| HARRAHS ENTERTAINMENT INC Item 1A Risk Factors |
| We are subject to extensive governmental regulation and taxation policies, the enforcement of which could adversely impact our business, financial condition and results of operations |
| We are subject to extensive gaming regulations and political and regulatory uncertainty |
| Regulatory authorities in the foreign countries that we operate, as well as at the US federal, state and local levels have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could adversely impact our business, financial condition and results of operations |
| From time to time, individual jurisdictions have also considered legislation or referendums, such as bans on smoking in casinos and other entertainment and dining facilities, which could adversely impact our operations |
| The likelihood or outcome of similar legislation and referendums in the future cannot be predicted |
| The casino entertainment industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate |
| From time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the administration of such laws, including increases in tax rates, which would affect the industry |
| If adopted, such changes could adversely impact our business, financial condition and results of operations |
| The development and construction of new hotels, casinos and gaming venues and the expansion of existing ones are susceptible to delays, cost overruns and other uncertainties, which could have an adverse effect on our business, financial condition and results of operations |
| We may decide to develop, construct and open new hotels, casinos and other gaming venues in response to opportunities that may arise, including developments in Singapore, Slovenia, Spain, Pennsylvania and the Bahamas previously disclosed |
| Future development projects and acquisitions may require significant capital commitments and could result in potentially dilutive issuances of equity securities, the incurrence of additional debt, guarantees of third party-debt, the incurrence of contingent liabilities and an increase in amortization expense related to intangible assets, which could have an adverse effect upon our business, financial condition and results of operations |
| The development and construction of new hotels, casinos and gaming venues and the expansion of existing ones, such as our expansions at our Harrah’s Atlantic City and Harrah’s New Orleans properties, are susceptible to various risks and uncertainties, such as: · the existence of acceptable market conditions and demand for the completed project; · general construction risks, including cost overruns, change orders and plan or specification modification, shortages of equipment, materials or skilled labor, labor disputes, unforeseen environmental, engineering or geological problems, work stoppages, fire and other natural disasters, construction scheduling problems and weather interferences; 8 ______________________________________________________________________ · changes and concessions required by governmental or regulatory authorities; · delays in obtaining, or inability to obtain, all licenses, permits and authorizations required to complete and/or operate the project; and · disruption of our existing operations and facilities |
| Our failure to complete any new development or expansion project as planned, on schedule, within budget or in a manner that generates anticipated profits, could have an adverse effect on our business, financial condition and results of operations |
| Servicing our indebtedness will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control |
| Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future |
| Harrah’s Entertainment, Inc |
| conducts substantially all of its operations through its subsidiaries |
| As a result, our ability to meet our debt service obligations substantially depends upon our subsidiaries’ cash flows and payments of funds to us by our subsidiaries |
| An economic downturn in a region in which we operate may adversely impact our business, results of operations and financial condition |
| Based on our current level of operations and recent acquisitions, including the acquisition of Caesars, we believe our cash flow from operations, available cash and available borrowings under our credit facility will be adequate to meet our liquidity needs for the foreseeable future |
| There can be no assurances, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs |
| We may need to refinance all or a portion of our indebtedness on or before maturity |
| There can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all |
| Acts of terrorism and war and natural disasters may negatively impact our future profits |
| Terrorist attacks and other acts of war or hostility have created many economic and political uncertainties |
| We cannot predict the extent to which terrorism, security alerts or war, or hostilities in Iraq will continue to directly or indirectly impact our business and operating results |
| As a consequence of the threat of terrorist attacks and other acts of war or hostility in the future, premiums for a variety of insurance products have increased, and some types of insurance are no longer available |
| Given current conditions in the global insurance markets, we are predominately uninsured for losses and interruptions caused by terrorist acts and acts of war |
| If any such event were to affect our properties, we would likely be adversely impacted |
| In addition, natural disasters such as major fires, floods, hurricanes and earthquakes could also adversely impact our business and operating results |
| For example, four of our properties were closed due to the damage sustained from Hurricanes Katrina and Rita in August and September 2005 |
| Such events could lead to the loss of use of one or more of our properties for an extended period of time and disrupt our ability to attract customers to certain of our gaming facilities |
| If any such event were to affect our properties, we would likely be adversely impacted |
| In most cases, we have insurance that covers portions of any losses from a natural disaster, but it is subject to deductibles and maximum payouts in many cases |
