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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR

|o | Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 1-14573

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PARK PLACE ENTERTAINMENT CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

88-0400631(I.R.S. Employer Identification No.)3930 Howard Hughes Parkway
Las Vegas, Nevada(Address of principal executive offices)

89109(Zip code)


(702) 699-5000(Registrant's telephone number, including area code)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Title of Each Class

Outstanding at May 1, 2002Common Stock, par value $0.01 per share

302,108,883


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PARK PLACE ENTERTAINMENT CORPORATION
INDEX

|         |  |                                                                                            |  | Page 
|-------- |  | ------------------------------------------------------------------------------------------ |  | -----
|PART I.  |  | FINANCIAL INFORMATION                                                                      |  |      
|Item 1.  |  | Unaudited Condensed Consolidated Financial Statements                                      |  |      
|         |  | Condensed Consolidated Balance Sheets March 31, 2002 and December 31, 2001                 |  | 3    
|         |  | Condensed Consolidated Statements of Operations
Three months ended March 31, 2002 and 2001 |  | 4    
|         |  | Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2002 and 2001 |  | 5    
|         |  | Notes to Condensed Consolidated Financial Statements                                       |  | 6-9  
|Item 2.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations      |  | 10-17
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                 |  | 17   
|PART II. |  | OTHER INFORMATION                                                                          |  |      
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                           |  | 18   
|         |  | Signatures                                                                                 |  | 19   

2

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PARK PLACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except par value)
(unaudited)

|                                     |                                                                                                                                                                     | March 31,
2002                             |   | December 31,
2001 |      
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ----------------- | -----
|Assets                               |                                                                                                                                                                     |                                            |   |                   |      
|                                     | Cash and equivalents                                                                                                                                                |                                            | $ | 328               |      
|                                     | Accounts receivable, net                                                                                                                                            |                                            |   | 206               |      
|                                     | Inventory, prepaids, and other                                                                                                                                      |                                            |   | 142               |      
|                                     | Income taxes receivable                                                                                                                                             |                                            |   |                  |      
|                                     | Deferred income taxes                                                                                                                                               |                                            |   | 114               |      
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total current assets                       |   |                   | 790  
|                                     | Investments                                                                                                                                                         |                                            |   | 203               |      
|                                     | Property and equipment, net                                                                                                                                         |                                            |   | 7,683             |      
|                                     | Goodwill, net                                                                                                                                                       |                                            |   | 832               |      
|                                     | Other assets, net                                                                                                                                                   |                                            |   | 260               |      
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total assets                               |   | $                 | 9,768
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|Liabilities and stockholders' equity |                                                                                                                                                                     |                                            |   |                   |      
|                                     | Accounts payable and accrued expenses                                                                                                                               |                                            | $ | 604               |      
|                                     | Current maturities of long-term debt                                                                                                                                |                                            |   | 1                 |      
|                                     | Income taxes payable                                                                                                                                                |                                            |   | 2                 |      
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total current liabilities                  |   |                   | 607  
|                                     | Long-term debt, net of current maturities                                                                                                                           |                                            |   | 5,208             |      
|                                     | Deferred income taxes, net                                                                                                                                          |                                            |   | 1,034             |      
|                                     | Other liabilities                                                                                                                                                   |                                            |   | 87                |      
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total liabilities                          |   |                   | 6,936
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|Commitments and contingencies        |                                                                                                                                                                     |                                            |   |                   |      
|Stockholders' equity                 |                                                                                                                                                                     |                                            |   |                   |      
|                                     | Common stock, $0.01 par value, 400.0 million shares authorized, 322.9 million and 322.4 million shares issued at March 31, 2002 and December 31, 2001, respectively |                                            |   | 3                 |      
|                                     | Additional paid-in capital                                                                                                                                          |                                            |   | 3,792             |      
|                                     | Retained earnings (accumulated deficit)                                                                                                                             |                                            |   | (684              | )    
|                                     | Accumulated other comprehensive loss                                                                                                                                |                                            |   | (35               | )    
|                                     | Common stock in treasury at cost, 21.1 million shares at                                                                                                            |                                            |   |                   |      
|                                     |                                                                                                                                                                     | March 31, 2002 and December 31, 2001       |   |                   | (244 
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total stockholders' equity                 |   |                   | 2,832
|                                     |                                                                                                                                                                     |                                            |   |                   |      
|                                     |                                                                                                                                                                     | Total liabilities and stockholders' equity |   | $                 | 9,768
|                                     |                                                                                                                                                                     |                                            |   |                   |      

