Diluted earnings per share were 40 cents, matching the 40 cents before extraordinary items reported in the year-ago quarter.

The company posted record second-quarter revenues of $914.0 million, up 4.3 percent from revenues of $876.2 million in the 2000 second quarter. Second-quarter Property Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was a record $234.7 million, up 1.3 percent from the year-ago quarter.

Same-store gaming revenues at Harrah's brand properties rose 6.3 percent in the 2001 second quarter from the year-earlier quarter. Tracked and cross-market play increased 16.6 percent and 20.8 percent, respectively.

"While many companies would be pleased with a 22.5 percent increase in earnings per share -- especially in today's economy -- we were disappointed that our second-quarter gains were lower than anticipated when the quarter began," said Phil Satre, Harrah's Entertainment Chairman and Chief Executive Officer.

"As discussed in our July 6 pre-announcement, the lower than expected second quarter results were due primarily to a low table-games hold percentage at the Rio, which reduced earnings approximately four to five cents per share, and to an economy-related decline in retail play in certain markets," Satre said.

"The good news is that our earnings continued to grow at a double-digit pace, proving that our strategy is driving results in a challenging economic environment," Satre said.
    
Among the second quarter's highlights:

• Harrah's Entertainment named Chief Operating Officer Gary Loveman to the new position of President and promoted Treasurer Charles Atwood to the additional positions of Senior Vice President and Chief Financial Officer. 

• The company announced an agreement to acquire Harveys Casino Resorts, which operates casinos in Lake Tahoe, Nev., Council Bluffs, Iowa, and Central City, Colo., for $625 million, plus assumption of certain contingent liabilities totaling $50 million. 

• Harrah's Entertainment's Nevada casinos became the first in the nation to offer The Price Is Right(TM) video slots to players. The company has an exclusive 30-day right to introduce this and subsequent versions of the highly popular game into each of the 17 markets where Harrah's operates a casino. 

• The company raised $500 million through the private placement of 7.125 percent Senior Notes due 2007. The net proceeds were used to pay down its bank credit facility. 

• Harrah's entered into a programming and marketing relationship with ShopNBC, a new shopping network reaching 46 million households, to develop and telecast a one-hour special featuring the Harrah's Total Rewards Treasure Hunt finale in November 2001. One lucky Harrah's customer will receive a treasure map leading to a chest containing $1 million. 

• Computerworld named Harrah's one of the Top Five of America's "100 Best Places to Work in Information Technology." Harrah's is the only company in any industry to receive a Top Five rating for each of the past three years. 

• Readers of Casino Player magazine selected Harrah's for 144 first-place awards and 251 total honors in the publication's "Best of Gaming" awards. Harrah's Total Rewards, the gaming industry's only nationwide player-card program, was honored as the "Best Slot Club" in every jurisdiction where the company operates a casino. 

For the first half of 2001, Adjusted Earnings Per Share rose 40.0 percent to 91 cents from 65 cents.  Diluted earnings per share rose 21.9 percent to 78 cents from 64 cents in the 2000 first half. The company posted record first-half revenues of $1.81 billion, up 9.0 percent from revenues of $1.66 billion in the year-ago period. First-half Property EBITDA rose to $470.1 million from $423.8 million in the first half of 2000.
 

Western Region results were marked by overall gains in revenues despite the sharp drop in retail business in Northern Nevada and the low table-games hold percentage at the Rio. Harrah's Las Vegas posted record Property EBITDA and Harrah's Laughlin recorded its second-highest Property EBITDA ever and the highest since 1993. 

Harrah's Northern Nevada casinos saw significant Property EBITDA declines as a result of lower retail play. Tracked play in Northern Nevada was up 4.6 percent.

"The gains in tracked play clearly indicate the benefits of our strategy," Satre said. "To boost retail play, we have introduced carefully crafted marketing programs aimed at increasing our appeal to that segment on a profitable basis."

The Rio posted 5.2 percent higher revenues and its Property EBITDA rose substantially. The Rio's second-quarter table-games hold percentage of 11.2 percent, though well below that of the first quarter, was above the 8.4 percent hold of the 2000 second quarter. Table-game volume rose 12.5 percent from a year ago, slot win per unit was up 12.8 percent and Revenue Per Available Room rose 8.8 percent. Food and beverage and entertainment profits also improved from the year-ago quarter.