| Although we may be covered by insurance from a natural disaster, the timing of our receipt of insurance proceeds, if any, is out of our control |
| Additionally, a natural disaster affecting one or more of our properties may affect the level and cost of 9 ______________________________________________________________________ insurance coverage we may be able to obtain in the future, which may adversely affect our financial position |
| Work stoppages and other labor problems could negatively impact our future profits |
| A lengthy strike or other work stoppage at one of our casino properties or construction projects could have an adverse effect on our business and results of operations |
| From time to time, we have also experienced attempts to unionize certain of our non-union employees |
| While these efforts have achieved only limited success to date, we cannot provide any assurance that we will not experience additional and more successful union activity in the future |
| We may not realize all of the anticipated benefits of our acquisition of Caesars |
| Our ability to realize the anticipated benefits of our acquisition of Caesars will depend, in part, on our ability to integrate the businesses of Caesars with our businesses |
| The combination of two independent companies is a complex, costly and time-consuming process |
| This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected |
| The difficulties of combining the operations of the companies include, among others: · coordinating marketing functions; · unanticipated issues in integrating information, communications and other systems; · unanticipated incompatibility of purchasing, logistics, marketing and administration methods; · retaining key employees; · consolidating corporate and administrative infrastructures; · the diversion of management’s attention from ongoing business concerns; and · coordinating geographically separate organizations |
| There is no assurance that our acquisition of Caesars will realize the full benefits anticipated |
| The risks associated with our international operations could reduce our profits |
| Some of our properties are located in countries outside the United States |
| Additionally, we have announced intentions to build additional facilities outside the United States |
| International operations are subject to inherent risks including: · variation in local economies; · currency fluctuation; · greater difficulty in accounts receivable collection; · trade barriers; · burden of complying with a variety of international laws; and · political and economic instability |
| If we are unable to effectively compete against our competitors, our profits will decline |
| The gaming industry is highly competitive and our competitors vary considerably by their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity |
| We also compete with other non-gaming resorts and vacation areas, and with various other entertainment businesses |
| 10 ______________________________________________________________________ In recent years, with fewer new markets opening for development, competition in existing markets has intensified |
| The expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we operate, and this intense competition is expected to continue |
| These competitive pressures have and are expected to continue to adversely affect our financial performance in certain markets |
| In particular, our business may be adversely impacted by the additional gaming and room capacity in Nevada, New Jersey, Mississippi, Missouri, Michigan, Indiana, Iowa, Illinois, Pennsylvania, Louisiana, Canada, Spain, Uruguay, Singapore, Slovenia, Bahamas and/or other projects not yet announced in any of the other markets in which we operate or intend to operate |
| In addition, our operations located in New Jersey and Nevada may be adversely impacted by the expansion of Native American gaming in New York and California |
| PRIVATE SECURITIES LITIGATION REFORM ACT This Annual Report on Form 10-K contains or may contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 |
| These statements can be identified by the fact that they do not relate strictly to historical or current facts |
| We have based these forward-looking statements on our current expectations about future events |
| Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements |
| These forward-looking statements are found at various places throughout the report |
| These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings and future financial results, wherever they occur in this report, are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements |
| These forward-looking statements should, therefore, be considered in light of various important factors set forth above and from time to time in our filings with the Securities and Exchange Commission |
| In addition to the risk factors set forth above, important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation: · the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming and hotel industry in particular; · construction factors, including delays, increased costs for labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues; · the effects of environmental and structural building conditions relating to our properties; · our ability to timely and cost-effectively integrate Caesars into our operations; · access to available and reasonable financing on a timely basis; · the ability of purchasers of any of our assets subject to sale agreements to close the purchases on a timely basis; · changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; 11 ______________________________________________________________________ · litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; · the ability of our customer-tracking, customer loyalty and yield-management programs to continue to increase customer loyalty and same store or hotel sales; · the ability to recoup costs of capital investments through higher revenues; · acts of war or terrorist incidents or natural disasters; · access to insurance on reasonable terms for our assets; · abnormal gaming holds; and · the effects of competition, including locations of competitors and operating and market competition |
| You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events, except as required by law |