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Harrah's Reports Record Results

LAS VEGAS – (PRESS RELEASE) -- Harrah's Entertainment, Inc. (NYSE: HET) today reported record fourth-quarter revenues of $1.19 billion, up 25.1 percent from revenues of $950.2 million in the 2003 fourth quarter.

Property Earnings Before Interest, Taxes, Depreciation and Amortization (Property EBITDA) rose 31.3 percent in the fourth quarter to a record $288.7 million from Property EBITDA of $219.9 million in the year-earlier period. Fourth-quarter Adjusted Earnings Per Share increased to a record 72 cents, up 44.0 percent from the 50 cents achieved in 2003's fourth quarter.

Property EBITDA and Adjusted EPS are not Generally Accepted Accounting Principles (GAAP) measurements but are commonly used in the gaming industry as measures of performance and as a basis for valuation of gaming companies. In addition, analysts' per-share earnings estimates for gaming companies are comparable to Adjusted EPS. Reconciliations of Adjusted EPS to GAAP EPS and Property EBITDA to income from operations are attached to this release.

Fourth-quarter income from operations rose 33.4 percent to a record $165.0 million from $123.7 million in the year-earlier quarter. Fourth-quarter net income was a record $77.0 million, up 117.5 percent from $35.4 million in the 2003 fourth quarter. Diluted earnings per share for the 2004 fourth quarter was a record 68 cents, 112.5 percent higher than the 32 cents achieved in the 2003 fourth quarter.

Fourth-quarter results included contributions from the three Horseshoe casinos, acquired by Harrah's on July 1, 2004. Results for Harrah's East Chicago and Harrah's Tunica, which are contracted for sale to an affiliate of Colony Capital, LLC, have been reclassified to discontinued operations. Harrah's anticipates closing the sale transaction during the 2005 first quarter.

"Strong organic growth, an accretive acquisition and prudent capital spending propelled the company to yet another record quarter," said Gary Loveman, Harrah's Entertainment's chairman, president and chief executive officer. "We achieved these results despite a month-long strike at our Atlantic City properties. This robust performance also demonstrates the value of our unique customer-loyalty strategy and our geographic diversification, as often measured by same-store sales growth and cross-market play."

Fourth-quarter 2004 same-store revenues increased 7.5 percent over the year-ago period. Cross-market play -- gaming by customers at Harrah's properties other than their "home" casino -- rose 15.3 percent from the fourth quarter of 2003. Tracked play -- gaming by customers using the company's Total Rewards player cards -- increased 10.8 percent from the year-ago fourth quarter.

"Our acquisitions have received considerable attention, but they are only one part of Harrah's growth story," Loveman said. "Over the past six years we have contended with recession, a post-9/11 travel slump, new competitors in multiple markets and the longest strike in the history of the Atlantic City gaming industry. Despite this litany of challenges, our company has posted same-store sales growth in all but one of the last 24 quarters. This remarkable record of consistent organic growth is a tribute to the effectiveness of our marketing and technological capabilities and our focus on delivering superior customer service."

For the full year 2004, revenues rose 15.2 percent to a record $4.55 billion from $3.95 billion in 2003. Property EBITDA increased to a record $1.22 billion, up 16.0 percent from $1.05 billion in 2003. Adjusted EPS was a record $3.37, 15.8 percent higher than the $2.91 achieved in 2003.

Income from operations for the full year 2004 was a record $791.1 million, up 16.5 percent from $678.8 million in full year 2003. Net income was a record $367.7 million, up 25.7 percent from $292.6 million in 2003. Full-year 2004 diluted earnings per share was a record $3.26, up 23.0 percent from $2.65 in the year-ago period.

For the full year 2004, cross-market play rose 18.0 percent to $1.44 billion. Tracked play for the full year 2004 increased 11.9 percent, while same-store revenues rose 6.5 percent.

Poised For Long-Term Growth

"In 2004 we achieved record results in pursuit of our strategy to position Harrah's as the world's leading distributor of casino entertainment," Loveman said. "Our implementation of marketing and customer-service initiatives, such as Total Rewards 2, strategic capital investments in existing properties and the acquisition of Horseshoe Gaming Holding Corp. set the stage for sustainable long-term growth.

