	)%
Income from operations		13.1			(1.9	)		11.2			18.8		(40.4	)%
Operating margin		7.6	%		(7.1	)%		5.6	%		8.7	%	(3.1	)pts

Second quarter 2008 revenues and income from operations from our Nevada properties outside of Las Vegas were lower than in second quarter 2007 due to lower customer spend per trip, the opening of an expansion at a competing property in Reno and higher costs aimed at attracting and retaining customers.

The same factors that drove declines in second quarter 2008 also drove lower revenues and income from operations for the six months ended June 30, 2008.

Managed/International/Other


*Quarter Results*	Successor			Predecessor			Percent Increase (Decrease)
	Second Quarter
(in millions)	2008			2007
Revenues
Managed	$	17.1		$	21.5		(20.5	)%
International		94.7			77.0		23.0	%
Other		40.3			17.2		N/M

Total revenues	$	152.1		$	115.7		31.5	%

Income/(loss) from operations
Managed	$	5.8		$	18.2		(68.1	)%
International		(47.7	)		(4.0	)	N/M
Other		7.6			(2.2	)	N/M

Total (Loss)/income from operations	$	(34.3	)	$	12.0		N/M


*Year-to-Date Results* (In millions)	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Net revenues
Managed	$	29.2		$	5.0		$	34.2		$	44.0		(22.3	)%
International		164.7			45.9			210.6			177.9		18.4	%
Other		66.4			8.1			74.5			33.7		N/M

Total net revenues	$	260.3		$	59.0		$	319.3		$	255.6		24.9	%


Income/(loss) from operations
Managed	$	10.8		$	4.0		$	14.8		$	35.8		(58.7	)%
International		(59.5	)		0.5			(59.0	)		10.1		N/M
Other		8.5			(10.6	)		(2.1	)		(29.3	)	92.8	%

Total (Loss)/income from operations	$	(40.2	)	$	(6.1	)	$	(46.3	)	$	16.6		N/M

N/M=Not Meaningful

Managed, international and other results include income from our managed properties, results of our international properties and certain marketing and administrative expenses, including development costs, and income from our non-consolidated subsidiaries. Favorable International revenues for second quarter and the six months ended June 30, 2008, are due to inclusion of three new properties of London Clubs International Limited (“London Clubs”) that opened during 2007, partially offset by the impact of a new smoking ban enacted in mid-2007. Income from operations for London Clubs was further impacted by a lower table game hold percentage, higher gaming taxes imposed during 2007 and reserves for receivables due from a joint venture member that may not be collectible. As of June 30, 2008, London Clubs owns or manages ten casinos in the United Kingdom, two in Egypt and one South Africa. London Clubs also has one casino under development in the United Kingdom.

Our second quarter and six-month 2008 results from managed properties were lower than in the 2007 periods due to the termination of our contract with the Prairie Band Potawatomi Nation on June 30, 2007, and lower operating results at our other managed casinos.

Other Factors Affecting Net Income


*Quarter Results*	Successor			Predecessor
(In millions)	Second Quarter Ended June 30, 2008			Second Quarter Ended June 30, 2007			Percentage Increase/ (Decrease)
(Income)/expense
Corporate expense	$	28.8		$	19.3		49.2	%
Merger and integration costs		5.1			3.5		45.7	%
Amortization of intangible assets		32.2			17.7		81.9	%
Interest expense, net		394.9			176.6		N/M
Other income		(7.9	)		(16.3	)	(51.5	)%
Effective tax rate (benefit)/provision		(34.9	)%		34.2	%	N/M
Minority interests	$	(1.4	)	$	3.1		N/M


