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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K (Mark One)[X]
    
    ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2003
 OR
 [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period
fromto
Commission file number 333-0214 HORSESHOE GAMING HOLDING CORP.  Delaware
    
    88-0425131(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 9921 Covington Cross Drive, Las Vegas, NV 89144-6835
(Address of principal executive offices) (Zip Code) Registrants telephone number, including area code: (702) 932-7800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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 12 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.  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  The aggregate market value of the equity of Horseshoe Gaming Holding Corp.
held by non-affiliates of Horseshoe Gaming Holding Corp. is inapplicable as the
equity of Horseshoe Gaming Holding Corp. is privately held. As of March 15, 2004, the Registrant had 13,336 shares of Class A Common
Stock and 9,779 of Class B Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE
None.




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HORSESHOE GAMING HOLDING
CORP.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2003 PagePART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23PART IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 8.
    
    Financial Statements and Supplementary Data
    
    
    36Item 9.
    
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    58Item 9A.
    
    Controls and Procedures
    
    
    58PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    59Item 11.
    
    Executive Compensation
    
    
    61Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    65Item 13.
    
    Certain Relationships and Related Transactions
    
    
    67Item 14.
    
    Principal Accounting Fees and Services
    
    
    68PART IVItem 15.
    
    Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    69Signatures
    
    
    
    
    72EXHIBIT 21.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I 
 Item 1. Business. General Horseshoe Gaming Holding Corp. (the Company) is a leading
multi-jurisdictional gaming company which owns and operates, through its wholly
owned subsidiaries, casinos under the Horseshoe brand. These include the
Horseshoe Bossier City Casino (Horseshoe Bossier City, Bossier or Bossier
City) in Bossier City, Louisiana, which commenced operations on July 9, 1994,
the Horseshoe Tunica Casino (Horseshoe Tunica or Tunica) in Tunica County,
Mississippi which commenced operations on February 13, 1995 and the Horseshoe
Casino Hammond (Horseshoe Hammond or Hammond) in Hammond, Indiana which
commenced operations on June 28, 1996. Hammond, along with Empress Casino
Joliet (Empress Joliet or Joliet) in Joliet, Illinois, were acquired from
Empress Entertainment, Inc. on December 1, 1999. On July 31, 2001, the Company
sold Joliet to Argosy Gaming Company. Gaming operations in Bossier City are
conducted on a riverboat that is not required to cruise. Gaming operations in
Tunica are conducted on a permanently moored barge, and Hammonds gaming
operations are conducted on a catamaran vessel that is not required to cruise. The Company was incorporated in Delaware on April 15, 1999 and prior to
such date operated under predecessor companies. The Companys headquarters are
currently located at 9921 Covington Cross Drive, Las Vegas, NV 89144-6835,
telephone (702) 932-8800. Additional information on the Company can be found
on its website at www.Horseshoe.com. On September 10, 2003, the Company and its stockholders entered into a
definitive Stock Purchase Agreement (the Harrahs Sale Agreement) with
Harrahs Entertainment, Inc. (Harrahs). Under the terms of the Harrahs
Sale Agreement, the stockholders of the Company agreed to sell all of the
outstanding capital stock of the Company to Harrahs, subject to customary
conditions, for $1.45 billion, including the assumption of debt. The
transaction is subject to regulatory approvals and is expected to be completed
in the second quarter of 2004. Operating data for the three most recent fiscal years is set forth in Item
8, pages 36 through 58 of this report. For a discussion of those results, see
Item 7, Managements Discussion and Analysis of Financial Condition and Results
of Operation, which is included on pages 25 through 35. This Annual Report on Form 10-K contains certain forward looking
statements, express or implied, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and, as
such, speak only as of the date made. The Company undertakes no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise. These forward-looking statements
generally can be identified by phrases such as the Company or its management
believes, anticipates, expects, forecasts, estimates, foresees, or
the negative or other variations thereof or comparable terminology. In
particular, they include statements relating to, among other things, future
actions, the sale of the Company, new projects, strategies, future performance,
the outcome of contingencies such as legal proceedings and future financial
results. These forward-looking statements are based on the beliefs of
management, as well as assumptions made based on information currently
available to management. The reader is cautioned that forward-looking
statements involve risks and uncertainties, which could cause actual results or
events to differ materially from those expressed or implied therein, including, 3




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but not limited to, risks associated with substantial indebtedness, debt
service and liquidity; risks of competition in the Companys existing and
future markets; failure to obtain or retain licenses or regulatory approvals;
changes in gaming laws and regulations, including taxation of gaming
operations; failure to consummate the sale of the Company to Harrahs; and acts
of war or terrorism. Bossier City Operations Market The Bossier City/Shreveport market is the largest gaming market in the
State of Louisiana. While approximately 300,000 people are full-time residents
of Bossier City/Shreveport, approximately 20 million people reside within 250
miles of the Companys Bossier City casino (approximately four hours driving
distance). The Bossier City/Shreveport market attracts a significant amount of
its gaming clientele from the Dallas/Fort Worth area of Texas. Horseshoe Bossier City The Horseshoe Bossier City is located along the east side of the Red
River, directly facing downtown Shreveport, Louisiana. The casino is located
on a riverboat, which has approximately 83,000 square feet spread out over five
decks with approximately 30,000 square feet of gaming space, including
approximately 1,670 gaming devices and 50 table games. The casino operation is
complemented by an approximately 62,000 square foot dockside pavilion with
three restaurants, a buffet, a 25-story hotel with 606 deluxe rooms, meeting
facilities, a health club and other luxury hotel amenities and a 1,770 car
parking garage. The riverboat and pavilion are joined via an enclosed,
climate-controlled boarding ramp with handicap access and escalators serving
each of the gaming decks. In addition, Horseshoe Bossier City features an
entertainment facility that provides seating for 1,300 guests. Competition The Horseshoe Bossier City competes directly with four other riverboat
casinos and a land-based horse racing facility, with approximately 900 slots,
in Shreveport and Bossier City. These five riverboat casinos and one horse
racing facility together currently comprise the Bossier City/Shreveport market
which generated $817.0 million in gaming revenues in 2003, a 1% decrease from
2002. In 2003, Horseshoe Bossier City held 22% of the gaming positions in the
Bossier City/Shreveport market, and produced approximately 31% of that markets
gaming revenues. The Bossier City/Shreveport casinos primarily draw from the Dallas/Ft.
Worth market and directly compete with a newly opened Chickasaw Nation casino,
located in Oklahoma, approximately one hour driving time north of the
Dallas/Ft. Worth metropolitan area. The Chickasaw Nation casino operates
approximately 1,100 electronic gaming devices as well as a bingo parlor and an
off track betting facility. In addition, the current Bossier City horse racing
facility is expected to add an additional 500 slot machines in the second
quarter of 2004. This will bring their total to 1,400 slot machines. The
Bossier City/Shreveport casinos also share the Houston area market with four
existing riverboats located in Lake Charles, Louisiana. The recipient of the
fifteenth and final Louisiana gaming license is expected to begin operating in
the Lake Charles market in early 2005. A land-based casino owned by the
Coushatta Indian Tribe, a 4




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horse racing facility with 1,500 slot machines located near Lake Charles,
Louisiana, and two riverboats in Baton Rouge, Louisiana also compete with the
Horseshoe Bossier City. The additional competitor at the Oklahoma facility, the increased slots at
the Bossier City horse racing facility and the new riverboat being added in
Lake Charles, Louisiana may have a material adverse impact on the operations of
Horseshoe Bossier City. Several Native American tribes have claimed the right to conduct land
based gaming in various locations in Louisiana. Recently, the Jena Band of
Choctaw Indians sought authority to take land into trust to operate a casino
within 75 miles of Horseshoe Bossier City. If the Jena Band of Choctaw Indians
is allowed to operate its proposed casino, or if other Native American tribes
were allowed to operate casinos in the area, competition would increase, which
could have a material adverse effect on our operations. If Texas or Arkansas
were to approve gaming, competition would increase, which may have a material
adverse effect on the operations of Horseshoe Bossier City. Tunica Operations Market The Tunica County, Mississippi market is the closest legalized gaming
jurisdiction to the Memphis, Tennessee metropolitan area, which is only 30
miles away. Tunica County benefits from its proximity to several major
population centers and to the popularity of the Memphis region as a vacation
destination. Over 2.1 million people live within 90 miles and over 7.4 million
people live within 200 miles of the Horseshoe Tunica. Horseshoe Tunica Horseshoe Tunica is located in Tunica County, Mississippi. The casino
operation is located on a barge of approximately 560,000 square feet. The
gaming area comprises approximately 63,000 square feet and contains
approximately 2,115 slot machines, 75 table games and 12 poker tables. The
casino facility includes three specialty restaurants, a 650 seat buffet, a
deli, bars, retail outlets, a 14-story hotel tower with 507 rooms, a health
club, meeting room facilities, an 1,100 space, four-level parking garage, and
an entertainment facility that provides seating for 1,200 guests. Competition Horseshoe Tunica competes with eight other casinos in the competitive
Tunica County, Mississippi market. The ten casinos operating in the Mississippi
North River Region, as published by the Mississippi Gaming Commission, which
include the nine Tunica casinos plus a casino in Lula, Mississippi, generated
$1.2 billion in gaming revenues in 2003, 3% below 2002. In 2003, the Horseshoe
Tunica casino held 13% of the gaming positions in the market, and produced
approximately 20% of that markets gaming revenues. Additional entrants into the market or the expansion of existing
competitors could have a material adverse effect on the operations of Horseshoe
Tunica. In 1996, the Mississippi county closest to Memphis (DeSoto County) voted
against permitting legalized gaming to be conducted aboard vessels located in
DeSoto County. Legislation passed in 1997 precludes DeSoto County from holding
a subsequent election on the 5




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issue until at least October 2004. If gaming were approved in DeSoto
County or in Arkansas or Tennessee, numerous additional sites closer to Memphis
would be available for gaming. Thus, while Tunica County is currently the
closest legalized gaming jurisdiction to the Memphis metropolitan area, there
is no assurance that this situation will not change in the future. If DeSoto
County, Arkansas or Tennessee were to approve gaming, competition would
increase, which could have a material adverse effect on the operations of
Horseshoe Tunica. Chicago Operations Market The Chicago market, which encompasses portions of both Illinois and
Indiana, consists of approximately 9.0 million people within a radius of 50
miles from downtown Chicago. The Illinois Riverboat Act authorizes ten owners
licenses for riverboat gaming operations, nine of which have been issued, and
four of which serve the Chicago metropolitan area. Current Indiana gaming
legislation authorizes a total of five licenses to operate riverboat casinos in
northern Indiana on Lake Michigan, all of which have been issued to casinos
that are currently operating, including Horseshoe Hammond. Horseshoe Hammond Horseshoe Hammond, the closest casino to downtown Chicago, includes an
approximately 125,000 square foot pavilion. The real estate used by Horseshoe
Hammond is leased from the City of Hammond and is subject to a 75-year lease.
The casino operation is located on a catamaran vessel and consists of
approximately 48,300 square feet of gaming space and contains approximately
2,000 slot machines and 50 table games. The pavilion features a steakhouse,
buffet, two deli style restaurants, coffee shop, retail shops, a 150-seat
banquet room and two lounges. The facility also includes a 1,150 space parking
garage. An additional 1,958 space parking garage is expected to be completed
in the second quarter of 2004. Competition Horseshoe Hammond primarily competes with eight casinos, four of which are
located on Lake Michigan in Indiana and four of which are located in Illinois.
The nine casinos operating in the Chicago market generated $2.3 billion in
gaming revenues in 2003, a 1% decrease from 2002. In 2003, Horseshoe Hammond
held 15% of the gaming positions in the Chicago market, and produced
approximately 15% of that markets gaming revenues. On March 15, 2004, the Illinois Gaming Board awarded the tenth and final
Illinois gaming license to Isle of Capri Casinos. Isle of Capri plans to build
a $150.0 million casino in Rosemont, Illinois, a suburb approximately 15 miles
from downtown Chicago and approximately 32 miles from Horseshoe Hammond. The
new facility is expected to open approximately eight months after receiving
final approval from the U.S. Bankruptcy Court. This new competitor in the
Chicago market may have a material adverse effect on Horseshoe Hammond. Several states surrounding Illinois and Indiana have authorized gaming
activities and other states may authorize such gaming activities in the future.
To date, riverboat and/or dockside gaming has also been approved in nearby
states such as Iowa and Missouri. Additionally, three land-based casinos
operate in Detroit, Michigan. 6




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Horseshoe Hammond competes, and expects to compete, with various gaming
operations on Native American land, including those located, or to be located,
in Michigan, Wisconsin and possibly northern Indiana. The Pokagon Band of the
Potawatomi Indians is planning to build a land-based casino in New Buffalo,
Michigan located in southwest Michigan, approximately 50 miles from Horseshoe
Hammond. In addition, the Saginaw Chippewa Tribe is currently operating one of
the largest Native American gaming complexes in the United States in Mt.
Pleasant, Michigan, approximately 250 miles northeast of Hammond, Indiana. The
opening of land based casinos, which generally have a competitive advantage
over riverboat casinos, in close proximity to Horseshoe Hammond could have a
material adverse effect on the operations of the casino. Gaming Regulatory Matters The Company is subject to state and Federal laws, which regulate
businesses generally and the gaming business specifically. Below is a brief
description of some of the more significant regulations which govern the
Company and its operations. All laws and regulations which govern the Company
are subject to change and different interpretations. Changes in laws or their
interpretation may result in the imposition of more stringent, burdensome or
expensive requirements, or the outright prohibition of an activity. Louisiana The Company conducts its Louisiana gaming operations through a subsidiary,
Horseshoe Entertainment (HE), which owns and operates the Horseshoe Casino in
Bossier City, Louisiana. The ownership and operation of casino facilities in
Louisiana are subject to extensive state and local regulation, but primarily
the licensing and regulatory control of the Louisiana Gaming Control Board. In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police, or the Louisiana Enforcement Division.
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission was authorized to establish regulations concerning
authorized routes, duration of excursions, minimum levels of insurance,
construction of riverboats and periodic inspections. The Louisiana Enforcement
Division was authorized to investigate applicants and issue licenses,
investigate violations of the statute and conduct continuing reviews of gaming
activities. The Louisiana gaming law authorizes the issuance of up to 15
licenses to conduct gaming activities on a riverboat of new construction on
certain designated waterways in accordance with applicable law. However, no
more than six licenses may be granted to riverboats operating from any
designated waterway. The State of Louisiana has granted approval to applicants for the 15
legislatively authorized licenses, five of which have been approved for the
northern region of the state in Bossier City/Shreveport. The Louisiana Gaming
Control Board awarded the fifteenth license on October 16, 2001. Prior to the
passage of legislation legalizing dockside gaming, effective April 1, 2001, in
the 2001 Special Session of the Louisiana Legislature, the Louisiana gaming law
stated that riverboat casinos must cruise. However, the Bossier
City/Shreveport casinos were granted a legislative exemption in June 1993 that
allows them to operate as dockside facilities. Louisiana permits most types of
casino games, other than bingo and sports betting, and has 7