"Our pending acquisition of Caesars Entertainment, Inc. will take Harrah's to an even higher level, giving us both a premier luxury brand of international renown and an expanded property portfolio offering a presence in every major gaming market in this country," Loveman said. "Our integration strategy calls for us to maintain and enhance the Caesars brand as experienced by their players, while integrating the best tools, capabilities and personnel of both companies into the combined entity.

"We are in substantial compliance with the Federal Trade Commission's second request for information with regards to the Caesars acquisition, and we remain optimistic we will be able to complete this transaction in the second quarter," Loveman said.

"The Horseshoe acquisition continued to be accretive in the fourth quarter, adding an estimated four cents to Adjusted EPS," Loveman said. "The integration of Horseshoe continues to proceed smoothly, an experience that will serve us well as we prepare for the integration of Caesars.

"We will be ready for the Caesars acquisition," Loveman said. "Our existing operations provide strong momentum, fueled by robust organic growth, a history of successful acquisitions and high returns on capital investments. The recently announced increase in our bank-credit capacity will not only facilitate the Caesars transaction, but provide us with the financial flexibility to pursue other opportunities as they arise.

"On January 1, Phil Satre retired as chairman after a remarkable 25-year career with our company," Loveman said. "Phil is truly a gaming-industry legend. His leadership and vision transformed a small Nevada casino chain into one of the largest companies in the gaming industry. On behalf of Harrah's 48,000 employees, I would like to wish Phil a fond farewell, and extend to him the best wishes of all of my colleagues on the next challenges in his life."

    Among the fourth-quarter highlights:
    * Building on the acquisition of Horseshoe, Harrah's announced plans to
      re-brand its Bluffs Run Casino to the Horseshoe brand as part of an
      expansion and renovation of the Council Bluffs, Iowa, property.  Upon
      completion in the first quarter of 2006, Horseshoe Council Bluffs will
      feature 69 percent more gaming space, 1,900 slot machines, 36 table
      games and a 20-table poker room.

    * Members of the UNITE-HERE Local 54 union in Atlantic City approved a
      five-year contract in November, ending a month-long strike at Harrah's
      Atlantic City and the Showboat.

    * The National Indian Gaming Commission approved an agreement between the
      Ak-Chin Indian Community and a Harrah's subsidiary that extends Harrah's
      contract to manage Harrah's Phoenix Ak-Chin hotel and casino for an
      additional five years, starting January 1, 2005.  Harrah's has managed
      the Arizona casino since its December 1994 opening.

    * Harrah's 28 casinos received a record 580 awards, including 252
      first-place finishes, in "Best of Slots," an annual poll of Strictly
      Slots magazine readers.  Harrah's Laughlin, Harrah's Lake Tahoe,
      Harrah's New Orleans and Horseshoe Bossier City were named "Best Overall
      Gaming Resort" in their markets, while Total Rewards was voted Best Slot
      Club in 10 markets -- Atlantic City, Chicagoland, Iowa, Lake Tahoe, Las
      Vegas Strip, Laughlin, Missouri, Native Midwest, Native West and New
      Orleans.

    * Harrah's announced the launch of the World Series of Poker Tournament
      Circuit, a series of five poker tournaments preceding the 36th Annual
      World Series of Poker in Las Vegas this summer.  The first circuit
      tournament was held in January at Harrah's Atlantic City; additional
      events will be held at Harrah's Rincon, the Rio, Harveys Lake Tahoe and
      Harrah's New Orleans.

    * An expansion of Harrah's Rincon near San Diego opened in December.  The
      project added a 21-story, 459-room hotel tower, 14,000 square feet of
      additional gaming space and a 7,500-square-foot spa.



            Southern Nevada Propels West Region To Record Results

     West Results
     (in millions)
                          2004     2003    Percent    2004     2003   Percent
                         Fourth   Fourth  Increase    Full     Full  Increase
                        Quarter  Quarter (Decrease)   Year     Year (Decrease)
     Southern Nevada
      Total revenues     $265.5   $226.0   17.5%   $1,062.5   $899.5   18.1%
      Income from
       operations          58.4     39.3   48.6%      246.0    165.4   48.7%
      Property EBITDA      75.5     57.9   30.4%      316.1    239.8   31.8%
     Northern Nevada
      Total revenues       99.8     99.0    0.8%      452.4    447.2    1.2%
      Income from
       operations           3.4     (2.3)   N/M        60.0     55.4    8.3%
      Property EBITDA      15.2     14.0    8.6%      103.1    100.8    2.3%
     Total West Region
      Total revenues      365.3    325.0   12.4%    1,514.9  1,346.7   12.5%
      Income from
       operations          61.8     37.0   67.0%      306.0    220.8   38.6%
      Property EBITDA      90.7     71.9   26.1%      419.2    340.6   23.1%

Strong market conditions and robust cross-market play at Harrah's three Southern Nevada properties helped Harrah's West Region achieve record fourth-quarter and full-year results.