See notes to condensed consolidated financial statements

3

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PARK PLACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)

|                                                     |                                                      | Three months ended
March 31, |      
|---------------------------------------------------- | ---------------------------------------------------- | ---------------------------- | -----
|
|Revenues                                             |                                                      |                              |      
|                                                     | Casino                                               |                              | $    
|                                                     | Rooms                                                |                              |      
|                                                     | Food and beverage                                    |                              |      
|                                                     | Other revenue                                        |                              |      
|                                                     |                                                      |                              |      
|                                                     |                                                      |                              | 1,158
|                                                     |                                                      |                              |      
|Expenses                                             |                                                      |                              |      
|                                                     | Casino                                               |                              |      
|                                                     | Rooms                                                |                              |      
|                                                     | Food and beverage                                    |                              |      
|                                                     | Other expense                                        |                              |      
|                                                     | Depreciation and amortization                        |                              |      
|                                                     | Corporate expense                                    |                              |      
|                                                     |                                                      |                              |      
|                                                     |                                                      |                              | 999  
|                                                     |                                                      |                              |      
|Operating income                                     |                                                      |                              | 159  
|                                                     | Interest and dividend income                         |                              |      
|                                                     | Interest expense, net of interest capitalized        |                              |      
|                                                     | Interest expense, net from unconsolidated affiliates |                              |      
|                                                     |                                                      |                              |      
|Income before income taxes, minority interest and    |                                                      |                              |      
|cumulative effect of accounting change               |                                                      |                              | 70   
|                                                     | Provision for income taxes                           |                              |      
|                                                     | Minority interest, net                               |                              |      
|                                                     |                                                      |                              |      
|Income before cumulative effect of accounting change |                                                      |                              | 40   
|Cumulative effect of accounting change               |                                                      |                              | (979 
|                                                     |                                                      |                              |      
|Net income (loss)                                    |                                                      | $                            | (939 
|                                                     |                                                      |                              |      
|Basic earnings (loss) per share                      |                                                      |                              |      
|                                                     | Income before cumulative effect of accounting change |                              | $    
|                                                     | Cumulative effect of accounting change               |                              |      
|                                                     |                                                      |                              |      
|                                                     | Net income (loss) per share                          |                              | $    
|                                                     |                                                      |                              |      
|Diluted earnings (loss) per share                    |                                                      |                              |      
|                                                     | Income before cumulative effect of accounting change |                              | $    
|                                                     | Cumulative effect of accounting change               |                              |      
|                                                     |                                                      |                              |      
|                                                     | Net income (loss) per share                          |                              | $    
|                                                     |                                                      |                              |      

See
notes to condensed consolidated financial statements

4

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PARK PLACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (in millions)  (unaudited)

|                                                  |                                                                                          | Three months ended
March 31,           |                                          
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------- | -----------------------------------------
|
|Operating activities                              |                                                                                          |                                        |                                          
|                                                  | Net income (loss)                                                                        |                                        | $                                        
|                                                  | Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                        |                                          
|                                                  |                                                                                          | Depreciation and amortization          |                                          
|                                                  |                                                                                          | Cumulative effect of accounting change |                                          
|                                                  |                                                                                          | Change in working capital components   |                                          
|                                                  |                                                                                          | Change in deferred income taxes        |                                          
|                                                  |                                                                                          | Other                                  |                                          
|                                                  |                                                                                          |                                        |                                          
|                                                  |                                                                                          |                                        | Net cash provided by operating activities
|                                                  |                                                                                          |                                        |                                          
|Investing activities                              |                                                                                          |                                        |                                          
|                                                  | Capital expenditures                                                                     |                                        |                                          
|                                                  | Change in investments                                                                    |                                        |                                          
|                                                  | Other                                                                                    |                                        |                                          
|                                                  |                                                                                          |                                        |                                          
|                                                  |                                                                                          | Net cash used in investing activities  |                                          
|                                                  |                                                                                          |                                        |                                          
|Financing activities                              |                                                                                          |                                        |                                          
|                                                  | Change in credit facilities and commercial paper                                         |                                        |                                          
|                                                  | Proceeds from issuance of notes                                                          |                                        |                                          
|                                                  | Purchases of treasury stock                                                              |                                        |                                          
|                                                  | Proceeds from exercise of stock options                                                  |                                        |                                          
|                                                  | Other                                                                                    |                                        |                                          
|                                                  |                                                                                          |                                        |                                          
|                                                  |                                                                                          | Net cash used in financing activities  |                                          
|                                                  |                                                                                          |                                        |                                          
|Decrease in cash and equivalents                  |                                                                                          |                                        |                                         
|Cash and equivalents at beginning of period       |                                                                                          |                                        | 328                                      
|                                                  |                                                                                          |                                        |                                          
|Cash and equivalents at end of period             |                                                                                          | $                                      | 328                                      
|                                                  |                                                                                          |                                        |                                          
|Supplemental Disclosures of Cash Flow Information |                                                                                          |                                        |                                          
|Cash paid for:                                    |                                                                                          |                                        |                                          
|                                                  | Interest, net of amounts capitalized                                                     |                                        | $                                        
|                                                  |                                                                                          |                                        |                                          
|                                                  | Income taxes, net of refunds                                                             |                                        | $                                        
|                                                  |                                                                                          |                                        |                                          