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neither betting nor loss limits. Moreover, house credit may be extended to
qualified patrons. The only significant limitation imposed by Louisiana gaming
regulations restricts gaming space on riverboats to no more than 30,000 square
feet. Fees to the State of Louisiana for conducting gaming activities on a
riverboat are (1) $50,000 per riverboat for the first year of operation and
$100,000 per year per riverboat thereafter plus (2) 21.5% of net gaming
proceeds. The city of Bossier City also imposes a 3.2% tax on gaming revenue
plus an annual fee of $700,000. In the 1996 Special Session of the Louisiana Legislature, Louisiana
lawmakers passed a measure which established the Louisiana Gaming Control Board
and provided that it is the successor to all such prior authorities with regard
to the regulation and supervision of gaming in Louisiana except for the
regulation of horse racing and off-track betting and the conducting of
charitable gaming operations. Effective May 1, 1996, the powers, duties,
functions, and responsibilities with respect to riverboat gaming of the
Louisiana Riverboat Gaming Commission and the Louisiana Enforcement Division
were transferred to the Louisiana Gaming Control Board. The Louisiana
Enforcement Division continues to provide investigative and enforcement support
to the Louisiana Gaming Control Board. In addition, legislation was passed in 1996 authorizing the Bossier Police
Jury, the governing body of Bossier Parish, to impose a boarding fee of $0.50
per patron entering riverboat gaming facilities in Bossier Parish. In response
to this legislation, Horseshoe Bossier City and the Isle of Capri Casino in
Bossier City commenced litigation against the Bossier Police Jury, asserting
that the Bossier Police Jury had previously contracted away their right to
impose an additional $0.50 boarding fee. In January 1997, Horseshoe Bossier
City separately settled with the Bossier Police Jury, and the lawsuit was
dismissed as it relates to Horseshoe Bossier City, but not Isle of Capri
Casino, and the Bossier Police Jury. As part of the settlement, Horseshoe
Bossier City agreed to pay a 1% tax on its gross casino revenues to Bossier
Parish with a minimum annual payment of $1.5 million regardless of actual
revenue. Under the terms of the settlement, Horseshoe Bossier City has the
right to receive a credit against gross gaming tax for the amount of Bossier
Parish property taxes assessed against Horseshoe Bossier City that exceed the
total amount of Bossier Parish property taxes paid in 1996 (the base year).
Such credit may be taken, up to a maximum of 80% of the tax on casino revenues,
and applies during the entire ten-year term of the agreement. In the 2003 Session of the Louisiana legislature, the legislature passed,
and the governor signed into law, House Bill 1944 (now, Act No. 1222) which
amended and re-enacted La. R.S. 27:93(A)(1) and provided, inter alia, for the
levying and allocation of riverboat admission fees for riverboats in Bossier
Parish. Specifically, the city of Bossier City is authorized to levy an
admission fee equal to 4.5% of the monthly net gaming proceeds of Horseshoe
Entertainment and to allocate such admission fees among various political
subdivisions and agencies. Importantly, the Act stated that nothing contained
in the provisions of the Act shall operate to impair the obligation of any
contract previously executed by the city of Bossier City and/or the Bossier
Police Jury which was in effect on the effective date of the Act.
Consequently, Horseshoe Bossier City continues to pay the City of Bossier City
and the Parish of Bossier in accordance with the respective boarding fee
agreement. In the 1997 Regular Session of the Louisiana Legislature, a law was passed
authorizing the operation of slot machines at certain horse racing tracks in
Louisiana, including a racetrack situated in Bossier Parish. The legislation
limits slot machine space at each racetrack to 15,000 8




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square feet. Within the gaming space, however, there is no numerical limit
on the number of slot machines that can be permissibly installed. In issuing a license, the Louisiana Gaming Control Board must find that
the applicant is a person of good character, honesty and integrity and a person
whose prior activities, criminal record, if any, reputation, habits, and
associations do not pose a threat to the public interest of the State of
Louisiana or to the effective regulation and control of gaming, or create or
enhance the dangers of unsuitable, unfair or illegal practices, methods and
activities in the conduct of gaming or the carrying on of business and
financial arrangements in connection therewith. The Louisiana Gaming Control
Board will not grant a license unless it finds that: (1) the applicant is
capable of conducting gaming operations, which means that the applicant can
demonstrate the capability, either through training, education, business
experience, or a combination of the above, to operate a gaming casino; (2) the
proposed financing of the riverboat and the gaming operations is adequate for
the nature of the proposed operation and from a source suitable and acceptable
to the Louisiana Gaming Control Board; (3) the applicant demonstrates a proven
ability to operate a vessel of comparable size, capacity and complexity to a
riverboat so as to ensure the safety of its passengers; (4) the applicant
submits a detailed plan of design of the riverboat in its application for a
license; (5) the applicant designates the docking facilities to be used by the
riverboat; (6) the applicant shows adequate financial ability to construct and
maintain a riverboat; and (7) the applicant has a good faith plan to recruit,
train and upgrade minorities in all employment classifications. Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding 5% or
greater interests in the licensee, and persons exercising influence over a
licensee (Affiliated Gaming Persons), are subject to the application and
suitability requirements of the Louisiana gaming law. The Louisiana gaming law specifies certain restrictions and conditions
relating to the operation of riverboat gaming, including the following: (1)
agents of the Louisiana Enforcement Division and the Louisiana Gaming Control
Board are permitted on board at any time during gaming operations; (2) gaming
machines, equipment and supplies may only be purchased or leased from permitted
suppliers; (3) gaming may only take place in the designated gaming area while
the riverboat is upon a designated river or waterway; (4) gaming equipment may
not be possessed, maintained or exhibited by any person on a riverboat except
in the specifically designated gaming area, or a secure area used for
inspection, repair or storage of such equipment; (5) wagers may be received
only from a person present on a licensed riverboat; (6) persons under the age
of 21 are not permitted in designated gaming areas; (7) except for slot machine
play, wagers may be made only with tokens, chips or electronic cards purchased
from the licensee aboard a riverboat; (8) licensees may only use docking
facilities and routes for which they are licensed and may only board and
discharge passengers at the riverboats licensed berth; (9) licensees must have
adequate protection and indemnity insurance; (10) licensees must have all
necessary Federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (11) gaming may only be conducted
in accordance with the terms of the license and the rules and regulations
adopted by the Louisiana Enforcement Division and the Louisiana Gaming Control
Board. The Louisiana gaming law requires that all riverboat gaming licensees
develop and implement comprehensive compulsive and problem gambling programs,
and the Louisiana 9




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Gaming Control Board has adopted rules for the development and
implementation of a uniform compulsive and problem gambling program. An initial license to conduct riverboat gaming operations is valid for a
term of five years. The Louisiana gaming law provides that a renewal
application for each five-year period succeeding the initial five-year term of
the operators license must be made to the Louisiana Enforcement Division. The
application for renewal consists of a statement under oath of any and all
changes to the information, including financial information, provided in the
previous application. Horseshoe Entertainment was issued an initial operators
license by the Louisiana Enforcement Division on November 22, 1993, and HE
timely submitted its renewal application to the Louisiana Enforcement Division.
On October 20, 1998, the Louisiana Gaming Control Board granted HEs license
renewal subject to suitability review, and on October 19, 1999 the Louisiana
Gaming Control Board extended the license renewal subject to suitability
review. On March 18, 2003, the Gaming Control Board approved a stipulation
finding HE and its owners suitable, and renewed the casino gaming license of HE
through November 2004. In the stipulation, HE offered to modify certain
procedures regarding procurement and minority procurement reporting among other
things. HE also paid $7.4 million to the State of Louisiana in conjunction
with the relicensing. The transfer of a license or permit or an interest in a license or permit
is prohibited except as permitted by the Louisiana gaming law. The sale,
purchase, assignment, transfer, pledge or other hypothecation, lease,
disposition or acquisition (a Transfer) by any person of securities which
represent 5% or more of the total outstanding shares issued by a corporation
that holds a license is subject to Louisiana Gaming Control Board disapproval.
A security issued by a corporation that holds a license must disclose these
restrictions. Prior Louisiana Gaming Control Board approval is required for the
Transfer of any ownership interest of 5% or more in any non-corporate licensee
or for the Transfer of any economic interest of 5% or more in any licensee or
Affiliated Gaming Person. An economic interest is defined for purposes of a
Transfer as any interest whereby a person receives or is entitled to receive,
by agreement or otherwise, a profit, gain, thing of value, loan, credit,
security interest, ownership interest or other economic benefit. Riverboat gaming licensees and their Affiliated Gaming Persons are
required to notify the Louisiana Enforcement Division prior to the receipt by
any such persons of any loans or extensions of credit. The Louisiana Gaming
Control Board is required to investigate the reported loan or extension of
credit and, subject to certain exemptions, to either approve or disapprove the
transaction. If disapproved, the loan or extension of credit cannot be
consummated by the licensee or Affiliated Gaming Person. The Company is an
Affiliated Gaming Person of HE. The Company and HE have submitted all required
disclosures to the Louisiana Gaming Control Board and the Louisiana Enforcement
Division. Any other advances by the Company to HE in the form of loans or other
inter-company indebtedness are subject to the disapproval power of the
Louisiana Gaming Control Board and the Louisiana Enforcement Division. Mississippi The Company conducts its Mississippi gaming operations through a
subsidiary, Robinson Property Group, Limited Partnership (RPG), which owns
and operates the Horseshoe Casino in the City of Robinsonville, Tunica County,
Mississippi. The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation, but primarily the
licensing and regulatory control of the Mississippi Gaming Commission and the
Mississippi State Tax Commission. 10




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The Mississippi Gaming Control Act (the Mississippi Act), which
legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990.
Effective October 29, 1991, the Mississippi Gaming Commission adopted
regulations in furtherance of the Mississippi Act (the regulations). The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to:  
    
    prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any
capacity;  
    
    establish and maintain responsible accounting practices and procedures;  
    
    maintain effective control over the financial practices of licensees, including establishing minimum procedures for
internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic
reports to the Mississippi Gaming Commission;  
    
    prevent cheating and fraudulent practices;  
    
    provide a source of state and local revenues through taxation and licensing fees; and  
    
    ensure that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi law or the regulations
or the Mississippi Gaming Commissions interpretations thereof may limit or
otherwise materially affect the types of gaming that may be conducted, and
could have a material adverse effect on the Company and RPGs Mississippi
gaming operations. The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River, but only if the voters in such counties have not voted to
prohibit gaming in that county. As of March 15, 2004, dockside gaming was
permissible in nine of the 14 eligible counties in the state and gaming
operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren
and Washington counties. Under Mississippi law, gaming vessels must be located
on the Mississippi River or on navigable waters in eligible counties along the
Mississippi River, or in the waters of the State of Mississippi lying south of
the state in eligible counties along the Mississippi Gulf Coast. Although there
are no legislative limitations on the number of gaming licenses which may be
issued in Mississippi, competition is limited by the availability of legal,
suitable and accessible sites. Mississippi law permits unlimited stakes gaming on permanently moored
barges on a continuous 24-hour basis and does not restrict the size of the
gaming area or the percentage of vessel space which may be utilized for gaming.
All types of casino games (other than bingo and race and/or sports betting)
may be offered. House credit may be extended to qualified patrons. The legal
age for gaming in Mississippi is 21. The Company and RPG are subject to the licensing and regulatory control of
the Mississippi Gaming Commission. The Company is registered under the
Mississippi Act as a publicly traded holding company of RPG. As a registered
publicly traded corporation, the 11




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Company is required to periodically submit detailed financial, operating and
other reports to the Mississippi Gaming Commission and furnish any other
information which the Mississippi Gaming Commission may require. If the
Company is unable to satisfy the registration requirements of the Mississippi
Act, the Company and RPG cannot own or operate gaming facilities in
Mississippi. RPG is also required to periodically submit detailed financial,
operating and other reports to the Mississippi Gaming Commission and the
Mississippi State Tax Commission and to furnish any other information required
thereby. RPG must maintain a gaming license from the Mississippi Gaming Commission
to operate a casino in Mississippi. Gaming licenses require the periodic
payment of fees and taxes and are not transferable. Gaming licenses are issued
for a maximum term of three years and must be renewed periodically thereafter.
RPG received its Mississippi gaming operators license on October 13, 1994 and
renewals on October 14, 1996, October 15, 1998, October 16, 2000 and October
16, 2003. No person may become a stockholder of or receive any percentage of
profits from a licensed gaming entity, including both the Company and RPG,
without first obtaining licenses and approvals from the Mississippi Gaming
Commission. Certain of the Companys officers, directors and employees and the
officers, directors and key employees of RPG who are actively and directly
engaged in the administration or supervision of gaming in Mississippi must be
found suitable or be licensed by the Mississippi Gaming Commission. On October
13, 1994, the Mississippi Gaming Commission found certain key principals of the
Company and RPG suitable, and all required findings of suitability have been
maintained and are current. The Company believes that it and RPG have applied
for all necessary findings of suitability with respect to these persons,
although the Mississippi Gaming Commission, in its discretion, may require
additional persons to file applications for findings of suitability. In
addition, any person having a material relationship or involvement with the
Company or RPG may be required to be found suitable, in which case those
persons must pay the costs and fees associated with the investigation. A
finding of suitability requires submission of detailed personal and financial
information followed by a thorough investigation. There can be no assurance
that a person who is subject to a finding of suitability will be found suitable
by the Mississippi Gaming Commission. The Mississippi Gaming Commission may
deny an application for a finding of suitability for any cause that it deems
reasonable. Findings of suitability must be periodically renewed. Changes in certain licensed positions must be reported to the Mississippi
Gaming Commission. In addition to its authority to deny an application for a
finding of suitability, the Mississippi Gaming Commission has jurisdiction to
disapprove a change in a licensed position. The Mississippi Gaming Commission
has the power to require the Company and RPG to suspend or dismiss officers,
directors and other key employees or sever relationships with other persons who
refuse to file appropriate applications or whom the authorities find unsuitable
to act in their capacities. Employees associated with gaming must obtain work permits that are subject
to immediate suspension. The Mississippi Gaming Commission will refuse to
issue a work permit to a person convicted of a felony and it may refuse to
issue a work permit to a gaming employee if the employee has committed various
misdemeanors or knowingly violated the Mississippi Act or for any other
reasonable cause. 12




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At any time, the Mississippi Gaming Commission has the power to
investigate and require a finding of suitability of the Companys record or
beneficial stockholders, regardless of the percentage of ownership.
Mississippi law requires any person who acquires more than 5% of the voting
securities of a publicly traded corporation registered with the Mississippi
Gaming Commission to report the acquisition to the Mississippi Gaming
Commission, and that person may be required to be found suitable. Also, any
person who becomes a beneficial owner of more than 10% of the voting securities
of such a company, as reported to the Mississippi Gaming Commission, must apply
for a finding of suitability by the Mississippi Gaming Commission. An
applicant for finding of suitability must pay the costs and fees that the
Mississippi Gaming Commission incurs in conducting the investigation. The
Mississippi Gaming Commission has generally exercised its discretion to require
a finding of suitability of any beneficial owner of more than 5% of a
registered public or private companys voting securities. However, the
regulations may permit institutional investors to own beneficially up to 15% of
a registered public or private companys common stock, and, in limited
circumstances, up to 19% of a registered public companys common stock without
a finding of suitability. Under certain circumstances, an institutional investor, as defined by
the regulations, which acquires more than 10% but not more than 15% of a
registered public or private companys voting securities, may apply to the
Executive Director of the Mississippi Gaming Commission for a waiver of such
finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not
be deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the registered public or private company, any change in the registered
public or private companys corporate charter, bylaws, management, policies or
operations of the registered public or private company or any of its gaming
affiliates, or any other action which the Mississippi Gaming Commission finds
to be inconsistent with holding the registered public or private companys
voting securities for investment purposes only. Activities that are not deemed
to be inconsistent with holding voting securities for investment purposes only
include:  
    
    voting, directly or indirectly through the delivery of a proxy
furnished by the board of directors, on all matters voted upon by the
holders of such voting securities;  
    
    serving as a member of any committee of creditors or security holders
formed in connection with a debt restructuring;  
    
    nominating any candidate for election or appointment to the board of
directors in connection with a debt restructuring;  
    
    accepting appointment or election as a member of the board of
directors in connection with a debt restructuring and serving in that
capacity until the conclusion of the members term;  
    
    making financial and other inquiries of management of the type
normally made by securities analysts for informational purposes and
not to cause a change in its management, policies or operations; and  
    
    such other activities as the Mississippi Gaming Commission may
determine to be consistent with such investment intent. An institutional investor that has been granted a waiver may beneficially
own more than 15%, but not more than 19%, of the voting securities of a
registered public company only if such 13