(In millions) *Year-to-Date Results* (Income)/expense	Successor Period Jan. 28, 2008 through June 30, 2008			Predecessor Period Jan. 1, 2008 through Jan. 27, 2008			Combined Six Months Ended June 30, 2008			Predecessor Six Months Ended June 30, 2007			Percentage Increase/ (Decrease)
Corporate expense	$	70.3		$	(26.2	)	$	44.1		$	41.0		7.6	%
Merger and integration costs		22.1			125.6			147.7			7.6		N/M
Amortization of intangible assets		52.9			5.5			58.4			35.4		65.0	%
Interest expense, net		773.6			89.7			863.3			362.4		N/M
Losses on early extinguishments of debt		211.3			—			211.3			—		N/M
Other income		(11.5	)		(5.1	)		(16.6	)		(25.3	)	(34.4	)%
Effective tax rate (benefit)/provision		(31.4	)%		(16.9	)%		(28.1	)%		35.5	%	N/M
Minority interests	$	(4.1	)	$	1.4		$	(2.7	)	$	7.8		N/M

N/M= Not Meaningful

Corporate expense was higher in the second quarter and first six months of 2008 due to a monitoring fee paid to affiliates of Apollo/TPG in periods subsequent to the Merger, partially offset by the continued realization of cost savings and efficiencies identified in an on-going project that began in September 2006.

2008 merger and integration costs include costs incurred in connection with the Merger, including the expense related to the accelerated vesting of employee stock options, SARs and restricted stock.

Amortization of intangible assets was higher in the second quarter and first six months of 2008 due to higher estimated amortization of intangible assets identified in the preliminary purchase price allocation in connection with the Merger.

Interest expense increased in the second quarter and first six months of 2008 from the same periods in 2007 primarily due to increased borrowings in connection with the Merger. Also included in interest expense in the quarter and six months ended June 30, 2008, are a credit of $40.9 million and a charge of $68.5 million, respectively, representing the changes in the fair values of our interest rate swap agreements. In the quarter and six months ended June 30, 2007, the change in the fair value of the swaps was $14.3 million. A change in interest rates on variable-rate debt will impact our financial results. For example, assuming a constant outstanding balance for our variable-rate debt, excluding $6.5 billion of variable-rate debt for which we have entered into interest rate swap agreements, for the next twelve months, a hypothetical 1% change in corresponding interest rates would change interest expense for the next twelve months by approximately $7.6 million, or $1.9 million per quarter. At June 30, 2008, our variable-rate debt, excluding $6.5 billion of variable-rate debt for which we have entered into interest rate swap agreements, represents approximately 4% of our total debt, while our fixed-rate debt is approximately 96% of our total debt.

Losses on early extinguishments of debt represent premiums paid and the write-offs of unamortized deferred financing costs and market value premiums related to debt retired in connection with the Merger.

Other income includes lower interest income on the cash surrender value of life insurance policies in 2008. Other income in the six months ended June 30, 2007, included a gain on the sale of corporate assets.

For the quarter and six months ended June 30, 2008, tax benefits were generated by operating losses caused by higher interest expense, partially offset by non-deductible merger costs, international income taxes and state income taxes. For the quarter and six months ended June 30, 2007, the effective tax provision rate is higher than the federal statutory rate due primarily to state income taxes.

Minority interests reflect minority owners’ shares of income from our majority owned subsidiaries.

Discontinued operations for the six months ended June 30, 2008, reflects insurance proceeds of $87.4 million, after taxes, representing the final funds received that were in excess of the net book value of the impacted assets and costs and expenses that were reimbursed under our business interruption claims for Grand Casino Gulfport. For the quarter and six months ended June 30, 2007, Discontinued operations reflected $42.0 million and $60.2 million, after taxes, respectively, that were reimbursed under our business interruption claims for Grand Casino Gulfport and Harrah’s Lake Charles, both of which were sold in 2006. Pursuant to the terms of the sales agreements, we retained all insurance proceeds related to these properties.