See
notes to condensed consolidated financial statements

5

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PARK PLACE ENTERTAINMENT CORPORATION AND SUBSIDIARIES  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (UNAUDITED)

Note 1. The Company

Park Place Entertainment Corporation ("Park Place" or the "Company"), a Delaware corporation, was formed in June 1998. The Company is primarily engaged in
the ownership, operation, and development of gaming facilities. The operations of the Company currently are conducted under the Caesars, Bally's, Paris, Flamingo, Grand, Hilton, and Conrad brands. The
Company operates a total of twenty-eight casinos, including seventeen wholly owned casino hotels located in the United States; of which eight are located in Nevada; four are located in Atlantic City,
New Jersey; and five are located in Mississippi. The Company has an 82 percent owned and managed riverboat casino in Harrison County, Indiana and a 49.9 percent owned and managed
riverboat casino in New Orleans. The Company partially owns and manages one casino hotel in Punta del Este, Uruguay, two casinos in Nova Scotia, Canada, one casino in South Africa, and has an interest
in two casinos on cruise ships. The Company provides management services to two casino hotels in Australia, a casino in Windsor, Canada and the slot operations at the Dover Downs racetrack in
Delaware.

Note 2. Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and investments in unconsolidated affiliates, which are
50 percent or less owned, accounted for under the equity method. All material intercompany accounts and transactions are eliminated.

The
condensed consolidated financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities
and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments)
necessary for a fair presentation of results for the interim periods have been made. The results for the three month period are not necessarily indicative of results to be expected for the full fiscal
year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001.

Reclassifications

The consolidated financial statements for prior periods reflect certain reclassifications to conform to classifications adopted in the current period. These
reclassifications have no effect on previously reported net income.

EITF
00-14 "Accounting for Certain Sales Incentives," which is effective January 1, 2002, focuses on the accounting for, and presentation of, discounts, coupons, and
rebates. EITF 00-14 requires that cash or equivalent amounts provided or returned to customers as part of a transaction should not be shown as an expense but should be an offset to the
related revenue. The Company's casinos offer cash inducements and match-play coupons to customers to encourage visitation and play at the casinos. The Company early adopted the provisions
of EITF 00-14 for 2001 year-end reporting.

6

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With
the adoption of the new standard, the prior-year period has been reclassified to conform to the new presentation. This resulted in a reduction of casino revenues (and a
corresponding reduction in casino expenses) of $34 million in 2001. The requirements of EITF 00-14 did not have an impact on previously reported operating income or net income.

Note 3. Goodwill and Other Intangible AssetsAdoption of Statement of Financial Accounting Standards No. 142

On January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Accounting for Goodwill and
Other Intangible Assets." Under SFAS No. 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Separable intangible
assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives (but with no maximum life).

As
of January 1, 2002, the Company had approximately $1.8 billion of unamortized goodwill. Approximately two-thirds of the total relates to the acquisition of
the Bally's properties in 1996, while the remainder relates primarily to the Caesars acquisition in December 1999. In accordance with the initial adoption of SFAS No. 142, each property
with assigned goodwill is to be valued as an operating entity. If the fair value of the operating entity is greater than the book value, including assigned goodwill, no further testing is required.
However, if the book value, including goodwill, is greater than the fair value of the operating entity, the assets and liabilities of the operating entity will need to be valued. The difference
between the fair value of the operating entity and the fair value of the assets is the implied fair value of goodwill. To the extent that the implied fair value of goodwill is less than the book value
of goodwill, an impairment charge will be recognized as a cumulative effect of a change in accounting upon adoption.

The
Company engaged an independent company to assist in the valuation of properties with a significant amount of assigned goodwill. The fair value of the operating entities was
determined using a combination of a discounted cash flow model, a guideline company method using valuation multiples and similar transactions method. Based on this analysis and the tests noted above,
the Company completed its implementation analysis of goodwill arising from prior acquisitions and recorded an impairment charge of $979 million which has been recorded as a cumulative effect of
accounting change in the first quarter of 2002. There were no other additions or adjustments to goodwill during the three months ended March 31, 2002.

In
the first quarter of 2001, the Company recorded goodwill amortization of $12 million. Had the new rules been in effect for the prior period, the Company would have reported the
following (in millions):

Three months ended
March 31, 2001Net income as reported

$
45Add back: Goodwill amortization


12Adjusted net income

$
57Net income per share as reportedBasic and Diluted

$
0.15Adjusted net income per shareBasic and Diluted

$
0.19


7

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Note 4. Earnings (Loss) Per Share

Basic earnings (loss) per share ("EPS") is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period.
The basic weighted-average number of common shares outstanding for the three months ended March 31, 2002 and 2001 was 302 million and 298 million, respectively. Diluted EPS
reflects the effect of assumed stock option exercises. The dilutive effect of the assumed exercise of stock options increased the weighted-average number of common shares by 2 million and
4 million for the three months ended March 31, 2002 and 2001, respectively.