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additional ownership above 15% results from the operation of such companys
stock repurchase program, as long as the institutional investor does not
purchase or acquire any additional voting securities of the such company and
the institutional investor reduces its ownership in such company to 15% or less
within one year from the date the institutional investor receives constructive
notice that its ownership in such company exceeded 15%. If a stockholder who must be found suitable is a corporation, partnership
or trust, it must submit detailed business and financial information including
a list of beneficial owners. The Mississippi Gaming Commission may at any time
dissolve, suspend, condition, limit or restrict a finding of suitability to own
the Companys equity interests for any cause it deems reasonable. The Company may be required to disclose to the Mississippi Gaming
Commission, upon request, the identities of the holders of any debt or other
securities. In addition, under the Mississippi Act, the Mississippi Gaming
Commission may, in its discretion:  
    
    require holders of debt securities of registered corporations to file applications;  
    
    investigate the holders; and  
    
    require the holders to be found suitable to own the debt securities. Although the Mississippi Gaming Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Gaming Commission retains the discretion to do so for
any reason, including but not limited to a default, or where the holder of the
debt instrument exercises a material influence over the gaming operations of
the entity in question. Any holder of debt or equity securities required to
apply for a finding of suitability must pay all investigative fees and costs of
the Mississippi Gaming Commission in connection with the investigation. Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the Companys securities
beyond the time that the Mississippi Gaming Commission prescribes may be guilty
of a misdemeanor. The Company and RPG will be subject to disciplinary action
if, after receiving notice that a person is unsuitable to be a stockholder, a
holder of the Companys debt securities or to have any other relationship with
the Company or RPG, the Company:  
    
    pays the unsuitable person any dividend, interest or other
distribution whatsoever;  
    
    recognizes the exercise, directly or indirectly, of any voting rights
conferred through such securities held by the unsuitable person;  
    
    pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in limited and specific circumstances;  
    
    makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction;
or  
    
    fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the
immediate purchase of the securities for cash at a fair market value. RPG must maintain in Mississippi a current ledger with respect to the
ownership of its equity securities and the Company must maintain in Mississippi
a current list of its stockholders 14




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##### Table of Contents



which must reflect the record ownership of each outstanding share of any equity
security issued by the Company. The ledger and stockholder lists must be
available for inspection by the Mississippi Gaming Commission at any time. If
any securities are held in trust by an agent or by a nominee, the record holder
may be required to disclose the identity of the beneficial owner to the
Mississippi Gaming Commission. A failure to make that disclosure may be
grounds for finding the record holder unsuitable. The Company must also render
maximum assistance in determining the identity of the beneficial owner. The Mississippi Act requires that the certificates representing securities
of the Company bear a legend to the general effect that the securities are
subject to the Mississippi Act and the regulations of the Mississippi Gaming
Commission. On October 15, 2001, the Mississippi Gaming Commission granted the
Company a waiver of this legend requirement. The Mississippi Gaming Commission
has the power to impose additional restrictions on the Company and the holders
of its securities at any time. Substantially all loans, leases, sales of securities and similar financing
transactions by a licensed gaming subsidiary must be reported to or approved by
the Mississippi Gaming Commission. A licensed gaming subsidiary may not make a
public offering of its securities, but may pledge or mortgage casino facilities
if it obtains the prior approval of the Mississippi Gaming Commission. The
Company may not make a public offering or private placement of its securities
without the prior approval of the Mississippi Gaming Commission if any part of
the proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for those purposes. The approval, if given, does
not constitute a recommendation or approval of the accuracy or adequacy of the
prospectus or the investment amounts of the securities subject to the offering.
In September 2001, the Mississippi Gaming Commission granted the Company a
waiver of the prior approval requirement for the Companys securities offerings
for a period of two years, which was subsequently extended to September 2005,
subject to certain conditions. The waiver may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop order by the
Executive Director of the Mississippi Gaming Commission. Under the regulations of the Mississippi Gaming Commission, RPG may not
guarantee a security issued by the Company pursuant to a public offering, or
pledge its assets to secure payment or performance of the obligations evidenced
by a security issued by the Company, without the prior approval of the
Mississippi Gaming Commission. Similarly, the Company may not pledge the
ownership interests of RPG, nor may the pledgee of such ownership interests
foreclose on such a pledge, without the prior approval of the Mississippi
Gaming Commission. Moreover, restrictions on the transfer of an equity
security issued by RPG and agreements not to encumber such securities granted
by the Company are ineffective without the prior approval of the Mississippi
Gaming Commission. The waiver of the prior approval requirement for the
Companys securities offerings received from the Mississippi Gaming Commission
includes a waiver of the prior approval requirement for such guarantees,
pledges and restrictions of RPG, subject to certain conditions. Neither the Company nor RPG may change its control through merger,
consolidation, acquisition of assets, management or consulting agreements or
any form of takeover without the prior approval of the Mississippi Gaming
Commission. The Mississippi Gaming Commission may also require controlling
stockholders, officers, directors, and other persons having a material 15




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##### Table of Contents



relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction. Neither the Company nor RPG may engage in gaming activities in Mississippi
while the Company, RPG and/or persons found suitable to be associated with the
gaming license of RPG conduct gaming operations outside of Mississippi without
approval of the Mississippi Gaming Commission. The Mississippi Gaming
Commission may require means for it to have access to information concerning
the Companys and its affiliates out-of-state gaming operations. If the Mississippi Gaming Commission decides that a licensed gaming
subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the
subsidiary. In addition, the licensee, its registered holding company, and the
persons involved could be subject to substantial fines for each separate
violation. A violation under any of the Companys other operating
subsidiaries gaming licenses may be deemed a violation of RPGs gaming
license. Because of a violation, the Mississippi Gaming Commission could
attempt to appoint a supervisor to operate the casino facilities. Limitation,
conditioning or suspension of RPGs gaming license or the Companys
registration with the Mississippi Gaming Commission as a holding company of
RPG, or the appointment of a supervisor could, and revocation of any gaming
license or registration would, materially adversely affect the business of RPG,
the Company, and the Companys other operating subsidiaries. A licensed gaming subsidiary must pay license fees and taxes, computed in
various ways depending on the type of gaming involved, to the State of
Mississippi and to the county or city in which the licensed gaming subsidiary
conducts operations. Depending upon the particular fee or tax involved, these
fees and taxes are payable periodically and are based upon:  
    
    a percentage of the gross gaming revenues received by the casino operation;  
    
    the number of slot machines operated by the casino; and  
    
    the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon gaming
receipts, generally defined as gross receipts less payouts to customers as
winnings, and equals:  
    
    4% of gaming receipts of $50,000 or less per month;  
    
    6% of gaming receipts over $50,000 but not exceeding
$134,000 per month; and  
    
    8% of gaming receipts over $134,000 per month. These license fees are allowed as a credit against a licensees
Mississippi income tax liability for the year paid. The gross revenue fee
imposed by the Mississippi cities and counties in which casino operations are
located is in addition to the fees payable to the State of Mississippi and
equals approximately 4% of the gaming receipts. The Mississippi Gaming Commission adopted a regulation in 1994 requiring
as a condition of licensure or license renewal that a gaming establishments
plan include a 500-car parking facility in close proximity to the casino
complex and infrastructure facilities which will amount to at least 25% of the
casino cost. Infrastructure facilities are defined in the regulation to
include a hotel with at least 250 rooms, theme park, golf course and other
similar facilities. With the opening of its hotel and other amenities, the
Horseshoe Tunica is in compliance with this requirement. On January 21, 1999,
the Mississippi Gaming Commission adopted an amendment 16




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to this regulation which increased the infrastructure requirement to 100% from
the existing 25%; however, the regulation grandfathers existing licensees and
applies only to new casino projects and casinos that are not operating at the
time of acquisition or purchase, and would therefore not apply to the Horseshoe
Tunica. In any event, the Horseshoe Tunica would comply with the increased
requirement. Both the local jurisdiction and the Alcoholic Beverage Control Division of
the Mississippi State Tax Commission license, control and regulate the sale of
alcoholic beverages, including beer and wine, by RPG at the Horseshoe Tunica.
Horseshoe Tunica is in an area designated as a special resort area, which
allows casinos located therein to serve alcoholic beverages on a 24-hour basis.
The Alcoholic Beverage Control Division requires that the key officers and
managers of the Company and RPG and all owners of more than 5% of RPGs equity
submit detailed personal, and in some instances, financial information to the
Alcoholic Beverage Control Division and be investigated and licensed. All such
licenses are non-transferable. The Alcoholic Beverage Control Division must
approve changes in key positions. The Alcoholic Beverage Control Division has
the full power to limit, condition, suspend or revoke any license for the
service of alcoholic beverages or to place a licensee on probation with or
without conditions. Any disciplinary action could, and revocation would, have
a material adverse effect upon the operations of Horseshoe Tunica. Indiana The Company conducts its Indiana gaming operations through a subsidiary,
Horseshoe Hammond, Inc., which owns and operates the Horseshoe Casino in
Hammond, Indiana. The ownership and operation of casino facilities in Hammond,
Indiana are subject to extensive state and local regulation, but primarily the
licensing and regulatory control of the Indiana Gaming Commission. The Indiana Riverboat Gaming Act (Indiana Act) authorizes the issuance
of up to ten riverboat gaming licenses on waterways located in Indiana counties
that are contiguous to Lake Michigan and the Ohio River. The Indiana Act also
authorizes the issuance of one operating license to an operator to be located
in historic Orange County, Indiana. The Indiana Act strictly regulates the
facilities, persons, associations and practices related to gaming operations
pursuant to the police powers of the State of Indiana, including comprehensive
law enforcement provisions. The Indiana Act vests the Indiana Gaming Commission
with the power and duties of administering, regulating and enforcing the system
of riverboat gaming in the State of Indiana. The Indiana Gaming Commissions
jurisdiction extends to every person, association, corporation, partnership and
trust involved in riverboat gaming operations in the State of Indiana. The Indiana Act requires the owner of a riverboat gaming operation to hold
an owners license issued by the Indiana Gaming Commission. Each license
granted entitles the licensee to own and operate one riverboat and gaming
equipment as part of the gaming operation. The Indiana Gaming Commission has issued: (i) two licenses for riverboats
operating from Gary; (ii) one license for a riverboat operating in Hammond;
(iii) one license for a riverboat operating in East Chicago; (iv) one license
for a riverboat operating in any city located in LaPorte County and (v) five
licenses for riverboats that operate upon the Ohio River from counties
contiguous thereto and with no more than one operating in any county. The
Indiana Gaming Commission has not issued the sole operators license for Orange
County and will entertain proposals for that license in the near term. 17




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##### Table of Contents



Each initial owners license runs for a period of five years. Thereafter,
the license is subject to renewal on an annual basis upon a determination by
the Indiana Gaming Commission that the licensee continues to be eligible for an
owners license pursuant to the Indiana Act and the rules and regulations
adopted thereunder. The Indiana Act requires that a licensed owner undergo a
complete investigation every three years. If for any reason the license is
terminated, the assets of the riverboat gaming operation cannot be disposed of
without the approval of the Indiana Gaming Commission. Furthermore, the Indiana
Act requires that officers, directors and employees of a gaming operation be
licensed. The Companys Hammond license was renewed in August 2001, and again
in May 2002 and June 2003. Horseshoe Hammond will undergo a complete
reinvestigation in the second quarter of 2004. Applicants for licensure must submit a comprehensive application and
personal disclosure forms and undergo an exhaustive background investigation
prior to the issuance of a license. The applicant must also disclose the
identity of every person holding an ownership interest in the applicant. Any
person holding significant interests (5%) in the applicant must undergo a
background investigation and be licensed. The Indiana Gaming Commission has
the authority to request specific information on or license anyone holding an
ownership interest. An institutional investor which acquires 5% or more of any class of voting
securities of a holding company of a licensee is required to notify the Indiana
Gaming Commission and may be subject to a finding of suitability. Institutional
investors acquiring 15% or more must be found suitable. A person who acquires
5% or more of any class of voting securities of a holding company of a licensee
is required to apply to the Indiana Gaming Commission for a finding of
suitability. A holder of a gaming license is required to post a bond with the Indiana
Gaming Commission in an amount that the Indiana Gaming Commission determines
will adequately reflect the amount that a local community will expend for
infrastructure and other facilities associated with a riverboat operation. A
licensee must hold insurance of the type and amount deemed necessary by the
Indiana Gaming Commission. A riverboat owner licensee or any other person may not lease, hypothecate,
borrow money against or loan money against an owners riverboat gaming license.
An ownership interest in an owners riverboat gaming license may only be
transferred in accordance with the regulations promulgated under the Indiana
Act. The Indiana Act does not limit the maximum bet or per patron loss. The
licensee sets minimum and maximum wagers on games. Wagering may not be
conducted with money or other negotiable currency. No person under the age of
21 is permitted to wager, and wagers may only be taken from a person present on
a licensed riverboat. Riverboats operating in Indiana must (i) have a valid certificate of
inspection from the U.S. Coast Guard to carry at least 500 passengers; and (ii)
be at least 150 feet long. Any riverboat that operates on the Ohio River must
replicate, as nearly as possible, historic Indiana steamboat passenger vessels
of the nineteenth century. Riverboats operating on Lake Michigan need not meet
this requirement. 18




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After consultation with the Army Corps of Engineers, the Indiana Gaming
Commission may determine the available navigable waterways that are suitable
for the operation of riverboats under the Indiana Act. If the Corps rescinds an
approval for the operation of riverboats on a waterway, a license issued under
the Indiana Act is void and the holder may not conduct or continue gaming
operations under the Indiana Act. Pursuant to Indiana Gaming Commission policy, gaming may be conducted 24
hours each day. The Indiana General Assembly amended the Indiana Riverboat
Gaming Act in 2002 to allow riverboats to choose between continuing to conduct
excursions or operate dockside. The Indiana Gaming Commission authorized
riverboats to commence dockside operations on August 1, 2002. The Companys
Hammond property opted to operate dockside and commenced dockside operations on
August 1, 2002. Pursuant to legislation, the tax rate was increased from 20% to 22.5% of
adjusted gross receipts (AGR) during any time an Indiana riverboat opts to
conduct excursions. For those riverboats that operate dockside, including the
Companys Hammond property, the following graduated tax rate is applicable:
(i) 15% of the first $25 million of AGR; (ii) 20% of AGR in excess of $25
million, but not exceeding $50 million; (iii) 25% of AGR in excess of $50
million, but not exceeding $75 million; (iv) 30% of AGR in excess of $75
million, but not exceeding $150 million; and (v) 35% of AGR in excess of $150
million. AGR is based on the States fiscal year (July 1 of one year through
June 30 of the following year). The Indiana Act requires the riverboat owner
licensee to pay a $3.00 admission tax for each person. A riverboat that opts
to continue excursions pays the admission tax on an excursion basis while a
riverboat that operates dockside pays the admission tax on a per entry basis.
The Indiana Act provides for the suspension or revocation of a license if the
wagering and admission tax are not timely submitted. Riverboats are assessed, for property tax purposes, as real property and
are taxed at rates determined by the State of Indiana. In the State of
Indiana, corporations are also subject to the Indiana gross income tax, the
Indiana adjusted gross income tax and the Indiana supplemental corporate net
income tax. As an S Corporation, the Company is not subject to such taxes. The Indiana Gaming Commission may subject a licensee to fines, suspension
or revocation of its license for any act that is in violation of the Indiana
Act, the regulations of the Indiana Gaming Commission, or for any other
fraudulent act. In addition, the Indiana Gaming Commission may revoke an
owners license if the Indiana Gaming Commission determines that the revocation
of the license is in the best interests of the State of Indiana. The Indiana Act places special emphasis upon minority and women s
business enterprise participation in the riverboat industry. Any person issued
a riverboat owners license must establish goals of expending at least 10% of
the total dollar value of the licensees contracts for goods and services with
minority business enterprises and 5% of the total dollar value of the
licensees contracts for goods and services with womens business enterprises. A riverboat owner licensee may not enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods and services rendered or received. All contracts are subject to
disapproval by the Indiana Gaming Commission. A riverboat owner licensee or an
affiliate may not enter into a debt transaction of $1.0 million or more without
the prior approval 19




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##### Table of Contents



of the Indiana Gaming Commission. The Indiana Gaming Commission has a rule
requiring the reporting of certain currency transactions, which is similar to
that required by Federal authorities. Status as an S Corporation As an S corporation, the Company is not subject to Federal income tax as
an entity. Instead, each stockholder generally is subject to income tax on his
proportionate share of the Companys income (or is required to take into
account his proportionate share of any loss). Pursuant to a stockholder
agreement, the Company makes distributions to its stockholders to enable them
to pay any taxes on their share of the Companys income. While the Company
believes it was properly formed and has been properly operating as an S
corporation and that its subsidiaries were properly formed and have been
properly operating as Qualified Subchapter S Subsidiaries for Federal and state
income tax purposes, if the Companys S corporation tax status or the Qualified
Subchapter S Subsidiary status of any of its subsidiaries were successfully
challenged, the Company or such subsidiary could be required to pay Federal and
certain state income taxes, plus interest and possibly penalties, on the
Companys taxable income for all open tax years. Such payments could have a
material adverse effect on the Company. At the time of the sale to Harrahs,
the S election will terminate. Other Laws and Regulations The Companys casinos operated in Bossier City and Hammond must comply
with U.S. Coast Guard requirements as to boat design, on-board facilities,
equipment, personnel and safety. Each vessel must hold a Certificate of
Seaworthiness or must be approved by the American Bureau of Shipping, or ABS,
for stabilization and floatation, and may also be subject to local zoning and
building codes. Loss of a riverboats Certificate of Seaworthiness or ABS
approval would preclude its use as a floating casino. Each of the Companys casinos is subject to extensive Federal, state and
local regulations. These laws and regulations include, but are not limited to,
restrictions and conditions concerning alcoholic beverages, environmental
matters, employees, currency transactions, taxation, zoning and building codes,
and marketing and advertising. Such laws and regulations could change or could
be interpreted differently in the future, or new laws and regulations could be
enacted. Material changes, new laws or regulations, or material differences in
interpretations by courts or governmental authorities could adversely affect
our operating results. Employees As of March 15, 2004, the Company and its subsidiaries employed 7,562
persons of whom 2,532 are employed at Horseshoe Bossier City, 2,562 are
employed at Horseshoe Tunica, 2,390 are employed at Horseshoe Hammond and 78
are employed in our corporate office. Management believes the Company and its subsidiaries maintain an excellent
relationship with their respective employees and we are not aware of any
threatened labor activity affecting its employees. Neither the Company nor any
of its subsidiaries have ever experienced a work stoppage due to a labor
dispute. 20




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##### Table of Contents



Item 2. Properties. The following is a list of the Companys principal properties as of
December 31, 2003. All of the real property and casinos are subject to first
priority liens securing the Companys Senior Secured Credit Facility (the
Credit Facility). Casino
    
    
    
    
    
    
    
    
    
    GarageSpace
    
    Hotel
    
    
    
    
    
    ParkingProperty Location
    
    (Sq. Ft.)
    