CAPITAL SPENDING AND DEVELOPMENT

In addition to the development and expansion projects discussed in the OPERATING RESULTS AND DEVELOPMENT PLANS section, we also perform on-going refurbishment and maintenance at our casino entertainment facilities to maintain our quality standards, and we 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, established debt programs (see DEBT AND LIQUIDITY), joint venture partners, specific project financing, guarantees of third-party debt and additional debt offerings. Our capital spending for the first six months of 2008 totaled approximately $684.6 million. Estimated total capital expenditures for 2008 are expected to be between $1.6 billion and $1.8 billion.

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 programs, our strategic acquisitions and on-going cost containment focus. For the first six months of 2008 and 2007, we reported cash flows from operating activities of $228.8 million and $200.9 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 to fund debt services. When necessary, we supplement the cash flows generated by our operations with funds provided by financing activities.

Our cash and cash equivalents totaled approximately $819.5 million at June 30, 2008, compared to $492.3 million at June 30, 2007.

We believe that our cash and cash equivalents balance, our cash flows from operations and the financing sources discussed herein, will be sufficient to meet our normal operating requirements during the next twelve months and to fund additional investments. In addition, we may consider issuing additional debt in the future to fund potential acquisitions or growth or to refinance existing debt. We continue to review additional opportunities to acquire or invest in companies, properties and other investments that meet our strategic and return on investment criteria. If a material acquisition or investment is completed, our operating results and financial condition could change significantly in future periods. In connection with the Merger, we incurred substantial additional debt, which significantly changed our financial position.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Long-term debt consisted of the following:


(In millions)	Successor At June 30, 2008			Predecessor At December 31, 2007
Credit facilities
Term loans, 5.919% at June 30, 2008, maturities to 2015	$	7,231.9		$	—
4.05%-6.25%, maturities to 2011		—			5,768.1
Subsidiary guaranteed debt
10.75% Senior Notes due 2016, including senior interim loans of $342.6, 9.25% at June 30, 2008		5,275.0			—
10.75%/11.5% Senior PIK Toggle Notes due 2018, including senior interim loans of $97.4, 9.25% at June 30, 2008		1,500.0			—
Unsecured Senior Notes
7.5%, maturity 2009		5.1			136.2
7.5%, maturity 2009		0.9			442.4
5.5%, maturity 2010		681.8			747.1
8.0%, maturity 2011		63.8			71.7
5.375%, maturity 2013		350.1			497.7
7.0%, maturity 2013		0.7			324.4
5.625%, maturity 2015		653.3			996.3
6.5%, maturity 2016		493.5			744.3
5.75%, maturity 2017		449.8			745.8
Floating Rate Contingent Convertible Senior Notes, maturity 2024		0.2			370.6
Floating Rate Notes, maturity 2008		—			250.0
Unsecured Senior Subordinated Notes
8.875%, maturity 2008		5.8			409.6
7.875%, maturity 2010		354.1			394.9
8.125%, maturity 2011		312.0			380.3
Other Secured Borrowings
S. Africa, prime less 1.5%, maturity 2009		8.8			10.5
6.0%, maturity 2010		25.0			25.0
4.25%–10.125%, maturities to 2037 at June 30, 2008		4.7			4.4
7.1%, maturity 2028		—			87.7
Other Unsecured Borrowings
LIBOR plus 4.5%, maturity 2010		23.5			29.1
Other, various maturities		70.8			1.6
Capitalized Lease Obligations
5.75%–10.0%, maturities to 2011		2.8			2.7

		17,513.6			12,440.4
Current portion of long-term debt		(82.9	)		(10.8	)

	$	17,430.7		$	12,429.6

In connection with the Merger, $7.7 billion, face amount, of our debt was retired, $4.6 billion, face amount, of our debt was retained and $20.5 billion, face amount, of new debt was issued, resulting in a very different debt structure for the Successor company. The discussion that follows is intended to update the information provided in our 2007 Annual Report on Form 10-K.