Note 5. Comprehensive Income (Loss)

Comprehensive income (loss) is the total of net income (loss) and all other non-stockholder changes in equity. Comprehensive income (loss) for the
three months ended March 31, 2002 and 2001 is as follows (in millions):

Three months ended
March 31,2002

2001Net income (loss)

$
(939
)
$
45Currency translation adjustment





(6
)Comprehensive income (loss)

$
(939
)
$
39


Note 6. Long-Term Debt

Long-term debt is as follows (in millions):

March 31,
2002

December 31,
2001Senior and senior subordinated notes, net of unamortized discount of $6 million and $7 million, respectively

$
3,769

$
3,393Credit facilities


1,435


1,904Other


5


115,209


5,308Less current maturities


(1
)

(7
)Net long-term debt

$
5,208

$
5,301


In
March 2002, the Company issued $375 million of 7.875% senior subordinated notes due 2010 through a private placement offering to institutional investors. The Company has
commenced an exchange of these notes for notes registered under the Securities Act of 1933, as amended. The notes are redeemable at any time prior to their maturity at the redemption prices described
in the indenture governing such notes. The notes are unsecured obligations, rank equal with the Company's other senior subordinated indebtedness and are junior to all the Company's senior
indebtedness. Proceeds from this offering were used to reduce borrowings under the credit facilities.

Note 7. Commitments and Contingencies

Litigation

Park
Place and its subsidiaries are party to various legal proceedings incidental to its business. The Company believes that all the actions brought against it are without merit and will
continue to vigorously defend against them. While any proceeding or litigation has an element of uncertainty, the

8

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Company believes that the final outcome of these matters is not likely to have a material adverse effect upon the Company's results of operations or financial position. For a discussion of certain
material litigation to which the Company and its subsidiaries are a party, see the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Note 8. Subsequent Event

On February 20, 2002, the Company entered into an agreement with Jupiters Limited, whereby Jupiters Limited will purchase 50 percent of the
Company's 19.9% equity interest in Jupiters Limited. The Company also entered into a separate agreement to sell its remaining equity interest in Jupiters Limited to institutional investors. On
April 17, 2002, Park Place completed the sale of the Jupiters Limited equity interest and received total gross proceeds of approximately $120 million. The proceeds were used to pay down
debt. As a result of this transaction, the Company will record a one-time pre-tax gain of approximately $44 million in the second quarter of 2002. Although the Company has sold
its equity interest in Jupiters Limited, it will continue to manage the two Jupiters' Queensland casino hotels.

9

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Results of operations include our wholly owned subsidiaries and investments accounted for under the equity method of accounting. We currently operate the
following portfolio of properties under the Caesars, Bally's, Paris, Flamingo, Grand, Hilton, and Conrad brand names:



The
following discussion presents an analysis of the results of operations for the three months ended March 31, 2002. EBITDA (earnings before interest, taxes, depreciation and
amortization) is presented supplementally in the tables below and in the discussion of operating results because this is how we review and analyze the results of each property. EBITDA can be computed
directly from our consolidated statements of operations by adding the amounts shown for depreciation and amortization to operating income (which is income before interest, taxes and cumulative effect
of accounting change). This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States of
America (such as operating income or net income), nor should it be considered as an indicator of our overall financial performance. Our calculation of EBITDA may be different from the calculation used
by other companies and therefore comparability may be limited.

10

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Comparison of Three Months Ended March 31, 2002 and 2001

A summary of our consolidated revenue and earnings for the three months ended March 31, 2002 and 2001 is as follows (in millions, except per share
amounts):

|                                                                                   |                                       | Three months ended
March 31, |      
|---------------------------------------------------------------------------------- | ------------------------------------- | ---------------------------- | -----
|
|Revenue                                                                            |                                       | $                            | 1,158
|Operating income                                                                   |                                       |                              | 159  
|Income before cumulative effect of accounting change                               |                                       |                              | 40   
|Net income (loss)                                                                  |                                       |                              | (939 
|Basic and diluted earnings per share before cumulative effect of accounting change |                                       |                              | 0.13 
|Basic earnings (loss) per share                                                    |                                       |                              | (3.11
|Diluted earnings (loss) per share                                                  |                                       |                              | (3.09
|Other operating data:                                                              |                                       |                              |      
|                                                                                   | Cash provided by operating activities |                              | $    
|                                                                                   | Cash used in investing activities     |                              |      
|                                                                                   | Cash used in financing activities     |                              |      
|                                                                                   | EBITDA                                |                              |      