    Rooms
    
    Acreage
    
    Spaces (1)Bossier City, LA
    
    
    30,000
    
    
    
    606
    
    
    
    48
    (2)
    
    
    1,770Tunica, MS
    
    
    63,000
    
    
    
    507
    
    
    
    45
    (3)
    
    
    1,100Hammond, IN
    
    
    48,300
    
    
    
    N/A
    
    
    
    38
    (4)
    
    
    1,150
  (1)
    
    Additional surface parking is also available.  (2)
    
    Horseshoe Bossier City owns 34 acres and leases 14 acres.  (3)
    
    Owned by Horseshoe Tunica.  (4)
    
    Horseshoe Hammond owns 33 acres. Approximately five acres
are leased from the City of Hammond, renewable for a term up to 75
years. In addition, the Company leases 17,740 square feet of office space in Las
Vegas, NV for its corporate headquarters. The lease on the Companys former
corporate headquarters in Tinley Park, IL will expire in April 2005. That
space is not currently being utilized. 
 Item 3. Legal Proceedings. On April 18, 2003, a lawsuit was filed in the Circuit Court of Tunica
County, Mississippi. The plaintiffs are personal representatives of the estate
of three individuals who died following a car accident in Tunica County,
Mississippi. The personal representatives allege that the car accident was the
result of an individual driving while under the influence of alcohol and that
the driver was served the alcohol while at Horseshoe Tunica. Tunica and the
Company deny the allegations in the complaint and intend to vigorously contest
the matter. On July 8, 2002, the Common Council of the City of Hammond filed its
Verified Complaint for Preliminary Injunction And Declaratory Judgment And
Petition for Determination Of The Nature Of The City Executive And Legislative
Power By The Court, sitting en Banc in the Lake County Superior Court in Crown
Point, Indiana and captioned as Robert A. Markovich, as President of The
Common Council of the City of Hammond vs. Duane W. Dedelow, Jr., as Mayor of
the City of Hammond, Horseshoe Hammond, Inc., f/k/a Empress Casino Hammond
Corporation, and Hammond Development Corporation. On June 21, 1996, the City
of Hammond and Horseshoe Hammond entered into the Hammond Riverboat Gaming
Project Development Agreement (Development Agreement). Subsequently, the
City of Hammond and Horseshoe Hammond entered into the First Amendment to
Development Agreement in August of 1999, the Second Amendment to Development
Agreement in August of 1999, the Third Amendment to Development Agreement in
December of 2000 and the Fourth Amendment to Development Agreement in October
of 2001 (collectively referred to herein as the Development Agreement
Amendments). Through the Development Agreement Amendments, the City of Hammond
and Horseshoe Hammond agreed, among other things, to allow Horseshoe Hammond to
expand its facilities in exchange for certain payments from Horseshoe Hammond
to certain governmental agencies at the Citys direction. In entering into 21




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##### Table of Contents



the Development Agreement Amendments, the Mayor of the City of Hammond did
not seek approval of the Development Agreement Amendments from the City of
Hammond Common Council. In the Verified Complaint, the Common Council asked
the Court to (i) enjoin the Mayor from entering into any further agreements
providing for payments from Horseshoe Hammond or spending any of the funds
already paid by Horseshoe Hammond, (ii) determine that the Mayor does not have
unilateral authority to enter into agreements with Horseshoe Hammond and (iii)
enter a declaratory judgment finding the Development Agreement Amendments
invalid. During the fourth quarter of 2002, the parties to the suit entered
into a stipulation which provided that the resolution of the lawsuit shall not
affect the validity or performance of the Development Agreement or the
Development Agreement Amendments. The parties further stipulated that the only
effect of the lawsuit would be to create a claim by the Common Council for
repayment from the recipients of any funds transferred by the Company. In
January 2004, the parties in the lawsuit agreed to its dismissal. On June 2, 2000, a lawsuit was filed in the United States District Court
for the Northern District of Indiana, against the Company and Horseshoe Hammond
on behalf of current and former employees of Horseshoe Hammond, alleging that
Horseshoe Hammond and the Company are responsible for damages to current and
former employees as a result of poor air quality on the gaming vessel operating
in Hammond, Indiana. The lawsuit alleged certain tort claims based on poor air
quality and sought certification as a class on behalf of similarly situated
current and former employees of Horseshoe Hammond. On May 8, 2002, the United
States District Court denied plaintiffs request for class certification and on
October 18, 2002, plaintiffs counsel amended the suit to add 25 additional
plaintiffs. Horseshoe Hammond and the Company deny the allegations in the
complaint asserted by the named employees and intend to vigorously contest this
matter. In 1996, legislation was passed in Louisiana authorizing each parish
Police Jury, including the Bossier Police Jury, the governing body of Bossier
Parish, to impose a boarding fee of $0.50 per patron entering riverboat gaming
facilities in Bossier Parish. In response to this legislation, Horseshoe
Bossier City commenced litigation against the Bossier Police Jury, asserting
that the Bossier Police Jury had previously contracted away their right to
impose an additional $0.50 boarding fee. In January 1997, Horseshoe Bossier
City separately settled with the Bossier Police Jury, and the lawsuit was
dismissed as it relates to Horseshoe Bossier City and the Bossier Police Jury.
As part of the settlement, Horseshoe Bossier City agreed to pay a 1% tax on its
gross casino revenues to Bossier Parish with a minimum annual payment of $1.5
million regardless of actual revenue. Subsequently, legislation was passed
increasing the maximum amount the Bossier Police Jury could collect to $3.00
per person boarding gaming boats in Bossier City. On July 5, 2001, James
Wellborn and Charles J. Nickel filed a lawsuit in the 26th Judicial Court
(Bossier Parish) against the Municipality of Bossier City, Louisiana asking the
Court to (i) order the City to collect a $3.00 per person boarding fee from
Horseshoe Bossier City, (ii) invalidate a contract fixing the amount paid by
Horseshoe Bossier City to Bossier Parish as opposed to a per person boarding
fee and (iii) certify the suit as a class action on behalf of all citizens and
taxpayers of Bossier Parish. The Company believes the suit is without merit
and will vigorously defend itself in the action, including the validity of the
contract. In addition, Billy Brooks Hudson, among others, filed a lawsuit seeking
the exact same relief sought in the case filed by Wellborn, as described above.
The suit brought by Hudson had previously been dismissed. However, in August
2002, the Louisiana Court of Appeals found that Billy Brooks Hudson, among
others, have the right as taxpayers to prosecute a suit against the City of
Bossier and others, seeking the same relief sought in the case filed by
Wellborn on 22




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##### Table of Contents



July 5, 2001. Accordingly, the Louisiana Court of Appeals directed that the
trial court reinstate in the 26th Judicial District Court, Bossier Parish
Louisiana, the previously dismissed case of Hudson et.al. v. City of Bossier
et.al. The Company believes that, like the Wellborn suit, the Hudson suit is
without merit and the Company will vigorously defend itself in the action. 
 Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 
 PART II 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters. There is no established public trading market for the equity interests in
the Company. As of March 15, 2004, the number of record holders for the
Companys Class A Common Stock was forty-one and for the Companys Class B
Common Stock was one. The Company pays tax distributions in accordance with its debt agreements
and stockholders agreement to enable the holders of equity interests in the
Company to pay Federal and state income taxes on their proportionate share of
the Companys income. The amount of tax distributions paid during 2003 and 2002
were approximately $17.9 million and $27.0 million, respectively. The
Companys debt agreements contain provisions which restrict the ability of the
Company to make distributions to the holders of equity interests, based on the
Companys earnings, the ability of the Company to meet certain restrictions on
borrowing, and certain other criteria. Cash dividends of approximately $4.8
million and $0 were paid during the years ended December 31, 2003 and 2002,
respectively. 23




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##### Table of Contents



Item 6. Selected Financial Data. The following table summarizes certain selected consolidated financial
data, which should be read in conjunction with the Companys Consolidated
Financial Statements and notes thereto, included elsewhere herein and with
Managements Discussion and Analysis of Financial Condition and Results of
Operations. The selected consolidated financial data as of and for the years
ended December 31, 2003, 2002, 2001, 2000, and 1999 have been derived from the
Companys audited consolidated financial statements. Year ended December 31,2003
    
    2002
    
    2001(a)
    
    2000
    
    1999(b)(in thousands)Statements of Income Data:Net revenues
    
    $
    826,265
    
    
    $
    812,566
    
    
    $
    933,258
    
    
    $
    980,830
    
    
    $
    500,316Operating expense:Casino
    
    
    479,555
    
    
    
    434,887
    
    
    
    528,827
    
    
    
    523,423
    
    
    
    247,349Non-casino
    
    
    34,635
    
    
    
    33,469
    
    
    
    37,710
    
    
    
    45,442
    
    
    
    26,859General and administrative
    
    
    111,858
    
    
    
    117,574
    
    
    
    119,877
    
    
    
    127,659
    
    
    
    69,558Preopening expenses
    
    
    
    
    
    
    
    
    
    
    4,064
    (c)
    
    
    
    
    
    
    Gain on sale of Joliet
    
    
    
    
    
    
    
    
    
    
    (165,485
    )
    
    
    
    
    
    
    Net loss (gain) on disposal of assets, excluding Joliet
    
    
    3,218
    
    
    
    5,033
    
    
    
    1,640
    
    
    
    (1,602
    )
    
    
    10,424Corporate expenses (d)
    
    
    23,265
    
    
    
    35,767
    
    
    
    22,073
    
    
    
    46,283
    
    
    
    8,414Depreciation and amortization
    
    
    53,333
    
    
    
    56,036
    
    
    
    66,945
    
    
    
    81,468
    
    
    
    41,806Operating income
    
    
    120,401
    
    
    
    129,800
    
    
    
    317,607
    
    
    
    158,157
    
    
    
    95,906Interest expense, net
    
    
    (48,898
    )
    
    
    (58,944
    )
    
    
    (78,749
    )
    
    
    (96,211
    )
    
    
    (53,332
    )Loss on early retirement of debt
    
    
    
    
    
    
    (9,683
    )
    
    
    (6,893
    )
    
    
    
    
    
    
    (9,653
    )Other, net
    
    
    68
    
    
    
    (974
    )
    
    
    382
    
    
    
    (1,232
    )
    
    
    (548
    )Net income
    
    $
    71,571
    
    
    $
    60,199
    
    
    $
    232,347
    
    
    $
    60,714
    
    
    $
    32,373As of December 31,2003
    
    2002
    
    2001(a)
    
    2000
    
    1999(b)(in thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    103,359
    
    
    $
    87,373
    
    
    $
    220,817
    
    
    $
    78,133
    
    
    $
    118,276Total assets
    
    
    917,276
    
    
    
    901,559
    
    
    
    1,057,259
    
    
    
    1,204,538
    
    
    
    1,409,244Long-term debt, including current maturities
    
    
    533,968
    
    
    
    556,773
    
    
    
    739,521
    
    
    
    1,028,221
    
    
    
    1,258,948Stockholders equity
    
    
    290,601
    
    
    
    229,511
    
    
    
    212,185
    
    
    
    52,608
    
    
    
    34,594
  (a)
    
    Includes the results of operations of Joliet through July 31, 2001, the
date of sale to Argosy Gaming Company.(b)
    
    Includes the results of operations of Hammond and Joliet since their
acquisition on December 1, 1999.(c)
    
    Includes advertising and production costs of approximately $2.0 million.(d)
    
    Includes deferred compensation of approximately $0.3 million, $10.2
million, $(0.4) million, $8.3 million and $0.5 million for the years ended
December 31, 2003, 2002, 2001, 2000 and 1999, respectively. 24




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations. The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
consolidated financial condition and results of operations of Horseshoe Gaming
Holding Corp. (the Company) and its subsidiaries. The discussion should be
read in conjunction with Selected Consolidated Financial Data and the
Consolidated Financial Statements and notes thereto included elsewhere herein.
References to 2003, 2002 and 2001 refer to the years ended December 31, 2003,
2002 and 2001, respectively. Introduction The Company is a leading riverboat gaming company that owns and operates,
through its wholly owned subsidiaries, casinos under the Horseshoe brand.
These include the Horseshoe Bossier City Casino (Bossier City) in Bossier
City, Louisiana, which commenced operations on July 9, 1994; the Horseshoe
Tunica Casino (Tunica) in Robinsonville, Mississippi, which commenced
operations on February 13, 1995; and the Horseshoe Casino Hammond (Horseshoe
Hammond or Hammond) in Hammond, Indiana which commenced operations on June
28, 1996. Hammond, along with Empress Casino Joliet (Empress Joliet or
Joliet) in Joliet, Illinois, were acquired from Empress Entertainment, Inc.
on December 1, 1999. On July 31, 2001, the Company sold Joliet to Argosy
Gaming Company. Gaming operations in Bossier City are conducted on a riverboat
that is not required to cruise. Gaming operations in Tunica are conducted on a
permanently moored barge, and Hammonds gaming operations are conducted on a
catamaran vessel that is not required to cruise. The success of the Company is based on a simple concept, put the customer
first. This is accomplished first by providing the customer with a true
gambling experience. In addition, the Company prides itself in providing
unparalleled customer service, luxurious accommodations at its Bossier City and
Tunica locations and excellent food options at its numerous restaurants. While the Bossier City and Tunica markets are now approaching maturity,
growth in the Hammond market continues, aided somewhat by the tax turmoil in
neighboring Illinois and the introduction of dockside gaming. If the momentum
in Hammond continues, additional capacity in Hammond may be warranted. The
Company is focusing on more creative ways to entice its customers in order to
maintain market share at each of its locations. The Companys key performance indicators are:  
    
    Gaming revenues  these include slot coin-in and table
games drop (volume indicators) as well as hold percentages, which
are not fully controllable by the Company.  
    
    Promotional allowances  these include complimentaries
offering food and beverage, rooms and other services to guests
without charge, slot club points and direct mail offers. The
Company closely monitors each of these items.  
    