At June 30, 2008, $5.7 million, face amount, of our 8.875% Senior Subordinated Notes due September 15, 2008 and $5.1 million, face amount, of our 7.5% Senior Notes due January 15, 2009, are classified as long-term in our Consolidated Condensed Balance Sheet because the Company has both the intent and the ability to refinance these notes. The majority of our debt is due after 2010. Payments of short-term debt obligations and other commitments are expected to be made from operating cash flows and from borrowings under our established debt programs. Long-term obligations are expected to be paid through operating cash flows, refinancing of debt, joint venture partners or, if necessary, additional debt offerings.

In July 2008, HOC made the permitted election under the Indenture governing its 10.75%/11.5% Senior Toggle Notes due 2018 and the Senior Unsecured Interim Loan Agreement dated January 28, 2008, to pay all interest due on January 28, and February 1, 2009, for the loan in kind. The Company intends to use the cash savings generated by this election for general corporate purposes.

Credit Agreements

As of June 30, 2008, our senior secured credit facilities (the “Credit Facilities”) provide for senior secured financing of up to $9.25 billion, consisting of (i) senior secured term loan facilities in an aggregate principal amount of up to $7.25 billion maturing on January 28, 2015 and (ii) a senior secured revolving credit facility in an aggregate principal amount of $2.0 billion, maturing January 28, 2014, including both a letter of credit sub-facility and a swingline loan sub-facility. Interest on the Credit Agreement is based on our debt ratings and leverage ratio and is subject to change. In addition, we may request one or more incremental term loan facilities and/or increase commitments under our revolving facility in an aggregate amount of up to $1.75 billion, subject to certain conditions and receipt of commitments by existing or additional financial institutions or institutional lenders. As of June 30, 2008, $7.23 billion in borrowings was outstanding under the Credit Facilities with an additional $0.2 billion committed to back letters of credit. After consideration of these borrowings and letters of credit, $1.8 billion of additional borrowing capacity was available to the Company under the Credit Facilities as of June 30, 2008.

Borrowings under the Credit Facilities bear interest at a rate equal to the then-current LIBOR rate or at a rate equal to the alternate base rate, in each case plus an applicable margin. In addition, on a quarterly basis, we are required to pay each lender (i) a commitment fee in respect of any unused commitments under the revolving credit facility and the delayed draw portion of the term facility and (ii) a letter of credit fee in respect of the aggregate face amount of outstand letters of credit under the revolving credit facility. As of June 30, 2008, the Credit Facilities bore interest based upon 300 basis points over LIBOR and bore a commitment fee for unborrowed amounts of 50 basis points.

The Credit Facilities require scheduled quarterly payments on the term loans in amounts equal to 0.25% of the original principal amount of the term loans for six years and three quarters, with the balance paid at maturity.

On August 1, 2008, HOC entered into an agreement with Harrah’s Entertainment whereby Harrah’s Entertainment has agreed to extend to HOC an intercompany unsecured revolving credit facility in an aggregate principal amount not to exceed $200.0 million. The credit facility expires January 29, 2014, and bears interest at a rate per annum equal to BBA LIBOR (as defined in the HOC Credit Agreement) plus 3%. Interest payments are due annually; however, HOC may choose to add such interest to the loan balance instead of paying the interest. All or any portion of the outstanding principal balance may be prepaid at any time, from time to time, without premium or penalty.

Derivative Instruments

We account for derivative instruments 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 statements of operations or in other comprehensive income/(loss), depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction and the effectiveness of the hedge. The estimated fair values of our derivative instruments are based on market prices obtained from dealer quotes. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts.

Our derivative instruments 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.

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of June 30, 2008, we have ten interest rate swap agreements for notional amounts totaling $6.5 billion. The difference to be paid or received under the terms of the interest rate swap agreement is 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 the interest rate swap agreement will have a corresponding effect on future cash flows. The major terms of the interest rate swap agreements are as follows.