We
recorded income before a cumulative effect of accounting change of $40 million or diluted earnings per share of $0.13 for the three months ended March 31, 2002 compared
with net income of $45 million or diluted earnings per share of $0.15 for the three months ended March 31, 2001. The adoption of SFAS No. 142 "Accounting for Goodwill and Other
Intangible Assets," on January 1, 2002 required that we no longer amortize goodwill and that we compare the fair value of our operating entities with goodwill to the book value of those
entities in order to determine if an impairment of our goodwill existed. Based on this analysis, we recognized an impairment charge of $979 million as a cumulative effect of an accounting
change in the first quarter of 2002. Including this cumulative effect of
accounting change, we reported a net loss of $939 million or a diluted loss per share of $3.09 for the first quarter ended March 31, 2002. Results for the first quarter of 2001 include
$12 million of goodwill amortization. For comparative purposes, net income in the first quarter of 2001 would have been $57 million, or $0.19 per share excluding this goodwill
amortization. From an operating standpoint, we posted strong first quarter results in the East and Mid-South, while Las Vegas continues to recover after the effects of the terrorist
attacks on September 11, 2001. See the discussion below for a further analysis.

Western Region

|                   |                      | Revenues
Three months ended
March 31, |     | EBITDA
Three months ended
March 31,
|------------------ | -------------------- | ------------------------------------- | --- | -----------------------------------
|
|
|Paris/Bally's      |                      | $                                     | 161 |                                    
|Caesars Palace     |                      |                                       | 112 |                                    
|Flamingo Las Vegas |                      |                                       | 70  |                                    
|Other              |                      |                                       | 137 |                                    
|                   |                      |                                       |     |                                    
|                   | Total Western Region |                                       | $   | 480                                
|                   |                      |                                       |     |                                    

The
Western Region reported a decrease of $47 million in EBITDA for the first quarter of 2002 compared to the first quarter of 2001. Revenues decreased 13 percent between
the two periods. The

11

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shortfall was primarily due to weak results early in the quarter due to the continued impact of the terrorists attacks of September 11, 2001, coupled with a two percentage point decline in
table hold versus last year's first quarter. The Company experienced increases in hotel occupancy, average daily rate and gaming volumes as the quarter progressed. In March 2002, occupancy in
our Las Vegas properties was 98 percent with average daily rates at approximately 99 percent of last year's rate. For the three months ended March 31, 2002, occupancy for the
Western Region was 89 percent compared to 92 percent in the prior year. The average room rate decreased to $94 compared to $98 in the prior year's quarter.

Paris/Bally's
Las Vegas reported EBITDA of $46 million in the first quarter of 2002 versus $59 million in the first quarter of 2001. Revenues declined 11 percent
year over year. The decline is primarily attributable to a three percentage point decline in table hold as compared to last year.

Caesars
Palace reported a decrease in revenues of 12 percent between the first quarter of 2002 and 2001. EBITDA was $17 million during the first quarter of 2002, down from
last year's $31 million. The shortfall was primarily due to sports book losses associated with the Super Bowl, lower table game win and severance charges. In addition, the property is
undergoing extensive expansion and is experiencing business disruption from ongoing construction at two Strip entrances.

Flamingo
Las Vegas produced $22 million in EBITDA for the quarter compared to $29 million last year. Early on in the quarter, room occupancy and average room rates were
below the prior year as a result of the events of September 11, 2001. The property continued to gain momentum throughout the quarter and as the Las Vegas market recovers, we expect the Flamingo
Las Vegas to return to its normal operating results.

Other
Nevada properties (Las Vegas Hilton, Reno Hilton, Caesars Tahoe and Flamingo Laughlin) on a combined basis reported $20 million in EBITDA for the first quarter of 2002. That
compares to $33 million in EBITDA for the first quarter of 2001, which also included results from the Flamingo Reno, which was sold in the fourth quarter of 2001. This decrease is primarily due
to decreased gaming volumes at each of these properties and a 5 point decrease in table hold at the Las Vegas Hilton.

Current
and potential competitors have indicated expansion and new development plans for the Las Vegas Strip, which are in the early planning stages. Any new hotel/casino capacity could
intensify competition in the Las Vegas marketplace and/or broaden Las Vegas' appeal to an expanded customer base. In addition, the proliferation of Native American gaming in western states, especially
California, could have an adverse effect on our operating results in Nevada. We cannot predict if these projects or other projects will be completed or how any additional capacity would affect our
future operating results.