    Revenue per FTE (Full Time Equivalent)  assists
management in monitoring labor costs. On September 10, 2003, the Company and its stockholders entered into a
definitive Stock Purchase Agreement (the Harrahs Sale Agreement) with
Harrahs Entertainment, Inc. (Harrahs). Under the terms of the Harrahs
Sale Agreement, the stockholders of the Company 25




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##### Table of Contents



agreed to sell all of
the outstanding capital stock of the Company to Harrahs, subject to customary
conditions, for $1.45 billion, including the assumption of debt. The
transaction is subject to regulatory approvals and is expected to be completed
in the second quarter of 2004. Results of OperationsFinancial Highlights Years ended December 31,
    
    % Increase/(Decrease)2003
    
    2002
    
    2001
    
    '03 vs. '02
    
    '02 vs. '01(dollars in thousands)Casino revenuesBossier City
    
    $
    254,313
    
    
    $
    255,583
    
    
    $
    242,719
    
    
    
    
    
    
    
    5
    %Tunica
    
    
    243,302
    
    
    
    255,669
    
    
    
    254,648
    
    
    
    -5
    %
    
    
    Hammond
    
    
    350,613
    
    
    
    316,347
    
    
    
    261,414
    
    
    
    11
    %
    
    
    21
    %Joliet (a)
    
    
    
    
    
    
    
    
    
    
    158,174
    
    
    
    (e
    )
    
    
    (e
    )$
    848,228
    
    
    $
    827,599
    
    
    $
    916,955
    
    
    
    2
    %
    
    
    -10
    %Net revenuesBossier City
    
    $
    251,801
    
    
    $
    255,712
    
    
    $
    250,389
    
    
    
    -2
    %
    
    
    2
    %Tunica
    
    
    234,681
    
    
    
    247,727
    
    
    
    253,678
    
    
    
    -5
    %
    
    
    -2
    %Hammond
    
    
    339,783
    
    
    
    309,127
    
    
    
    267,639
    
    
    
    10
    %
    
    
    16
    %Joliet (a)
    
    
    
    
    
    
    
    
    
    
    161,552
    
    
    
    (e
    )
    
    
    (e
    )$
    826,265
    
    
    $
    812,566
    
    
    $
    933,258
    
    
    
    2
    %
    
    
    -13
    %Operating income (loss)Bossier City (b)
    
    $
    40,213
    
    
    $
    32,194
    
    
    $
    29,881
    
    
    
    25
    %
    
    
    8
    %Tunica (b)
    
    
    53,050
    
    
    
    68,024
    
    
    
    67,869
    
    
    
    -22
    %
    
    
    Hammond (b)
    
    
    51,402
    
    
    
    63,710
    
    
    
    31,850
    
    
    
    -19
    %
    
    
    100
    %Joliet (a) (b)
    
    
    
    
    
    
    
    
    
    
    47,393
    
    
    
    (e
    )
    
    
    (e
    )Gain on assets held for sale
    
    
    
    
    
    
    
    
    
    
    165,485
    
    
    
    (e
    )
    
    
    (e
    )Corporate expenses
    
    
    (22,928
    )
    
    
    (25,538
    )
    
    
    (22,483
    )
    
    
    10
    %
    
    
    -14
    %Preopening expenses (c)
    
    
    
    
    
    
    
    
    
    
    (4,064
    )
    
    
    (e
    )
    
    
    (e
    )Deferred compensation
    
    
    (337
    )
    
    
    (10,229
    )
    
    
    410
    
    
    
    (e
    )
    
    
    (e
    )Other
    
    
    (999
    )
    
    
    1,639
    
    
    
    1,266
    
    
    
    -161
    %
    
    
    29
    %$
    120,401
    
    
    $
    129,800
    
    
    $
    317,607
    
    
    
    -7
    %
    
    
    -59
    %Other informationInterest expense, net
    
    $
    48,898
    
    
    $
    58,944
    
    
    $
    78,749
    
    
    
    -17
    %
    
    
    -25
    %Loss on early retirement of debt
    
    $
    
    
    
    $
    9,683
    
    
    $
    6,893
    
    
    
    (e
    )
    
    
    (e
    )Net income
    
    $
    71,571
    
    
    $
    60,199
    
    
    $
    232,347
    
    
    
    19
    %
    
    
    -74
    %Operating margin (operating
income/net revenue)(d)Bossier City (b)
    
    
    16
    %
    
    
    13
    %
    
    
    12
    %
    
    3 pts.
    
    1 pt.Tunica (b)
    
    
    23
    %
    
    
    27
    %
    
    
    27
    %
    
    -4 pts.
    
    0 pts.Hammond (b)
    
    
    15
    %
    
    
    21
    %
    
    
    12
    %
    
    -6 pts.
    
    9 pts.Joliet (a) (b)
    
    
    
    
    
    
    
    
    
    
    29
    %
    
    
    (e
    )
    
    
    (e
    )Consolidated
    
    
    15
    %
    
    
    16
    %
    
    
    34
    %
    
    -1 pt.
    
    -18 pts.
  (a)
    
    Results for Joliet are through July 31, 2001, the date of sale to Argosy Gaming Company.(b)
    
    Before corporate allocations, deferred compensation, preopening expenses and gain on assets held for sale.(c)
    
    Includes advertising and production costs of approximately $2.0 million.(d)
    
    The % Increase/(Decrease) for operating margin represents the absolute
difference in percentage points (pts.) between the two periods.(e)
    
    Not meaningful.


26



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##### Table of Contents



Years Ended December 31, 2003 and 2002 Consolidated casino revenues for the year ended December 31, 2003
increased 2% as compared to the prior year. Revenue improvements in Hammond as
the result of the conversion to dockside gaming in August 2002, were partially
offset by year-over-year revenue decreases experienced in Tunica. A
significant tax increase in Hammond, along with decreases in revenue in Tunica,
were the primary reasons that those two properties experienced decreases in
operating income in 2003. Casino revenues in Bossier City were flat in 2003 as compared to the prior
year while the Shreveport/Bossier City market decreased approximately 1%
between the two periods. Contributing to the market results was the May 21,
2003 opening of approximately 900 slots at a nearby horse racetrack facility.
Increased slot and table hold percentages in Bossier City in 2003 were offset
by a 3% decline in slot volume and a 1% decline in table volume as compared to
2002. Impacting Bossier Citys operating income in the prior year was a $7.4
million charge related to the relicensing of that facility. Excluding that
charge, operating income and operating margins increased slightly in 2003 as
compared to 2002 despite another 1% increase in gaming taxes in 2003. Operating income in Tunica decreased 22% in 2003 as compared to 2002
primarily due to marketing wars and intense competition. Casino revenues in
Tunica decreased 5% in 2003 as compared to the prior year while the Tunica
market declined approximately 3%. Slot volume declined 1% and table volume
declined 5% over 2002, which, along with an approximate .2 percentage point
decline in slot hold and .4 percentage point decline in table hold, caused the
5% decrease in casino revenues. Operating income for Tunica in 2002 include an
approximate $1.9 million positive adjustment related to favorable resolutions
on various tax matters. Casino revenues in Hammond increased 11% in 2003 as compared to 2002,
primarily as a result of the August 2002 conversion to dockside gaming. Slot
and table game volume increased 7% and 14%, respectively, in 2003 as compared
to 2002. Also contributing to the increase in casino revenue was a .2
percentage point increase in slot hold in the year ended 2003 as compared to
2002. While Hammond has experienced revenue increases from dockside gaming,
operating income and margins still fell significantly short of prior year
primarily due to the increase in state gaming taxes enacted in the second half
of 2002. In addition to the higher effective tax rate that Hammond is now
experiencing, an additional $5.1 million in gaming taxes was recorded in 2003
as the result of a retroactive tax increase imposed by the Indiana legislature
during 2003. Excluding the retroactive tax, Hammond recorded an additional
$36.7 million in state gaming taxes in 2003 as compared to 2002, resulting in
an effective state gaming tax rate of 30.6% as compared to a 22.2% effective
rate in 2002. Corporate expenses decreased approximately $2.6 million, or 10%, in the
year ended December 31, 2003 as compared to the prior year. During 2003,
approximately $2.3 million was recorded related to the relocation of the
corporate headquarters from Illinois to Nevada, partially offset by lower
payroll and related costs of approximately $1.0 million as compared to 2002.
Also in 2003, the Company reversed approximately $1.0 million of the liability
established upon the sale of Joliet to cover liabilities for which amounts were
escrowed. Upon the two-year anniversary of the sale of Joliet, the escrow was
released. In 2002, an approximate $2.3 million payment for franchise taxes
related to a Louisiana franchise tax audit was recorded. 27




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##### Table of Contents



Deferred compensation decreased approximately $9.9 million in the year
ended December 31, 2003 as compared to the prior year due primarily to a
decrease in the valuation used to calculate the value of vested stock
appreciation rights. Net interest expense decreased approximately 17% in 2003 as compared to
the prior year due primarily to lower outstanding debt balances during the 2003
period. In June 2002, the Company redeemed approximately $159.0 million of
Senior Subordinated Notes, resulting in a loss on early retirement of debt of
approximately $9.7 million in the year ended December 31, 2002. Years Ended December 31, 2002 and 2001 Consolidated casino revenues decreased approximately 10% in the year ended
December 31, 2002 as compared to the prior year, primarily as the result of the
sale of Joliet on July 31, 2001. Excluding Joliet, the three remaining
properties averaged a 9% increase in gaming revenues, led by Hammond with a 21%
increase. The revenue increases experienced in Hammond in the first seven
months of 2002 became even more pronounced once dockside gaming was enacted on
August 1, 2002. Casino revenues in Bossier City increased approximately 5% in
2002 as compared to 2001 in a market that increased only 2%, while Tunica
casino revenues were flat in 2002 compared to 2001 as the Tunica market
increased less than 1%. With the adoption of Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets (SFAS 142), the Company ceased
amortization on most intangibles, including goodwill, on January 1, 2002. Such
amortization expense totaled approximately $12.3 million in the year ended
December 31, 2001. Excluding amortization expense in the 2001 period,
operating income before corporate allocations, deferred compensation,
pre-opening expenses and gain on assets held for sale increased 2% and 56% in
Bossier City and Hammond, respectively, and decreased 1% in Tunica. In
addition, 2002 operating margins before corporate allocations, deferred
compensation, pre-opening expenses and gain on assets held for sale were
approximately 13%, 27% and 21% in Bossier City, Tunica and Hammond,
respectively, as compared to operating margins before corporate allocations,
deferred compensation, pre-opening expenses and gain on assets held for sale of
approximately 13%, 27% and 15%, respectively, in the 2001 period when
calculated on a comparable basis. Improved results were achieved in Bossier City despite an additional 1%
increase in gaming taxes that went into effect on April 1, 2002. The positive
results in Bossier City in 2002 can be partially attributed to the absence of
some of the unusual costs that impacted the property in 2001. These include
an approximate $1.4 million sales tax assessment on progressive slot machine
royalty payments in 2001 and approximately $0.9 million of relicensing costs
that were recorded in 2001. Impacting 2002 was a $7.4 million charge related
to Bossier Citys relicensing. The 2002 period also includes a $0.8 million
reserve against a note receivable related to the year 2000 sale of its off-site
hotel. Increases in insurance expense and points expense in Tunica in 2002 were
offset by decreases in health care costs, bad debt expense and direct mail
costs. Additionally, Tunica results in 2002 include an approximate $1.9
million positive adjustment related to favorable resolutions on various tax
matters. 28




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##### Table of Contents



After the successful re-branding in 2001, Horseshoe Hammond experienced a
record year in 2002. Prior to the initiation of dockside gaming on August 1,
2002, Hammond generated a 14% increase in gaming revenues in the seven months
ended July 31, 2002, as compared to the same period in the prior year. The
positive momentum continued with the advent of dockside gaming, with the
property experiencing a 31% increase in gaming revenues during the five month
period from August 1, 2002 through December 31, 2002, as compared to the same
period in the prior year. Along with dockside gaming came a substantial
increase in gaming taxes, with a maximum rate of 35% on gaming revenues in
excess of $150.0 million. This is up from a 20% flat rate prior to July 1,
2002 and a 22.5% rate imposed from July 1, 2002 until the date dockside gaming
began. The effective state gaming tax rate for Hammond for the twelve months
ended December 31, 2002 was 22.2%. Operating income in 2001 includes approximately $4.1 million in
pre-opening expenses, including approximately $2.0 million of advertising and
production costs, related to the re-branding of the Hammond casino. Corporate expenses increased approximately $3.1 million, or 14%, in 2002
as compared to 2001. This is largely attributable to the 2002 resolution of a
1999  2001 Louisiana franchise tax audit, as a result of which the Company
paid approximately $2.3 million, plus interest. Also impacting 2002 was an
approximate $0.8 million increase in payroll and related costs over 2001. In
addition, approximately $2.3 million of the monthly consulting payments to the
former owners of Joliet were included in corporate expense during the 2001
period. Upon the sale of Joliet, the present value of the remaining liability
was accrued and charged against the sale of Joliet, thereby excluding those
payments from corporate expense in the 2002 period. Deferred compensation increased approximately $10.6 million in 2002 due to
an increase in the valuation used to calculate the value of vested stock
appreciation rights. During 2001, the Company recorded a gain of approximately $165.5 million
as a result of the sale of Joliet to Argosy Gaming Company. Depreciation and amortization expense decreased approximately $10.9
million, or 16%, in 2002 as compared to 2001. This is primarily the result of
ceasing to amortize goodwill and certain other intangibles upon the adoption of
SFAS 142, as discussed above. Net interest expense decreased approximately 25% in 2002 as compared to
2001 primarily due to reduced debt outstanding and aided by lower interest
rates on the Credit Facility. The Company retired its 9.375% Senior
Subordinated Notes on the first call date of June 15, 2002. This transaction
generated a loss on early retirement of debt in the amount of approximately
$9.7 million in 2002 as compared to a $6.9 million loss on early retirement of
debt in 2001. Liquidity and Capital Resources Net cash provided by operating activities was approximately $125.9
million, $122.6 million and $138.1 million for the years ended December 31,
2003, 2002 and 2001, respectively. In 2002 and 2001, the Company used its cash
flow from operating activities primarily to fund capital expenditures at its
existing properties and to repay debt. In 2003, with virtually no pre-payable
debt, the Company used its cash flow from operating activities primarily for
the pavilion 29




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##### Table of Contents



and garage expansion in Hammond. With the anticipated sale to Harrahs
expected to close in the latter part of the second quarter of 2004, the Company
has been accumulating cash. Net cash (used in) provided by investing activities was approximately
$(64.4) million, $(36.0) million and $370.6 million, for the years ended
December 31, 2003, 2002 and 2001, respectively. Cash flows from investing
activities for 2001 include the net proceeds from the sale of Joliet. Net cash used in financing activities was approximately $45.6 million,
$220.0 million and $366.0 million for the years ended December 31, 2003, 2002
and 2001, respectively. During 2003, 2002 and 2001, approximately $43.0
million, $266.0 million and $351.6 million, respectively, was repaid on
long-term debt. During 2003, Hammond completed a $16.5 million interim expansion of its
boat and pavilion, including the addition of approximately 400 slot machines.
The construction of a $50.1 million parking garage in Hammond is underway and
is expected to be completed in the second quarter of 2004. As of December 31,
2003, the Company had expended approximately $25.1 million related to the
parking garage. With the pending sale to Harrahs, the Company is not planning any new
major capital expenditure projects in 2004, however, normal routine maintenance
will continue. Assuming the sale to Harrahs does not occur in 2004, the
Company anticipates approximately $29.9 million in capital expenditures,
excluding the completion of the Hammond garage, could be incurred in 2004. As of December 31, 2003, the Company had long-term debt outstanding of
approximately $534.0 million related to its 8.625% Senior Subordinated Notes,
due 2009. The first call date on these Notes is in May 2004. The Company
does not intend to take any action at that time. In 1999, the Company completed its $375.0 million Senior Secured Credit
Facility (the Credit Facility). The Credit Facility consisted of a $250.0
million, five-year revolver and a $125.0 million, seven-year term loan. In
2001, the Company amended its Credit Facility to allow, among other things, for
the reduction of its loan commitment to $150.0 million. All of the operating
subsidiaries guarantee the obligations under the Credit Facility. The Credit
Facility, as amended, was permanently reduced by $28.1 million on December 31,
2003 and will be permanently reduced by $40.6 million per quarter beginning
March 31, 2004. The Credit Facility expires on September 30, 2004. There are
no amounts currently outstanding on the Credit Facility, nor does the Company
anticipate any more borrowings prior to its expiration in September 2004. Due
to the pending sale to Harrahs, no efforts have been made at this time to
extend the Credit Facility beyond its expiration. The Company believes that cash and cash equivalents on hand (approximately
$103.4 million at December 31, 2003) and cash flow from operations (budgeted at
approximately $147.4 million in 2004) will be adequate to meet existing debt
service obligations (approximately $46.1 million in 2004) and capital
expenditure commitments (approximately $57.2 million anticipated) for the next
twelve months. If the sale to Harrahs does not occur, the Company will
explore all of its refinancing alternatives, including the possible redemption
of all or part of the Senior Notes. 30