Effective Date	Notional Amount		Fixed Rate Paid		Variable Rate Received as of June 30, 2008		Next Reset Date	Maturity Date
	(In millions)
April 25, 2007	$	200	4.898	%	2.920	%	July 25, 2008	April 25, 2011
April 25, 2007		200	4.896	%	2.920	%	July 25, 2008	April 25, 2011
April 25, 2007		200	4.925	%	2.920	%	July 25, 2008	April 25, 2011
April 25, 2007		200	4.917	%	2.920	%	July 25, 2008	April 25, 2011
April 25, 2007		200	4.907	%	2.920	%	July 25, 2008	April 25, 2011
September 26, 2007		250	4.809	%	2.920	%	July 25, 2008	April 25, 2011
September 26, 2007		250	4.775	%	2.920	%	July 25, 2008	April 25, 2011
April 25, 2008		1,000	4.172	%	2.920	%	July 25, 2008	April 25, 2012
April 25, 2008		2,000	4.276	%	2.920	%	July 25, 2008	April 25, 2013
April 25, 2008		2,000	4.263	%	2.920	%	July 25, 2008	April 25, 2013

Until February 15, 2008, none of our interest rate swap agreements were designated as hedging instruments; therefore, gains or losses resulting from changes in the fair value of the swaps were recognized in earnings in the period of the change. On February 15, 2008, eight of our interest rate swap agreements for notional amounts totaling $3.5 billion were designated as hedging instruments, and on April 1, 2008, the remaining swap agreements were designated as hedging instruments. Upon designation as hedging instruments, only any measured ineffectiveness is recognized in earnings in the period of change. In the quarter and six months ended June 30, 2008, a credit of $40.9 million and a net charge of $68.5 million, respectively, representing the changes in the fair values of our swap agreements are included in Interest expense in our 2008 Consolidated Condensed Statement of Operations compared with $14.3 million for both the quarter and six months ended June 30, 2007.

Guarantees of Third-Party Debt and Other Obligations and Commitments

The tables below summarize HOC’s contractual obligations and other commitments as of June 30, 2008.


Contractual Obligations^(a) (In millions)	Total
Debt, including capital lease obligations	$	18,702.0
Estimated interest payments^(b)		11,208.0
Operating lease obligations		2,008.0
Purchase order obligations		50.0
Guaranteed payments to State of Louisiana		165.0
Construction commitments		889.5
Community reinvestment		125.8
Entertainment obligations		147.4
Other contractual obligations		73.0

^(a)	In addition to the contractual obligations disclosed in this table, we have unrecognized tax benefits that, based on uncertainties associated with the items, we are unable to make reasonably reliable estimates of the period of potential cash settlements, if any, with taxing authorities.

^(b)	Estimated interest for variable rate debt is based on rates in effect at June 30, 2008.


Other Commitments (In millions)	Total
Guarantees of loans	$	—
Letters of credit		182.7
Minimum payments to tribes		48.4

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 65 months from June 30, 2008, is $1.2 million. Each of these casinos currently generates sufficient cash flows to cover all of its obligations, including its debt service.

DEBT COVENANT COMPLIANCE

Certain covenants contained in the credit agreement governing our new senior secured credit facilities, the indenture and other agreements governing our new 10.75% Senior Notes due 2016, 10.75% Senior Toggle Notes due 2018 and senior interim loans (i) require the maintenance of a senior secured debt to Adjusted EBITDA ratio and (ii) restrict our ability to take certain actions such as incurring additional debt or making acquisitions if we are unable to meet defined Adjusted EBITDA to Fixed Charges, senior secured debt to Adjusted EBITDA and consolidated debt to Adjusted EBITDA ratios. The most restrictive of these covenants, the covenants that restrict additional indebtedness and the ability to make future acquisitions, require an Adjusted EBITDA to Fixed Charges ratio (measured on a trailing four-quarter basis) of 2.0: 1.0. Failure to comply with these covenants can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.