Eastern Region

|                      |                      | Revenues
Three months ended
March 31, |     | EBITDA
Three months ended
March 31,
|--------------------- | -------------------- | ------------------------------------- | --- | -----------------------------------
|
|
|Bally's Atlantic City |                      | $                                     | 128 |                                    
|Caesars Atlantic City |                      |                                       | 124 |                                    
|Atlantic City Hilton  |                      |                                       | 68  |                                    
|Other                 |                      |                                       | 37  |                                    
|                      |                      |                                       |     |                                    
|                      | Total Eastern Region |                                       | $   | 357                                
|                      |                      |                                       |     |                                    

12

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The
Eastern Region properties posted significant gains in the first quarter of 2002 compared to the first quarter of 2001. These properties were not as impacted by the
September 11, 2001 terrorist attacks as the Atlantic City customers travel primarily by car or bus. The region generated $97 million of EBITDA in the first quarter of 2002 compared to
$82 million in the prior-year quarter. Revenues increased 17 percent to $357 million in the three months ended March 31, 2002 compared to $305 million in the same period a
year ago. The 2002 results include the contribution of the Claridge Hotel and Casino acquired in June 2001. The average occupancy percent for our Atlantic City properties was 96 percent
for the first quarter of 2002, which was the same as the prior year's quarter. The average room rate decreased to $80 for the three months ended March 31, 2002 compared to $85 in the prior
year.

Bally's
Atlantic City produced a 14 percent increase in EBITDA and a 4 percent increase in revenues in the first quarter of 2002 versus the first quarter of 2001. Table
game win was up approximately 10 percent and slot win was essentially unchanged versus last year's first quarter results.

EBITDA
at Caesars Atlantic City improved approximately 21 percent in the first quarter of 2002 to $40 million compared to $33 million in 2001. The EBITDA increase
was due to a 14 percent increase in slot handle, a 7 percent increase in table play and a one percentage point higher table hold.

The
Atlantic City Hilton generated $12 million in EBITDA and $68 million in revenues in the first quarter of 2002, which is comparable to last year's first quarter results.
The Atlantic City Hilton experienced a one percent improvement in slot handle and a two percent increase in table game drop during the quarter. However table hold was more than two percentage points
lower than last year, causing EBITDA to be flat with the prior year.

Certain
competitors have begun construction on a 2000-room hotel/casino project in Atlantic City with an announced completion date in 2003. Other competitors have announced
or begun expansion projects with expected completion dates in 2002 and beyond. Such potential new hotel/casino capacity could intensify competition in the Atlantic City marketplace, and/or broaden
Atlantic City's appeal to an expanded customer base. In addition, a proliferation of Native American gaming in New York or the legalization or expansion of casino gaming in jurisdictions located near
our existing hotel/casinos would have an adverse effect on our operating results in Atlantic City. We cannot predict if these projects or other projects will be completed or how any additional
capacity would affect our future operating results.

Mid-South Region

|                |                        | Revenues
Three months ended
March 31, |    | EBITDA
Three months ended
March 31,
|--------------- | ---------------------- | ------------------------------------- | -- | -----------------------------------
|
|
|Grand Biloxi    |                        | $                                     | 59 |                                    
|Grand Tunica    |                        |                                       | 56 |                                    
|Caesars Indiana |                        |                                       | 68 |                                    
|Grand Gulfport  |                        |                                       | 48 |                                    
|Other           |                        |                                       | 53 |                                    
|                |                        |                                       |    |                                    
|                | Total Mid-South Region |                                       | $  | 284                                
|                |                        |                                       |    |                                    

For
the first quarter of 2002, the Mid-South Region generated a 4 percent increase in EBITDA and an 8 percent increase in revenues compared to the first quarter
of 2001. Similar to our Atlantic City properties, the Mid-South Region is primarily a market in which customers arrive by motor vehicles and therefore was not impacted as much as Las Vegas
as a result of the events of

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September 11, 2001. Caesars Indiana recorded a 27 percent year-over-year increase in quarterly EBITDA and a 28 percent increase in quarterly revenue. The
EBITDA results in Tunica were up approximately 9 percent compared to last year. However, the Biloxi market continued to experience competitive pressure during the quarter, which in part caused
the $3 million decrease in EBITDA and flat revenues at Grand Biloxi. The Mid-South Region's average room rate was $57 compared to $56 in the prior year and the average occupancy
percentage was 90 percent in the first quarter of 2002 versus 91 percent in the prior year.

Caesars
Indiana reported a 27 percent improvement in EBITDA, to $19 million, in the first quarter of 2002 compared to the prior year. The increase was driven primarily by
the addition of the new 500-room hotel that opened in late August 2001. Additional visitation to the property resulted in a 19 percent increase in table game drop and a
31 percent increase in slot handle.

Grand
Gulfport posted EBITDA of $12 million in the first quarter, equal to the first quarter of 2001. Revenues at Grand Gulfport increased 7 percent year over year in the
first quarter 2002. The property experienced increases in slot and table volumes. However, the increased revenues were offset by higher operating expenses.