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##### Table of Contents



The Companys debt agreements contain covenants that, among other things,
(i) limit the amount of dividends the Company can pay to its stockholders; (ii)
limit the amount of additional indebtedness which may be incurred by the
Company and its subsidiaries; and (iii) limit the amount of restricted
payments, as defined, the Company may make. In addition, the Companys debt
agreements prohibit the consolidation or merger of the Company or its
subsidiaries with an affiliate or third party, or any sale of substantially all
of the Company or its subsidiaries assets unless: (1) either (a) the Company
is the continuing entity or (b) the resulting entity is a corporation organized
under the laws of the United States and expressly assumes by supplemental
indenture all of the obligations of the Company in connection with the Senior
Subordinated Notes; (2) no default or event of default, as defined, shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; (3) immediately after giving effect to such transaction on a
pro forma basis, the consolidated resulting, surviving or transferee entity
would immediately thereafter be permitted to incur a least $1 of additional
indebtedness; and (4) such transaction will not result in the loss of any
material gaming license. Should the Companys pending sale to Harrahs trigger a change of control
triggering event, as defined, the Company would be required to make a change of
control offer to the bondholders at a cash price equal to 101% of the principal
amount thereof. The change of control offer is required to be made within ten
business days following a change of control triggering event and must remain
open for 20 business days following its commencement. The repurchase of any
tendered notes will take place not later than 35 business days after the change
of control triggering event. Prior to the commencement of a change of control
offer, the Company will terminate all commitments of indebtedness under the
Credit Facility or obtain the requisite consents under the Credit Facility to
permit the repurchase of the notes as described above. The Company has no off balance sheet financing. The Company has the following future contractual obligations as of
December 31, 2003 (in thousands): Payments due by period2009 andTotal
    
    2004
    
    2005-2006
    
    2007-2008
    
    afterLong-term debt obligations
    
    $
    535,015
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    535,015Operating lease obligations
    
    
    6,072
    
    
    
    1,872
    
    
    
    2,095
    
    
    
    659
    
    
    
    1,446Purchase obligations, excluding construction
commitments
    
    
    12,645
    
    
    
    11,668
    
    
    
    973
    
    
    
    4
    
    
    
    Construction commitments
    
    
    24,900
    
    
    
    24,900
    
    
    
    
    
    
    
    
    
    
    
    Long term liabilities per balance sheet
    
    
    6,068
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,068$
    584,700
    
    
    $
    38,440
    
    
    $
    3,068
    
    
    $
    663
    
    
    $
    542,529
 As of December 31, 2003, the Company had no capital lease obligations. Not included in the above table are certain employee related obligations
that will result upon the consummation of the pending sale to Harrahs. The
sale will trigger the change of control provisions in certain of the
Companys benefit plans, including a retention bonus plan, employment
agreements and executive severance agreements that cover 158 of its key
management. The executive severance agreements provide for, among other
things, a payment of up to 2.99 times the executives annual salary and bonus,
as defined. The estimated amount payable under the executive severance
arrangements is approximately $13.2 million. 31




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##### Table of Contents



The retention bonus plan and employment agreements provide for, among
other things, payments ranging from three months to twenty-four months salary.
The estimated amount payable under the retention bonus plan and employment
agreements is approximately $9.6 million. The Companys Equity Incentive Plan also contains a change of control
provision whereby the vesting is accelerated upon a change of control.
Management estimates that approximately $43.8 million will be paid to key
management under the Equity Incentive Plan upon the sale to Harrahs. In accordance with the terms of the Harrahs Sale Agreement, the Company
could be liable for a payment to Harrahs of approximately $27.5 million should
the Harrahs Sale Agreement be terminated by Harrahs due to a material adverse
effect, as defined, relating to the Company that cannot be cured by the
Company, or due to a breach by the Company or its stockholders, as defined, of
the Harrahs Sale Agreement that would result in the failure of certain closing
conditions described in the Harrahs Sale Agreement. Critical Accounting Policies and Estimates The Companys discussion and analysis of its financial condition and
results of operations are based upon the Companys consolidated financial
statements, which have been prepared in conformity with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, the disclosure of contingent assets
and liabilities, and the reported amounts of revenues and expenses. On an
on-going basis, the Company evaluates its policies, estimates and assumptions
related thereto, including those related to customer programs and incentives,
provision for bad debts, depreciation and amortization, asset impairment, self
insurance reserves, and contingencies and litigation. The Company bases its
estimates on historical experience, observance of trends in the industry and on
various other assumptions that are believed to be reasonable under the
circumstances. There can be no assurance that actual results will not differ
from our estimates. A summary of our significant accounting policies is
included in Note 2 of the accompanying consolidated financial statements. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts for accounts
receivable that may not be collected. Generally, this reserve is established
by applying standard reserve percentages to aged account balances. In
addition, accounts may be reserved based on specific knowledge of the customer.
Establishing and evaluating this reserve requires the use of managements
judgment. As of December 31, 2003, the Company had approximately $6.3 million
reserved for doubtful accounts. 32




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##### Table of Contents



Property and Equipment The Company makes estimates and assumptions when accounting for property
and equipment. Whether an expenditure is considered a maintenance expense or a
capital asset is a matter of judgment. When constructing or purchasing assets,
the Company must determine whether existing assets are being replaced or
otherwise impaired, which also may be a matter of judgment. The Companys
depreciation expense is highly dependent on the assumptions that are made about
the assets estimated useful lives. The estimated useful life is based on the
Companys experience with similar assets and an estimate of the usage of the
asset. The accuracy of these estimates affects the amount of depreciation
expense recognized in the Companys financial results and whether there is a
gain or loss on the disposal of the asset. Goodwill and Other Intangible Assets With a new accounting pronouncement adopted in 2002, the Company is now
required to perform an annual review (or more frequently if impairment
indicators arise) of impairment on goodwill and indefinite-lived intangible
assets. Performing this test requires the use of estimated future cash flows,
on an undiscounted basis, compared to the carrying value of the asset. Changes
in forecasted cash flows can materially affect these estimates. As of November
30, 2003, the date of our annual impairment test, no impairments of goodwill or
other intangible assets have been warranted. Slot Club Liability The Company has a slot club in which the customer earns points based on
their play. These points are primarily redeemable for cash. Points expire
after one year and are then purged from the system. The Company estimates its
liability related to the outstanding points based on historical redemption
activity. Self-insurance Reserves The Company is self-insured up to certain limits for costs associated with
general liability and workers compensation and employee medical coverage.
Estimates for these reserves are based on historical loss experience and
actuarial studies. In addition, the Company uses its historical health claim
loss history and lag time experience to estimate its incurred but not reported
health claims. Management believes that this methodology provides a reasonable
basis to estimate these highly judgmental liabilities. Risks of Competition The Companys casinos operate in very competitive environments. The risks
of competition come not only from expansion or reinvestments by existing
competitors but also from the possibility of additional competition. While the
states of Louisiana and Indiana (and also neighboring Illinois) currently limit
the number of casino licenses, the Company still runs the risk that those laws
can be changed or expanded, or that neighboring states, such as Texas, Arkansas
or Tennessee, may legalize gaming. It is also likely that Illinois tenth and
final gaming license will be built in Chicagoland in the next two years, which
could negatively impact Hammonds results. Additionally, the Company could be
negatively impacted by competition at casinos on Native American land in the
states in which we operate and also in neighboring states. 33




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##### Table of Contents



Regulation and Taxes The gaming industry is highly regulated and casinos are required to
maintain licenses to operate. The ownership, management, and operation of
gaming facilities are subject to extensive Federal, state and/or local laws,
rules and regulations, which are administered by the relevant regulatory agency
or agencies in each jurisdiction. These laws, rules, and regulations vary from
jurisdiction to jurisdiction, but generally concern the responsibility,
financial stability, and character of the owners and managers of gaming
operations, as well as persons financially interested or involved in gaming
operations. The regulatory environment in any particular jurisdiction may
change in the future and any such change could have a material adverse effect
on the results of operations of the Company. The gaming industry provides a significant source of tax revenue to the
various jurisdictions in which casinos operate. Occasionally, proposals are
made by Federal and state legislators to amend tax laws affecting the gaming
industry. It is not possible to determine with certainty the scope or
likelihood of possible future changes in tax laws or in the administration of
such laws. Changes in such laws, if any, could have a material effect on the
results of operations of the Company. Recently Issued Accounting Pronouncements In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143 Accounting for
Asset Retirement Obligations (SFAS 143). SFAS 143 requires the recognition
of legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or the normal
operation of the long-lived asset, as well as the disclosure of certain
information related to asset retirement obligations. The Company adopted SFAS
143 in the first quarter of 2003. Adoption of SFAS 143 did not have a material
impact on the Companys results of operations or financial position. In April 2002, the FASB issued SFAS No. 145 Rescission of FASB Statements
No. 4, 44, and 64, Amendments of FASB Statement No. 13, and Technical
Corrections (SFAS 145). SFAS 145 rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that statement, SFAS
No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.
SFAS 145 also rescinds SFAS No. 44, Accounting for Intangible Assets of Motor
Carriers. SFAS 145 amends SFAS No. 13, Accounting for Leases. The key
provisions of SFAS 145 that affects the Company rescinds the existing rule that
all gains or losses from the extinguishment of debt should be classified as
extraordinary items. Instead, such gains and losses must be analyzed to
determine if they meet the criteria for extraordinary item classification based
on the event being both unusual and infrequent. The Company adopted SFAS 145
beginning January 1, 2003. Previously recorded extraordinary losses of $9.7
million and $6.9 million recognized by the Company in the years ended December
31, 2002 and 2001, respectively, have been reclassified to conform to the
provisions of SFAS No. 145. 34




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##### Table of Contents



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 generally
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan, as previously required under EITF Issue 94-3. Examples
of costs covered by the statement include lease termination costs and certain
employee severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS 146 is to
be applied prospectively to exit or disposal activities initiated after
December 31, 2002. The Company adopted SFAS 146 in the first quarter of 2003.
Adoption of SFAS 146 did not have a material impact on the Companys results of
operations or financial position. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity
(SFAS 150). The statement changes the accounting for certain financial
instruments that, under previous guidance, issuers could account for as equity.
The new statement requires that those instruments be classified as liabilities
in statements of financial position. The statement was effective for interim
periods beginning after June 15, 2003. Adoption of SFAS 150 did not have a
material impact on the Companys results of operations or financial position. 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The Companys exposure to market risk is changes in its interest rate risk
associated with long term debt. To date, the Company has not held or issued
derivative financial instruments for trading purposes, and the Company does not
enter into derivative transactions that would be considered speculative
positions. At December 31, 2003, the Company has no exposure to interest rate market
risk as it relates to variable rate debt since it has no amounts outstanding.
There is no market risk associated with the Companys fixed rate debt. This
debt has a principal balance of approximately $535.0 million, a stated interest
rate of 8.625%, and matures in May 2009. The fair value of this fixed rate
debt is approximately $565.8 million and is based on the borrowing rates
currently available for debt instruments with similar terms and maturities and
market quotes of the Companys publicly traded debt. Other Risks The Company could not obtain the permission of Arthur Andersen LLP to the
inclusion in this Annual Report on Form 10-K of their Report of Independent
Public Accountants. Accordingly, the Arthur Andersen LLP Report of Independent
Public Accountants herein is merely reproduced from Horseshoe Gaming Holding
Corp.s Annual Report on Form 10-K for the year ended December 31, 2001
(although the consolidated balance sheets as of December 31, 2001 and 2000, the
consolidated statements of income, changes in shareholders equity, and cash
flows for the years ended December 31, 2000 and 1999 referred to in that report
are not included herein) and does not include the manual signature of Arthur
Andersen LLP. The conviction of the Companys former independent auditors,
Arthur Andersen LLP, on federal obstruction of justice charges may adversely
affect Arthur Andersen LLPs ability to satisfy any claims arising from the
provision of auditing services to the Company and may impede the Companys
access to the capital markets. 35




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data. INDEPENDENT AUDITORS REPORT
To the Stockholders of Horseshoe Gaming Holding Corp. We have audited the accompanying consolidated balance sheets of Horseshoe
Gaming Holding Corp. and subsidiaries (Company) as of December 31, 2003 and
2002, and the related consolidated statements of income, stockholders equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. The
consolidated financial statements of Horseshoe Gaming Holding Corp. as of
December 31, 2001 and for the year then ended, before the inclusion of the
disclosures discussed in Note 6 to the consolidated financial statements, were
audited by other auditors who have ceased operations. Those auditors expressed
an unqualified opinion on those financial statements in their report dated
February 15, 2002. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the 2003 and 2002 consolidated financial statements
present fairly, in all material respects, the financial position of Horseshoe
Gaming Holding Corp. and subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States
of America. As discussed above, the consolidated financial statements of Horseshoe
Gaming Holding Corp., as of December 31, 2001 and for the year then ended were
audited by other auditors who have ceased operations. As described in Note 6,
these financial statements have been revised to include the transitional
disclosures required by Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142), which was adopted by the
Company as of January 1, 2002. Our audit procedures with respect to the
disclosures in Note 6 with respect to 2001 included (1) comparing the
previously reported net income to the previously issued financial statements
and the adjustments to reported net income representing amortization expense
recognized in 2001 related to goodwill and intangible assets that are no longer
being amortized as a result of initially applying SFAS 142 to the Companys
underlying analysis obtained from management, (2) testing the mathematical
accuracy of the reconciliation of adjusted net income to reported net income.
In our opinion, the disclosures for 2001 in Note 6 are appropriate. However,
we were not engaged to audit, review or apply any procedures to the 2001
consolidated financial statements of the Company other than with respect to
such disclosures and, accordingly, we do not express an opinion or any other
form of assurance on the 2001 consolidated financial statements taken as a
whole. 36




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##### Table of Contents



As discussed in Note 6 to the consolidated financial statements, in 2002,
the Company changed its method of accounting for goodwill and other intangible
assets to conform to Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets. /s/ Deloitte & Touche LLP Memphis, Tennessee
March 19, 2004 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Horseshoe Gaming Holding Corp.: We have audited the accompanying consolidated balance sheets of HORSESHOE
GAMING HOLDING CORP. AND SUBSIDIARIES (the Company) (a Delaware corporation)
as of December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Horseshoe Gaming Holding
Corp. and Subsidiaries as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States. Arthur Andersen LLP Memphis, Tennessee,
February 15, 2002. EXPLANATORY NOTE REGARDING REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS On May 24, 2002, Horseshoe Gaming Holding Corp. (the Company) decided to
terminate Arthur Andersen LLP as the Companys independent public accountants
and on June 21, 2002 engaged Deloitte & Touche LLP to serve as its independent
public accountants for the year ending December 31, 2002. More information
regarding the Companys change in independent public accountants is contained
in its current report on Form 8-K filed with the Securities and Exchange
Commission on May 30, 2002. 37




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##### Table of Contents



The Company could not obtain the permission of Arthur Andersen LLP to the
inclusion in this Annual Report on Form 10-K of their Report of Independent
Public Accountants above. Accordingly, the Arthur Andersen LLP Report of
Independent Public Accountants herein is merely reproduced from Horseshoe
Gaming Holding Corp.s Annual Report on Form 10-K for the year ended December
31, 2001 (although the consolidated balance sheets as of December 31, 2001 and
2000 and the consolidated statements of operations, changes in stockholders
equity, and cash flows for the years ended December 31, 2000 and 1999 referred
to in that report are not included herein) and does not include the manual
signature of Arthur Andersen LLP. The conviction of the Companys former
independent public accountants, Arthur Andersen LLP, on federal obstruction of
justice charges may adversely affect Arthur Andersen LLPs ability to satisfy
any claims arising from the provision of auditing services to the Company and
may impede the Companys access to the capital markets. 38