EBITDA is defined as income from continuing operations plus interest, income taxes, depreciation and amortization. EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to income from continuing operations as a measure of operating performance or to cash flows from operations as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Our presentation of EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business than U.S. GAAP results alone. Because not all companies use identical calculations, these presentations of EBITDA may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is

defined as EBITDA further adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant compliance under the indenture and other agreements governing the senior notes, senior toggle notes and senior interim loans and/or our new senior credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

The following table reconciles EBITDA and Adjusted EBITDA of HOC for the twelve months ended June 30, 2008, and takes into consideration the CMBS Transactions and the London Clubs Transfer as if they had occurred at the beginning of the period.


(In millions)	Successor January 28, 2008 Through June 30, 2008			Predecessor January 1, 2008 Through January 27, 2008			Combined January 1, 2008 Through June 30, 2008			Predecessor Six Months Ended June 30, 2007			Predecessor Year Ended December 31, 2007			Last Twelve Months
(Loss)/income from continuing operations	$	(295.4	)	$	(107.6	)	$	(403.0	)	$	196.4		$	166.8		$	(432.6	)
Interest expense, net		762.7			85.7			848.4			357.2			787.5			1,278.7
(Benefit)/provision for income taxes		(137.1	)		(21.6	)		(158.7	)		112.4			152.6			(118.5	)
Depreciation and amortization		287.5			56.7			344.2			352.2			729.4			721.4

EBITDA		617.7			13.2			630.9			1,018.2			1,836.3			1,449.0

Project opening costs, abandoned projects and development costs^(a)		10.5			0.9			11.4			16.4			26.8			21.8
Merger and integration costs^(b)		22.1			125.6			147.7			5.3			9.4			151.8
Losses on early extinguishments of debt^(c)		211.3			—			211.3			—			2.0			213.3
Minority interests, net of distributions^(d)		(5.7	)		0.8			(4.9	)		4.9			(3.7	)		(13.5	)
Impairment of goodwill, intangible assets and investment securities^(e)		—			—			—			—			155.9			155.9
Non-cash expense for stock compensation benefits ^(f)		5.1			1.7			6.8			19.1			38.2			25.9
Income from insurance claims for hurricane losses^(g)		(185.7	)		—			(185.7	)		(55.7	)		(130.3	)		(260.3	)
Other non-recurring or non-cash items^(h)		50.2			0.8			51.0			9.5			55.6			97.1
Pro forma adjustment for acquired, new or disposed properties ⁽ⁱ⁾		—			—			—			2.8			3.3			0.5
Pro forma adjustment for yet-to-be realized cost savings^(j)																	38.2

Adjusted EBITDA																$	1,879.7

(a)	Represents (i) project opening costs incurred in connection with the integration of acquired properties and with expansion and renovation projects at various properties, (ii) write-off of abandoned development projects and (iii) non-recurring strategic planning and restructuring costs.

(b)	Represents costs in connection with the Acquisition, including review of certain strategic matters by the special committee established by Harrah’s Entertainment’s Board of Directors.

(c)	Represents premiums paid and the write-off of historical unamortized deferred financing costs.

(d)	Represents minority owners’ share of income from our majority-owned subsidiaries, net of cash distributions to minority owners.

(e)	Represents impairment of intangible assets related to London Clubs and Caesars Indiana and impairment of investment securities.

(f)	Represents non-cash compensation expense related to stock options, SARS and restricted stock.

(g)	Represents non-recurring insurance recoveries related to Hurricanes Katrina and Rita.

(h)

Represents the elimination of other non-recurring and non-cash items such as litigation awards and settlements, severance and relocation costs, excess gaming taxes, gains and losses from disposal of assets, equity in non-consolidated subsidiaries (net of distributions) and one-time costs relating to new state gaming legislation.

(i)	Represents the full year/period estimated impact of acquired, new and disposed properties.

(j)	Represents the annualized additional cost savings expected to be realized from our previously announced profitability improvement program.consolidated subsidiaries (net of distributions) and one-time costs relating to new state gaming legislation.