Revenues at Harrah's Las Vegas rose 13.9 percent and Property EBITDA was up 10.7 percent from the second quarter of 2000. In Laughlin, second-quarter revenues were up 4.3 percent from the 2000 second quarter and Property EBITDA rose 4.9 percent.
   
In Northern Nevada, Harrah's Reno reported 3.8 percent lower revenues and a 15.5 percent decline in Property EBITDA. The company's Lake Tahoe properties posted revenues approximately 3.0 percent below last year's second quarter, while Property EBITDA declined 21.7 percent. Declines in the facilities' Property EBITDA were due primarily to increased energy costs and lower levels of play from non-tracked customers.

For the first half, Western Region revenues were up 4.8 percent and Property EBITDA rose 25.7 percent from the 2000 first half due primarily to the favorable year-over-year first-quarter hold percentages at the Rio and the continued strong performance of Harrah's Southern Nevada properties.
 

Harrah's Atlantic City posted moderate gains in revenues, and Property EBITDA rose 6.2 percent.  Showboat Atlantic City gained market share for each month of the second quarter, and its Property EBITDA rate of decline was about half that of the first quarter. For the first six months of 2001, Eastern Region revenues declined 0.8 percent but Property EBITDA was up 1.7 percent.
 

Harrah's Chicagoland casinos posted record second-quarter revenues, but Property EBITDA was down 5.6 percent due primarily to increased expenses associated with building revenues in that highly competitive market.

In Missouri, combined revenues from Harrah's North Kansas City and St. Louis properties rose 8.6 percent and Property EBITDA was up 18.9 percent from the year-ago second quarter. St. Louis posted an 11.7 percent gain in revenues and a 35.3 increase in Property EBITDA due primarily to consolidation of the Player's Maryland Heights facility with the company's adjacent Harrah's casino in St. Louis and to related operational synergies.

Construction was completed in late June on the new casino space in North Kansas City that replaced the riverboat the company has used in that market since 1994. Aided by its new hotel and restaurants, Harrah's Shreveport achieved a 27.7 percent gain in revenues. Property EBITDA was up 13.5 percent.

Harrah's Lake Charles posted higher revenues and nearly matched the 2000 second-quarter Property EBITDA even though 40 percent of the property's rooms were out of service for refurbishment during the quarter, Tropical Storm Alison severely restricted access to the market for several days in June and gaming taxes were three percentage points higher than in the year-ago quarter.

For the first half of 2001, Central Region revenues were up 20.6 percent. Property EBITDA rose 17.9 percent.

Managed Properties:

The company earned higher management fees at its Indian casinos due to improved performances at the properties. But it earned lower fees in New Orleans and from Star City in Sydney, Australia, as terms of those fee agreements were changed from the prior year's quarter.

Other Items:

Corporate expense decreased 6.5 percent from the second quarter of 2000. For the first half of 2001, corporate expense was up slightly, but comprised the same percentage of revenue as in the year-ago six-month period.

Losses from affiliates were significantly lower in the 2001 second quarter than in the year-ago quarter as the company incurred significantly lower losses at Harrah's New Orleans casino. Interest expense increased in the second quarter due to a $2.7 million pre-tax charge arising from an initiative to reduce the income-statement volatility of a deferred compensation program and a higher level of debt. No shares were repurchased under the company's stock-repurchase program during the second quarter of 2001. The company can repurchase up to 1.2 million shares under its current Board-approved authorization, as it acquired approximately 3.3 million shares at an average price of $29.71 after the close of the second quarter. 

The company recorded a second-quarter $5.4 million pre-tax charge to write off its investment in Zoho Corporation.

Founded more than 60 years ago, Harrah's Entertainment Inc. is the most recognized and respected name in the casino-entertainment industry, operating 21 casinos in the United States under the Harrah's, Showboat, Rio and Players brand names. With a combined database of more than 23 million players, Harrah's Entertainment is focused on building loyalty and value with its target customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership.

This release includes "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.