"Our cross-market strategy and capabilities helped our Southern Nevada properties post particularly strong results," said Tim Wilmott, Harrah's chief operating officer. "Our competitive advantage was especially evident at Harrah's Laughlin, which posted EBITDA gains of more than 42 percent."

                      East Region Reports Lower Results

     East Results
     (in millions)
                          2004     2003    Percent    2004    2003   Percent
                         Fourth   Fourth  Increase    Full    Full  Increase
                        Quarter  Quarter (Decrease)   Year    Year (Decrease)
     Harrah's Atlantic City
      Total revenues     $96.0    $99.9    -3.9%    $423.3  $433.5   -2.4%
      Income from
       operations         18.1     25.9   -30.1%     109.4   133.4  -18.0%
      Property EBITDA     28.1     34.3   -18.1%     148.0   167.5  -11.6%
     Showboat Atlantic City
      Total revenues      82.0     82.4    -0.5%     357.6   347.8    2.8%
      Income from
       operations         15.5     17.0    -8.8%      90.4    83.9    7.7%
      Property EBITDA     24.1     23.9     0.8%     123.5   110.8   11.5%
     Total East Region
      Total revenues     178.0    182.3    -2.4%     780.9   781.3   -0.1%
      Income from
       operations         33.6     42.9   -21.7%     199.8   217.3   -8.1%
      Property EBITDA     52.2     58.2   -10.3%     271.5   278.3   -2.4%

A month-long strike at Harrah's two Atlantic City properties impacted fourth-quarter revenues, operating income and Property EBITDA from the Eastern Region.

"The strike presented a significant challenge to our Atlantic City operations, but we are pleased we were ultimately able to achieve our goal - a five-year contract that is fair and equitable to both union members and our shareholders," Wilmott said. "We're excited about the scheduled opening of the House of Blues club at the Showboat this summer. We believe it will provide a gaming and entertainment experience without rival in Atlantic City."

                 North Central Region Reports Record Results

     North Central Results
     (in millions)
                          2004     2003    Percent    2004     2003   Percent
                         Fourth   Fourth  Increase    Full     Full  Increase
                        Quarter  Quarter (Decrease)   Year     Year (Decrease)
     Illinois/Indiana
      Total revenues    $187.2    $87.2    114.7%   $587.8   $390.7    50.4%
      Income from
       operations         33.0     16.0    106.3%    103.0     74.5    38.3%
      Property EBITDA     40.0     20.2     98.0%    126.2     91.1    38.5%
     Iowa
      Total revenues      64.6     59.1      9.3%    254.0    238.7     6.4%
      Income from
       operations         13.8      7.1     94.4%     68.1     32.1   112.1%
      Property EBITDA     19.8     12.7     55.9%     75.7     52.5    44.2%
     Missouri
      Total revenues     119.7    109.5      9.3%    458.1    441.0     3.9%
      Income from
       operations         20.7     16.6     24.7%     78.2     83.0    -5.8%
      Property EBITDA     34.0     26.9     26.4%    123.1    120.8     1.9%
     Total North Central
      Total revenues     371.5    255.8     45.2%  1,299.9  1,070.4    21.4%
      Income from
       operations         67.5     39.7     70.0%    249.3    189.6    31.5%
      Property EBITDA     93.8     59.8     56.9%    325.0    264.4    22.9%

The addition of Horseshoe Hammond, a lower tax rate at Bluffs Run Casino and improved business from a recently completed expansion of Harrah's St. Louis all contributed to record fourth-quarter results for the company's North Central Region.

Due to the decision to sell the property, operating results from Harrah's East Chicago are reported as discontinued operations. The prior year results have been reclassified to conform to this presentation.