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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 (dollars in thousands, except share data) 2003
    
    2002ASSETSCurrent assetsCash and cash equivalents
    
    $
    103,359
    
    
    $
    87,373Restricted cash
    
    
    1,000
    
    
    
    14,286Accounts receivable, net of allowance for doubtful
accounts of $6,305 and $6,779, respectively
    
    
    16,720
    
    
    
    12,555Inventories
    
    
    4,889
    
    
    
    5,418Prepaid expenses and other
    
    
    6,780
    
    
    
    7,825Total current assets
    
    
    132,748
    
    
    
    127,457Property and equipment, net
    
    
    485,557
    
    
    
    471,003Goodwill
    
    
    252,242
    
    
    
    252,242Other, net
    
    
    46,729
    
    
    
    50,857$
    917,276
    
    
    $
    901,559LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    6,274
    
    
    $
    8,860Accrued expenses and other
    
    
    80,365
    
    
    
    99,492Total current liabilities
    
    
    86,639
    
    
    
    108,352Long-term liabilitiesLong-term debt
    
    
    533,968
    
    
    
    556,773Other long-term liabilities
    
    
    6,068
    
    
    
    6,923Total long-term liabilities
    
    
    540,036
    
    
    
    563,696Commitments and contingencies (Notes 12 and 13)Stockholders equityCommon stock, $.01 par value, 50,000 shares authorized, 25,000
shares issued, 23,115 and 23,077 shares outstanding, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    59,090
    
    
    
    59,808Retained earnings
    
    
    285,709
    
    
    
    225,001344,799
    
    
    
    284,809Treasury stock, at cost, 1,885 and 1,923 shares, respectively
    
    
    (54,198
    )
    
    
    (55,298
    )Total stockholders equity
    
    
    290,601
    
    
    
    229,511$
    917,276
    
    
    $
    901,559
 The accompanying notes are an integral part of these
consolidated financial statements. 39




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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 (in thousands) 2003
    
    2002
    
    2001RevenuesCasino
    
    $
    848,228
    
    
    $
    827,599
    
    
    $
    916,955Food and beverage
    
    
    80,203
    
    
    
    79,384
    
    
    
    87,876Hotel
    
    
    30,010
    
    
    
    28,772
    
    
    
    29,697Retail and other
    
    
    18,370
    
    
    
    19,290
    
    
    
    20,856976,811
    
    
    
    955,045
    
    
    
    1,055,384Promotional allowances and other
    
    
    (150,546
    )
    
    
    (142,479
    )
    
    
    (122,126
    )Net revenues
    
    
    826,265
    
    
    
    812,566
    
    
    
    933,258ExpensesCasino
    
    
    479,555
    
    
    
    434,887
    
    
    
    528,827Food and beverage
    
    
    26,744
    
    
    
    24,067
    
    
    
    27,245Hotel
    
    
    1,995
    
    
    
    2,351
    
    
    
    2,963Retail and other
    
    
    5,896
    
    
    
    7,051
    
    
    
    7,502General and administrative
    
    
    111,858
    
    
    
    117,574
    
    
    
    119,877Corporate expenses
    
    
    22,928
    
    
    
    25,538
    
    
    
    22,483Deferred compensation
    
    
    337
    
    
    
    10,229
    
    
    
    (410
    )Preopening expenses
    
    
    
    
    
    
    
    
    
    
    4,064Net loss (gain) on disposal of assets
    
    
    3,218
    
    
    
    5,033
    
    
    
    (163,845
    )Depreciation and amortization
    
    
    53,333
    
    
    
    56,036
    
    
    
    66,945Total expenses
    
    
    705,864
    
    
    
    682,766
    
    
    
    615,651Operating income
    
    
    120,401
    
    
    
    129,800
    
    
    
    317,607Other income (expense)Interest expense
    
    
    (49,571
    )
    
    
    (61,243
    )
    
    
    (82,720
    )Interest income
    
    
    673
    
    
    
    2,299
    
    
    
    3,971Loss on early retirement of debt
    
    
    
    
    
    
    (9,683
    )
    
    
    (6,893
    )Other, net
    
    
    68
    
    
    
    (974
    )
    
    
    382Total other income (expense)
    
    
    (48,830
    )
    
    
    (69,601
    )
    
    
    (85,260
    )Net income
    
    $
    71,571
    
    
    $
    60,199
    
    
    $
    232,347
 The accompanying notes are an integral part of these
consolidated financial statements. 40




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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY FOR YEARS ENDED DECEMBER 31, 2003, 2002 and 2001 (in thousands) Treasury
    
    Paid-in
    
    RetainedStock
    
    Capital
    
    Earnings
    
    TotalBalance, January 1, 2001
    
    $
    (43,374
    )
    
    $
    52,715
    
    
    $
    43,267
    
    
    $
    52,608Dividends:Cash
    
    
    
    
    
    
    
    
    
    
    (71,255
    )
    
    
    (71,255
    )Net receivable
    
    
    
    
    
    
    
    
    
    
    803
    
    
    
    803Treasury stock purchases
    
    
    (9,411
    )
    
    
    7,093
    
    
    
    
    
    
    
    (2,318
    )Net income
    
    
    
    
    
    
    
    
    
    
    232,347
    
    
    
    232,347Balance, December 31, 2001
    
    
    (52,785
    )
    
    
    59,808
    
    
    
    205,162
    
    
    
    212,185Dividends:Cash
    
    
    
    
    
    
    
    
    
    
    (27,845
    )
    
    
    (27,845
    )Net payable
    
    
    
    
    
    
    
    
    
    
    (12,515
    )
    
    
    (12,515
    )Treasury stock purchases
    
    
    (2,513
    )
    
    
    
    
    
    
    
    
    
    
    (2,513
    )Net income
    
    
    
    
    
    
    
    
    
    
    60,199
    
    
    
    60,199Balance, December 31, 2002
    
    
    (55,298
    )
    
    
    59,808
    
    
    
    225,001
    
    
    
    229,511Dividends:Cash
    
    
    
    
    
    
    
    
    
    
    (10,226
    )
    
    
    (10,226
    )Net payable
    
    
    
    
    
    
    
    
    
    
    (637
    )
    
    
    (637
    )Exercise of stock options
    
    
    1,100
    
    
    
    (718
    )
    
    
    
    
    
    
    382Net income
    
    
    
    
    
    
    
    
    
    
    71,571
    
    
    
    71,571Balance, December 31, 2003
    
    $
    (54,198
    )
    
    $
    59,090
    
    
    $
    285,709
    
    
    $
    290,601
 The accompanying notes are an integral part of these
consolidated financial statements. 41




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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 (in thousands) 2003
    
    2002
    
    2001Cash flows from operating activitiesNet income
    
    $
    71,571
    
    
    $
    60,199
    
    
    $
    232,347Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation and amortization
    
    
    53,333
    
    
    
    56,036
    
    
    
    66,945Net loss (gain) on disposal of assets
    
    
    3,218
    
    
    
    5,033
    
    
    
    (163,845
    )Amortization of debt discounts,
deferred finance charges and other
    
    
    2,714
    
    
    
    2,918
    
    
    
    3,964Provision for doubtful accounts
    
    
    2,997
    
    
    
    4,068
    
    
    
    7,226Deferred compensation
    
    
    337
    
    
    
    10,229
    
    
    
    (410
    )Loss on early retirement of debt
    
    
    
    
    
    
    9,683
    
    
    
    6,893Decrease (increase) in restricted cash
    
    
    9,836
    
    
    
    (10,727
    )
    
    
    Net change in current assets and liabilities
    
    
    (18,110
    )
    
    
    (14,818
    )
    
    
    (14,988
    )Net cash provided by operating activities
    
    
    125,896
    
    
    
    122,621
    
    
    
    138,132Cash flows from investing activitiesPurchases of property and equipment
    
    
    (68,946
    )
    
    
    (43,768
    )
    
    
    (44,137
    )Proceeds from sale of property and equipment
    
    
    841
    
    
    
    485
    
    
    
    241Net proceeds from sale of Joliet
    
    
    
    
    
    
    
    
    
    
    442,662Indemnification escrow related to Joliet sale
    
    
    3,450
    
    
    
    10,500
    
    
    
    (14,059
    )Decrease (increase) in other assets
    
    
    297
    
    
    
    (3,240
    )
    
    
    (14,126
    )Net cash (used in) provided by investing activities
    
    
    (64,358
    )
    
    
    (36,023
    )
    
    
    370,581Cash flows from financing activitiesProceeds from long-term debt
    
    
    20,000
    
    
    
    83,000
    
    
    
    55,000Repayments on long-term debt
    
    
    (43,000
    )
    
    
    (266,031
    )
    
    
    (351,590
    )Dividends
    
    
    (22,741
    )
    
    
    (27,041
    )
    
    
    (69,096
    )Exercise of stock options
    
    
    189
    
    
    
    
    
    
    
    Debt issue costs and commitment fees
    
    
    
    
    
    
    (7,457
    )
    
    
    (343
    )Purchase of stock for treasury
    
    
    
    
    
    
    (2,513
    )
    
    
    Net cash used in financing activities
    
    
    (45,552
    )
    
    
    (220,042
    )
    
    
    (366,029
    )Net change in cash and cash equivalents
    
    
    15,986
    
    
    
    (133,444
    )
    
    
    142,684Cash and cash equivalents, beginning of period
    
    
    87,373
    
    
    
    220,817
    
    
    
    78,133Cash and cash equivalents, end of period
    
    $
    103,359
    
    
    $
    87,373
    
    
    $
    220,817
 The accompanying notes are an integral part of these
consolidated financial statements. 42




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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2003 NOTE 1 ORGANIZATION AND PENDING SALE Organization Horseshoe Gaming Holding Corp., a Delaware corporation, and subsidiaries,
(the Company), conduct casino gaming, hotel and other related operations at
riverboat casinos under the Horseshoe name in Bossier City, Louisiana; Tunica
County, Mississippi; and Hammond, Indiana. In addition, the Company owned and
operated the Empress Casino Joliet (Joliet or Empress Joliet) in Joliet,
Illinois from December 1, 1999 until July 31, 2001 (see Note 3). A description of each principal subsidiary is as follows:  
    
    New Gaming Capital Partnership (NGCP) is a Nevada limited
partnership which was formed on February 4, 1993. NGCP is 100%
owned by the Company and its subsidiary, Horseshoe GP, Inc. and
owns 91.92% of Horseshoe Entertainment (HE), a Louisiana limited
partnership, which owns and operates the Horseshoe Bossier City
(Bossier City). The remaining 8.08% is owned by the Company.
    
    Robinson Property Group, Limited Partnership (RPG) is a
Mississippi limited partnership, which was formed on June 7, 1993.
RPG owns and operates the Horseshoe Tunica (Tunica) located in
Tunica County, Mississippi, and is 100% owned by the Company and
its subsidiary, Horseshoe GP, Inc.
    
    Horseshoe Hammond, Inc. (Hammond), formerly Empress
Casino Hammond Corporation, is an Indiana corporation, which was
formed on November 25, 1992. The Company acquired Hammond from
Empress Entertainment, Inc. on December 1, 1999. Hammond owns and
operates the Horseshoe Casino in Hammond, Indiana and is 100% owned
by the Company. Pending Sale On September 10, 2003, the Company and its stockholders entered into a
definitive Stock Purchase Agreement (the Harrahs Sale Agreement) with
Harrahs Entertainment, Inc. (Harrahs). Under the terms of the Harrahs
Sale Agreement, the stockholders of the Company agreed to sell all of the
outstanding stock of the Company to Harrahs, subject to customary conditions,
for $1.45 billion, including the assumption of debt. The transaction is
subject to regulatory approvals and is expected to be completed in the second
quarter of 2004 (see Note 13). 43




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##### Table of Contents



NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company
and all of its subsidiaries (see Note 1). All significant intercompany
accounts and transactions have been eliminated. Cash and Cash Equivalents Cash equivalents are highly liquid investments with an original maturity
of three months or less and are stated at the lower of cost or market. Restricted Cash Restricted cash at December 31, 2003 represents amounts on deposit
pursuant to the bonding requirements of the Indiana Gaming Commission. Included
in restricted cash at December 31, 2002 is approximately $10.6 million on
deposit pursuant to the bonding requirements of the Indiana Gaming Commission
and approximately $3.7 million of net proceeds remaining in escrow to cover
potential indemnifications related to the sale of Joliet (see Note 3). Inventories Inventories consist primarily of food, beverage, retail merchandise,
kitchen smallwares and employee wardrobe and are stated at the lower of cost or
market. Cost is determined using either the first-in, first-out method or the
average cost method. Property and Equipment Property and equipment are stated at cost. The costs of normal repairs
and maintenance are expensed as incurred while major expenditures that extend
the useful lives of assets are capitalized. Depreciation is provided on the straight-line basis over the estimated
useful lives as follows: Buildings, boats and barges
    
    10 to 30 yearsImprovements
    
    2 to 30 yearsFurniture, fixtures and equipment
    
    2 to 10 years
 Capitalized Interest The Company capitalizes interest for associated borrowing costs of major
construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. Interest capitalized
during the year ended December 31, 2003 was approximately $0.7 million. No
interest was capitalized during the years ended December 31, 2002 and 2001. 44




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##### Table of Contents



Impairment of Long-Lived Assets When events or circumstances indicate that the carrying amount of
long-lived assets to be held and used might not be recoverable, the expected
future undiscounted cash flows from the assets is estimated and compared with
the carrying amount of the assets. If the sum of the estimated undiscounted
cash flows is less than the carrying amount of the assets, an impairment loss
is recorded. The impairment loss is measured on a property by property basis
by comparing the fair value of the assets with their carrying amount.
Long-lived assets that are held for disposal are reported at the lower of the
assets carrying amount or fair value less costs related to the assets
disposition. Goodwill Goodwill represents the cost of net assets acquired in excess of their
fair value. During the years ended December 31, 2001 and prior, the Company
amortized goodwill on a straight-line basis over 25 years, which management
estimated was the related minimum benefit period. In accordance with Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 142 Goodwill and Other Intangible Assets (SFAS 142), effective
January 1, 2002, goodwill and intangible assets that are determined to have an
indefinite life are no longer amortized, but are subject to impairment testing
at least annually (see Note 6). Deferred Finance Charges Deferred finance charges, which are included in other assets, consist of
fees and expenses incurred to obtain the Companys debt. The deferred finance
charges are being amortized over the term of the related debt using the
effective interest method (see Note 8). Deferred finance charges, net of
accumulated amortization, were approximately $10.5 million and $13.0 million at
December 31, 2003 and 2002, respectively. Revenue Recognition Casino
Revenues - Casino revenues are the aggregate of gaming wins and
losses. Food,
Beverage, Hotel, Retail and Other Revenues - Food, beverage, hotel,
retail and other revenues are recognized at the point of sale and include the
complimentary goods and services that are furnished to guests without charge. Promotional Allowances and Other Promotional allowances and other consists of the following:  
    
    The retail value of complimentary food and beverage,
rooms and other services furnished to guests without charge.
    
    The estimated cash value of slot club points earned by
guests. In order to induce casino play, customers using their
player cards are able to earn points through casino play which
are redeemable for cash.
    
    Direct mail cash offers redeemed by guests.
    