Grand
Biloxi's revenues remained flat year over year and EBITDA decreased $3 million in the first quarter of 2002 compared to the first quarter of 2001. Increased gaming volumes
were offset by the costs of enhanced marketing programs used to attract more customers as well as a two percentage point decline in table hold.

For
the first quarter of 2002, EBITDA at Grand Tunica was $13 million, equal to last year's results and revenues were up 2 percent year over year. EBITDA at the Company's
two other Tunica properties, Bally's Tunica and Sheraton Tunica, was up $2 million from the year-ago quarter.

International

On a combined basis, the International properties reported EBITDA of $24 million for the first quarter of 2002 compared to $26 million for the prior
year. The Punta del Este property in Uruguay posted strong results despite its dependence on the Argentine market. On a combined basis, for the first quarter of 2002, the International properties
reported an average room rate of $85 and occupancy of
66 percent compared to an average room rate of $87 and occupancy of 73 percent for the first quarter of 2001.

On
February 20, 2002, we entered into an agreement with Jupiters Limited, whereby it will purchase 50 percent of our 19.9% equity interest in Jupiters Limited. We also
entered into a separate agreement to sell our remaining equity interest in Jupiters Limited to institutional investors. On April 17, 2002, we completed the sale of the Jupiters Limited equity
interest and received total gross proceeds of approximately $120 million. The proceeds were used to pay down debt. As a result of this transaction, the Company will record a
one-time pre-tax gain of approximately $44 million in the second quarter of 2002. Although we have sold our equity interest in Jupiters Limited, we will continue to manage the
two Jupiters' Queensland casino hotels.

Depreciation and Amortization

Depreciation and amortization expense decreased to $120 million for the first quarter of 2002 compared to $131 million for the first quarter of
2001. This decrease was primarily due to goodwill amortization of $12 million that we no longer recognize in accordance with SFAS No. 142, offset by a slight increase in depreciation
expense related to new capital projects.

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Net Interest Expense

Consolidated net interest expense decreased $15 million to $89 million for the three months ended March 31, 2002 compared to $104 for the
three months ended March 31, 2001. The decrease in net interest expense was due primarily to a decrease in the interest rates for our credit facilities. Capitalized interest for the three
months ended March 31, 2002 was $2 million compared to $3 million for the first quarter of 2001.

Income Taxes

The effective income tax rate for the three months ended March 31, 2002 was 40.0 percent before the cumulative effect of an accounting change and
42.5 percent for the three months ended March 31, 2001. The decrease in our effective income tax rate is primarily due to goodwill no longer being amortized in accordance with SFAS
No. 142. Our effective income tax rate is determined by the level and composition of pretax income subject to varying foreign, state, and local taxes.

Adoption of SFAS No. 142 "Accounting for Goodwill and Other Intangible Assets"

On January 1, 2002, we adopted the provisions of SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets." Under SFAS No. 142,
goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Separable intangible assets that are not deemed to have an indefinite life
will continue to be amortized over their useful lives (but with no maximum life).

As
of January 1, 2002, we had approximately $1.8 billion of unamortized goodwill. Approximately two-thirds of the total relates to the acquisition of the Bally's properties in
1996, while the remainder relates primarily to the Caesars acquisition in December 1999. During the first quarter of 2002, we engaged an independent company to assist in the valuation of properties
with a significant amount of assigned goodwill. The fair value of the operating entities was determined using a combination of a discounted cash flow model, a guideline company method using valuation
multiples and similar transactions method. Based on this analysis, we completed our implementation analysis of goodwill arising from prior acquisitions and recorded an impairment charge of $979
million which has been recorded as a cumulative effect of accounting change in the first quarter of 2002.

The
new accounting standard does not allow for the restatement of prior-period results to adjust for this change in accounting principle. However, it does require that pro forma results
be presented to disclose what the results would have been had the new rules been in effect in the prior periods. The pro forma amounts for the prior year are presented in Note 3 of the
condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As of March 31, 2002, we had cash and cash equivalents of $328 million. Net cash provided by operating activities for the three months ended
March 31, 2002 was $161 million. In addition, we had availability under our credit facilities of approximately $1.9 billion at March 31, 2002, subject to continuing
compliance with existing covenant restrictions. We expect to finance our operations and capital expenditures through cash flows from operations, existing cash balances, borrowings under our credit
facilities, new issuances in the public bond markets, and commercial paper borrowings.

Investing Activities

Investing cash flow activities include maintenance capital expenditures, new construction, improvement projects at existing facilities, and acquisitions. For the
three months ended March 31,

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2002, net cash used in investing activities of $64 million related to capital expenditures for normal maintenance and expansion projects. Expansion projects are primarily the
4,000-seat performing arts "Colosseum" at Caesars Palace and a connector bridge between Claridge and Bally's Atlantic City.