"Harrah's St. Louis, Harrah's Council Bluffs, Bluffs Run and Horseshoe Hammond all posted strong fourth-quarter performances," Wilmott said. "The completion of the expansion of Harrah's North Kansas City later this year, along with the renovation, expansion and rebranding of Bluffs Run, will reinforce our strong position in the Midwest."

                South Central Region Also Posts Record Results

     South Central Results
     (in millions)
                          2004     2003    Percent    2004    2003   Percent
                         Fourth   Fourth  Increase    Full    Full  Increase
                        Quarter  Quarter (Decrease)   Year    Year (Decrease)
     Louisiana
      Total revenues     $198.9   $165.5   20.2%    $762.5  $659.9   15.5%
      Income from
       operations          21.3     22.2   -4.1%      97.3    92.3    5.4%
      Property EBITDA      35.0     30.8   13.6%     148.6   136.3    9.0%
     Mississippi
      Total revenues       55.3       --    N/A      113.4      --    N/A
      Income from
       operations          11.2       --    N/A       25.8      --    N/A
      Property EBITDA      15.8       --    N/A       33.4      --    N/A
     Total South Central
      Total revenues      254.2    165.5   53.6%     875.9   659.9   32.7%
      Income from
       operations          32.5     22.2   46.4%     123.1    92.3   33.4%
      Property EBITDA      50.8     30.8   64.9%     182.0   136.3   33.5%

The South Central Region benefited from the addition of Horseshoe Bossier City and Horseshoe Tunica, as well as continued strong business trends at Harrah's New Orleans.

Due to the decision to sell the property, operating results from Harrah's Tunica are reported as discontinued operations. Prior year results have been reclassified to conform to this presentation.

"Strong cross-market play continues to drive outstanding growth at Harrah's New Orleans," Wilmott said. "We look forward to the addition of a 450-room hotel tower in early 2006 that will position Harrah's New Orleans to extend its strong results well into the future."

Managed Properties And Other Items

Fourth-quarter management-fee revenues were down 10.4 percent from the year-ago period due to lower fee schedules associated with contract extensions at tribal-owned properties.

Fourth-quarter development costs declined to $4.4 million from $10.2 million in the year-ago quarter. In the first quarter of 2005, Harrah's and Gala Group dissolved the joint venture formed in 2003 for the development of regional casinos in the United Kingdom in response to the government's proposal to restrict development of regional casinos. Harrah's will focus its UK efforts on opportunities to develop large-scale destination casino resorts with more than 50,000 square feet of gaming space, as well as hotel rooms, restaurants and entertainment venues.

Corporate expense increased 42.2 percent over the year-ago quarter due to on-going costs related to Sarbanes-Oxley compliance, increased depreciation and incentive-compensation costs. Interest expense was 29.8 percent higher than in the 2003 fourth quarter due to additional debt related to the Horseshoe acquisition. The company recorded $2.3 million in costs during the quarter related to integration planning for the Caesars acquisition.

The effective income tax rate after minority interest for the full year 2004 was 36.7 percent, compared to 37.3 percent for the year 2003. The tax rate for the fourth quarter of 2004 was 33.8 percent, the same as in the year-ago period.

Discontinued operations, which includes the operating results of Harrah's East Chicago and Harrah's Tunica, increased over the prior year due to the cessation of depreciation following the third-quarter 2004 agreement to sell the properties, lower income taxes and improved operating performance.

Harrah's Entertainment will host a conference call Wednesday, February 2, 2005, at 9:00 a.m. Eastern Standard Time to review its 2004 fourth-quarter and year-end results. Those interested in participating in the call should dial 1-888-399-2695, or 1-706-679-7646 for international callers, approximately 10 minutes before the call start time.

A taped replay of the conference call can be accessed at 1-800-642-1687, or 1-706-645-9291 for international callers, beginning at 10:00 a.m. EST Wednesday, February 2. The replay will be available through 11:59 p.m. EST on Tuesday, February 8. The passcode number for the replay is 3289511.

Interested parties wanting to listen to the live conference call on the Internet may do so on the company's web site -- www.harrahs.com -- in the Investor Relations section under the Investor News tab.

Various subsidiaries of Harrah's Entertainment, Inc. own or manage 28 casinos in the United States, primarily under the Harrah's and Horseshoe brand names. Founded 67 years ago, Harrah's Entertainment is focused on building loyalty and value with its valued customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership.

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