During
2002 we intend to spend approximately $290 million on maintenance capital expenditures at our properties, and up to $160 million on selective expansion or
improvement investments at certain of our existing properties. These projects include the addition of a golf course for Caesars Indiana, the connector bridge between the Claridge and Bally's Atlantic
City, a new strip entrance restaurant and night club complex at Paris Las Vegas, and master plan projects at Caesars Palace, including the "Colosseum."

Financing Activities

During the three months ended March 31, 2002, we reduced our debt by $99 million with the net cash flow we generated.

We
have revolving bank credit facilities with a syndicate of financial institutions. At March 31, 2002, the total aggregate commitment was $3.3 billion, consisting of a
$1.3 billion 364-day revolving facility expiring August 2002 and a $2.0 billion multi-year revolving facility expiring December 2003 with a
$1.4 billion 2-year extension upon expiration or termination of the existing multi-year facility. Approximately $1.9 billion was available at March 31,
2002, subject to continuing compliance with existing covenant restrictions.

The
credit facilities contain financial covenants including a maximum leverage ratio (total debt to EBITDA, as defined in the credit facility) of 5.50 to 1.00 and a minimum interest
coverage ratio (EBITDA, as defined in the credit facility, to interest expense) of 2.50 to 1.00. We are required to compute our actual leverage and interest coverage ratios on a rolling twelve-month
basis as of the end of each calendar quarter. If we are not in compliance with the required covenant ratios, an event of default would occur, which if not cured could cause the entire outstanding
borrowings under the credit facilities to become immediately due and payable. The maximum leverage covenant adjusts to 5.25 to 1.00 as of September 30, 2002, 5.00 to 1.00 as of
December 31, 2002, and 4.50 to 1.00 for each quarterly testing period thereafter. The minimum interest coverage covenant adjusts to 2.75 to 1.00 as of September 30, 2002 and for each
quarterly testing period thereafter. As of March 31, 2002, the Company was in compliance with the applicable covenants.

Borrowings
under the credit facilities bear interest at a floating rate and may be obtained, at our option, as LIBOR advances for varying periods, or as base rate advances, each adjusted
for an applicable margin (as further described in the credit facilities), or as competitive bid loans. The applicable interest rate is based upon the leverage ratio noted above as well as our credit
rating and may be adjusted quarterly. At March 31, 2002, LIBOR advances under the multi-year credit facility bear an all-in interest of LIBOR plus 135 basis points.

In
March 2002, we issued $375 million of 7.875% senior subordinated notes due 2010 through a private placement offering to institutional investors. We have commenced an
exchange of these notes for notes registered under the Securities Act of 1933, as amended. The notes are redeemable at any time prior to their maturity at the redemption prices described in the
indenture governing such notes. The notes are unsecured obligations, rank equal with our other senior subordinated indebtedness and are junior to all of our senior indebtedness. Proceeds from this
offering were used to reduce borrowings under the credit facilities.

FORWARD-LOOKING STATEMENTS

Factors that May Affect Future Results(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

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Certain
information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to be made by the Company or its representatives) contains or may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. The forward-looking statements include statements that
reflect management's beliefs, plans, objectives, goals, expectations, anticipations, intentions with respect to the financial condition, results of operations, future performance and business of the
Company including:



Further,
statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or other words or expressions of similar
meaning may identify forward-looking statements. These statements reflect our judgment on the date they are made and we undertake no duty to update such statements in the future. Such statements
include information relating to plans for future expansion and other business development activities as well as capital spending, financing sources and the effects of regulation (including gaming and
tax regulation) and competition. From time to time, oral or written forward-looking statements are included in the Company's periodic reports on Forms 10-K, 10-Q and
8-K, press releases and other materials released to the public.

Although
we believe that the expectations in these forward-looking statements are reasonable, any or all of the forward-looking statements in this report and in any other public
statements that are made may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Consequently, actual results
may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking
statement in this report or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such
forward-looking statements.

We
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further
disclosures made on related subjects in our subsequent reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K should be consulted.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates, and commodity prices. We
are exposed to market risk in the form of changes in interest rates and the potential impact such change may have on our variable-rate debt. We attempt to limit the impact of changes in
interest rates by balancing the mix of our borrowings pursuant to our credit facilities and commercial paper program and our long-term fixed-rate debt. We have not invested in
derivative-based financial instruments.

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PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

On March 12, 2002, the Company filed a Form 8-K dated January 29, 2002. This Form 8-K contains our earnings
release for the quarter and year ended December 31, 2001.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                   |  | PARK PLACE ENTERTAINMENT CORPORATION(Registrant)                                                                                            
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                             
|Date: May 14, 2002 |  | /s/HARRY C. HAGERTY, IIIHarry C. Hagerty, III Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Accounting Officer)

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