    Customer discounts. 45




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##### Table of Contents



The retail value of complimentary food and beverage, rooms and other
services furnished to guests without charge was approximately $91.0 million,
$87.6 million and $93.9 million for the years ended December 31, 2003, 2002 and
2001, respectively. Such amounts are included in gross revenues and deducted
as promotional allowances and other. The estimated costs of providing such
complimentary services, which are included in casino expenses, are as follows
(in thousands): Years ended December 31,2003
    
    2002
    
    2001Food and beverage
    
    $
    61,853
    
    
    $
    60,842
    
    
    $
    67,426Hotel
    
    
    9,642
    
    
    
    8,660
    
    
    
    8,893Other operating expenses
    
    
    8,753
    
    
    
    9,523
    
    
    
    10,844$
    80,248
    
    
    $
    79,025
    
    
    $
    87,163
 Preopening Expenses The Company expenses preopening costs as incurred. During 2001, the
Company incurred preopening expenses related to the rebranding of Hammond.
Included in preopening expenses are advertising and production costs related to
the name change of approximately $2.0 million for the year ended December 31,
2001. Dividends The Companys debt agreements contain covenants that limit dividends and
tax distributions to its stockholders. As of December 31, 2003, the maximum
permitted dividends that could be paid by the Company was approximately $96.4
million. In addition, tax distributions to the stockholders are based upon the
Companys taxable income and the highest marginal Federal and state individual
statutory tax rates in effect, which are applicable to any stockholder. Such
tax distributions are to be paid quarterly based upon estimated taxable income.
After filing of the annual tax returns by the Company and its subsidiaries,
each stockholder is to reimburse the Company for overpayments of tax
distributions or the Company is to withhold such amounts from future dividends
to the stockholders. Advertising Costs The costs associated with the production of advertising are expensed as
incurred while the costs of communication (airtime or space) are expensed the
first time the advertising takes place. Advertising costs are included in
general and administrative expenses in the accompanying consolidated statements
of income and totaled approximately $17.0 million, $17.4 million and $15.9
million for the years ended December 31, 2003, 2002 and 2001, respectively. Corporate Expenses Expenses associated with the management of the Company are recorded as
corporate expenses and are reflected in the accompanying consolidated
statements of income in the periods such expenses are incurred. 46




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##### Table of Contents



Deferred Compensation Deferred compensation represents compensation expenses related to
ownership interests in the Company issued to employees pursuant to the
Horseshoe Gaming Holding Corp. Equity Incentive Plan. Deferred compensation of
approximately $0.3 million, $10.2 million and $(0.4) million was recorded in
the accompanying statements of income during the years ended December 31, 2003,
2002 and 2001, respectively (see Note 10). Equity Incentive Plan The Company has an Equity Incentive Plan in which stock options (with
tandem Stock Appreciation Rights (SARs)) or SARs are granted to certain key
employees. The stock options and/or SARs are expensed ratably, based on the
current market price, over their four year vesting period (see Note 10). Income Taxes The Company is organized as a corporation under Delaware laws and has
elected to be taxed as an S Corporation for Federal income tax purposes.
Accordingly, no provision is made in the accounts of the Company for Federal
income taxes, as such taxes are liabilities of the stockholders. Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, and disclosure of contingent assets and liabilities,
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. Reclassifications Certain amounts from prior years have been reclassified to conform to the
current year presentations, which have no effect on previously reported net
income. NOTE 3 SALE OF EMPRESS CASINO JOLIET On July 31, 2001, the Company sold Joliet to Argosy Gaming Company for
$465.0 million in cash. The net proceeds from the sale, net of a deficiency in
working capital and other transaction costs, were approximately $442.7 million.
An additional $38.4 million in tax distributions related to the sale were made
in the third quarter of 2001. A gain of approximately $165.5 million related to
the sale of Joliet is included in the net loss (gain) on disposal of assets for
the year ended December 31, 2001 in the accompanying consolidated statements of
income. 47




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##### Table of Contents



Pursuant to the merger agreement in which the Company sold Joliet, the
Company deposited $16.3 million of the net proceeds into escrow to cover
potential future indemnifications related to the Joliet facility. Of this
amount, $2.3 million was disbursed in October 2001, $10.5 million was returned
to the Company in November 2002, and approximately $3.5 million was returned to
the Company in September 2003. The escrowed funds, including earnings, which
totaled approximately $0 and $3.7 million at December 31, 2003 and 2002,
respectively, are reflected as restricted cash in the accompanying consolidated
balance sheets. Joliet did not contribute any revenues or profits for the years ended
December 31, 2003 or 2002. Included in the accompanying consolidated
statements of income, are net revenues from Joliet of approximately $161.6
million for the year ended December 31, 2001. Joliet also contributed
approximately $47.4 million of operating income before corporate allocations
and deferred compensation for the year ended December 31, 2001. NOTE 4 ALLOWANCE FOR DOUBTFUL ACCOUNTS Activity in the allowance for doubtful accounts consists of the following (in thousands): As of and for theyears ended December 31,2003
    
    2002
    
    2001Balance, beginning of period
    
    $
    6,779
    
    
    $
    13,160
    
    
    $
    13,112Additions charged to expense
    
    
    2,997
    
    
    
    4,068
    
    
    
    7,226Deductions from reserves and uncollectable accounts
written off, net of amounts received
    
    
    (3,471
    )
    
    
    (10,449
    )
    
    
    (7,178
    )Balance, end of period
    
    $
    6,305
    
    
    $
    6,779
    
    
    $
    13,160
 NOTE 5 PROPERTY AND EQUIPMENT, NET Property and equipment, net consists of the following (in thousands): Years ended December 31,2003
    
    2002Land and land improvements
    
    $
    33,603
    
    
    $
    33,053Buildings, boat, barge and improvements
    
    
    493,237
    
    
    
    487,444Furniture, fixtures and equipment
    
    
    171,808
    
    
    
    155,752Construction in progress
    
    
    36,148
    
    
    
    3,236734,796
    
    
    
    679,485Accumulated depreciation
    
    
    (249,239
    )
    
    
    (208,482
    )$
    485,557
    
    
    $
    471,003
 48




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##### Table of Contents



NOTE 6 GOODWILL AND OTHER INTANGIBLE ASSETS On January 1, 2002, the Company adopted SFAS 142. SFAS 142 states that
goodwill and indefinite-lived intangible assets are no longer amortized but are
reviewed for impairment annually (or more frequently if impairment indicators
arise). Separable intangible assets that are not deemed to have an indefinite
life continue to be amortized over their useful lives. The following table sets forth a reconciliation of net income, assuming
that SFAS No. 142 was applied during 2001. Net income:As reported
    
    $
    232,347Goodwill amortization
    
    
    12,340Indefinite-lived intangibles amortization
    
    
    167As adjusted
    
    $
    244,854
 The Company conducted its annual goodwill impairment test as of November
30, 2003. No impairment charge was required as a result of the test. As of December 31, 2003 and 2002, the Company had the following intangible
assets recorded on its balance sheet (in thousands): GrossCarrying
    
    AccumulatedAmount
    
    Amortization
    
    Balance2003Deferred licensing fees
    
    $
    11,131
    
    
    $
    3,640
    
    
    $
    7,491Other
    
    
    6,380
    
    
    
    3,322
    
    
    
    3,058$
    17,511
    
    
    $
    6,962
    
    
    $
    10,5492002Deferred licensing fees
    
    $
    11,131
    
    
    $
    3,091
    
    
    $
    8,040Covenant not to compete
    
    
    7,959
    
    
    
    6,369
    
    
    
    1,590Other
    
    
    5,968
    
    
    
    2,628
    
    
    
    3,340$
    25,058
    
    
    $
    12,088
    
    
    $
    12,970
 Amortization expense for the years ended December 31, 2003 and 2002 was
approximately $2.8 million and $5.0 million, respectively. Estimated annual
amortization expense for the years ended December 31, 2004, 2005, 2006, 2007
and 2008 is approximately $1.3 million, $0.8 million, $0.8 million, $0.8
million and $0.8 million, respectively. 49




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##### Table of Contents



NOTE 7 ACCRUED EXPENSES AND OTHER Accrued expenses and other consists of the following (in thousands): As of December 31,2003
    
    2002Payroll and related liabilities
    
    $
    22,312
    
    
    $
    24,417Gaming, sales, use and property taxes
    
    
    20,498
    
    
    
    16,342Progressive slot and slot club liabilities
    
    
    10,315
    
    
    
    10,648Accrued interest
    
    
    5,768
    
    
    
    6,618Insurance and guest claims payable
    
    
    2,456
    
    
    
    1,638Accrued stockholder dividends
    
    
    2,182
    
    
    
    12,515Bossier City relicensing
    
    
    
    
    
    
    7,400Other accrued expenses
    
    
    16,834
    
    
    
    19,914$
    80,365
    
    
    $
    99,492
 NOTE 8 LONG-TERM DEBT Long-term debt consists of the following (in thousands): As of December 31,2003
    
    20028.625% Senior Subordinated Notes (effective interest rate
of 8.657%), due May 15, 2009, net of unamortized
discount of $1,047 and $1,242, respectively, interestpayable semi-annually on May 15 and November 15
    
    $
    533,968
    
    
    $
    533,773Senior Secured Revolving Credit Facility, secured by
substantially all of the assets of the Company, $121.9
million borrowing capacity, due September 30, 2004,
with variable interest rates based upon the
Eurodollar
    
    
    
    
    
    
    23,000533,968
    
    
    
    556,773Current maturities
    
    
    
    
    
    
    $
    533,968
    
    
    $
    556,773
 At December 31, 2003 and 2002, the fair market value of the 8.625% Senior
Subordinated Notes, based on quoted market prices was approximately $565.8
million and $569.8 million, respectively. The fair market value of the
Companys other long-term debt approximated its carrying value as of December
31, 2002, based on the borrowing rates available for debt with similar terms. There are no maturities of long-term debt during the five-year period
ending December 31, 2008. In July 2001, approximately $65.0 million of the Companys 8.625% Senior
Subordinated Notes and approximately $0.9 million of the Companys 9.375%
Senior Subordinated Notes were tendered in an Asset Sale Offer to its
bondholders. As a result of these retirements, the Company recorded a loss on
early retirement of debt of approximately $6.9 million in the year ended
December 31, 2001. 50




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##### Table of Contents



In June 2002, the Company called and retired the remaining 9.375% Senior
Subordinated Notes for approximately $166.5 million, including call premium.
As a result of the retirement, the Company recorded a loss on early retirement
of debt of approximately $9.7 million in the year ended December 31, 2002. In 1999, the Company completed its $375.0 million Senior Secured Credit
Facility (the Credit Facility). The Credit Facility consisted of a $250.0
million, five-year revolver and a $125.0 million, seven-year term loan. In
2001, the Company amended its Credit Facility to allow, among other things, the
reduction of its loan commitment to $150.0 million. The Credit Facility, as
amended, was permanently reduced by $28.1 million on December 31, 2003 and will
be permanently reduced by $40.6 million per quarter beginning March 31, 2004.
The Credit Facility expires on September 30, 2004. As of December 31, 2003
there were no amounts outstanding under the Credit Facility. The Companys debt agreements contain covenants that, among other things,
(i) limit the amount of dividends the Company can pay to its stockholders; (ii)
limit the amount of additional indebtedness which may be incurred by the
Company and its subsidiaries; and (iii) limit the amount of restricted
payments, as defined, the Company may make. In addition, the Companys debt
agreements prohibit the consolidation or merger of the Company or its
subsidiaries with an affiliate or third party, or any sale of substantially all
of the Company or its subsidiaries assets unless: (1) either (a) the Company
is the continuing entity or (b) the resulting entity is a corporation organized
under the laws of the United States and expressly assumes by supplemental
indenture all of the obligations of the Company in connection with the Senior
Subordinated Notes; (2) no default or event of default, as defined, shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; (3) immediately after giving effect to such transaction on a
pro forma basis, the consolidated resulting, surviving or transferee entity
would immediately thereafter be permitted to incur a least $1 of additional
indebtedness; and (4) such transaction will not result in the loss of any
material gaming license. Should the Companys pending sale to Harrahs trigger a change of control
triggering event, as defined, the Company would be required to make a change of
control offer to the bondholders at a cash price equal to 101% of the principal
amount thereof. The change of control offer is required to be made within ten
business days following a change of control triggering event and must remain
open for 20 business days following its commencement. The repurchase of any
tendered notes will take place not later than 35 business days after the change
of control triggering event. Prior to the commencement of a change of control
offer, the Company will terminate all commitments of indebtedness under the
Credit Facility or obtain the requisite consents under the Credit Facility to
permit the repurchase of the notes as described above. Certain of the Companys debt securities have been guaranteed by HE, RPG
and Hammond. The Company has no independent assets or operations, the
guarantees are full and unconditional and joint and several and any
subsidiaries of the Company, other than the subsidiary guarantors, are minor. 51




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NOTE 9 TRANSACTIONS WITH RELATED PARTIES A current owner, through an entity he owns, provides certain financial
consulting services to the Company. For each of the years ended December 31,
2003, 2002 and 2001, the Company paid fees of approximately $0.4 million to
this owner. In addition, this entity received approximately $1.7 million in
fees from various investment banking firms related to the sale of Joliet in
2001. NOTE 10 EMPLOYEE COMPENSATION AND BENEFITS Equity Incentive Plan The Horseshoe Gaming Holding Corp. Equity Incentive Plan provides for (i)
certain employees to be granted stock options (with tandem Stock Appreciation
Rights (SARs)) to purchase stock in the Company and, (ii) certain other
employees to be granted SARs to share in the increase in the market value of
the stock options and SARs as determined in accordance with the Equity
Incentive Plan. The exercise price for the stock options/SARs is determined in
accordance with the plan document and represents managements best estimate of
the fair market value at the date of grant. The stock options/SARs vest over a
period of four years and expire in ten years. The Equity Incentive Plan also
contains a change of control provision whereby the vesting is accelerated upon
a change of control. In 2001, the Company amended the Equity Incentive Plan to modify the
valuation methodology for options and SARs granted after January 1, 2002.
Options and SARs granted prior to January 1, 2002 continue to be valued using
the original method. The following table represents stock option (with tandem SARs) activity
for the three years ended December 31, 2003: Number
    
    Average Priceof Shares
    
    per ShareBalance, December 31, 2000
    
    
    235.36
    
    
    $
    32,211Issued
    
    
    568.53
    
    
    $
    22,303Cancelled
    
    
    (348.25
    )
    
    $
    30,842Exercised
    
    
    (38.13
    )
    
    $
    13,641Balance, December 31, 2001
    
    
    417.51
    
    
    $
    21,557Issued
    
    
    212.95
    
    
    $
    4,940Exercised
    
    
    (153.90
    )
    
    $
    23,129Balance, December 31, 2002
    
    
    476.56
    
    
    $
    13,624Issued
    
    
    219.85
    
    
    $
    13,545Cancelled
    
    
    (35.38
    )
    
    $
    14,934Exercised
    
    
    (134.84
    )
    
    $
    10,481Balance, December 31, 2003
    
    
    526.19
    
    
    $
    14,307Exercisable at December 31, 2003
    
    
    43.30
    
    
    $
    33,366
 52




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##### Table of Contents



The following table represents SAR activity (not including SARs/options
issued in tandem) for the three years ended December 31, 2003: Number
    
    Average Priceof Shares
    
    per ShareBalance, December 31, 2000
    
    
    563.32
    
    
    $
    39,036Issued
    
    
    1,118.15
    
    
    $
    21,774Cancelled
    
    
    (886.59
    )
    
    $
    32,491Exercised
    
    
    (28.54
    )
    
    $
    13,660Balance, December 31, 2001
    
    
    766.34
    
    
    $
    22,333Issued
    
    
    442.65
    
    
    $
    5,062Cancelled
    
    
    (51.46
    )
    
    $
    19,604Exercised
    
    
    (265.49
    )
    
    $
    23,650Balance, December 31, 2002
    
    
    892.04
    
    
    $
    13,528Issued
    
    
    468.55
    
    
    $
    13,404Cancelled
    
    
    (44.80
    )
    
    $
    12,268Exercised
    
    
    (212.12
    )
    
    $
    9,882Balance, December 31, 2003
    
    
    1,103.67
    
    
    $
    14,227Exercisable at December 31, 2003
    
    
    99.77
    
    
    $
    31,802
 Options and SARs cancelled and issued during 2001 include the activity
resulting from a reduction of the exercise price of options and SARs issued in
2000 and 2001 by 25% due to the sale of Joliet. The sale prompted this
adjustment to set the exercise price of the options and SARs to an amount more
consistent with a pricing that would have occurred if the Company had not owned
Joliet when the options and SARs were issued. In total, 1,044.7 options and
SARs with an average exercise price of $30,964 were adjusted to an average
exercise price of $23,223. The estimated market price on the date of
adjustment was $16,500. 401(k) Savings Plan The Company maintains a 401(k) Savings Plan whereby eligible employees may
contribute up to 50% of their earnings to the plan, on a pre-tax basis.
Employees are eligible to participate in the plan on the first day of the next
calendar quarter following six months of service. In addition, the Company
provides a matching contribution of 100% of the first 2% and 50% of the next 4%
of the employees contributions. Employees vest in the Companys matching
contributions over four years. The Companys matching contributions were
approximately $3.9 million, $3.8 million and $4.2 million for the years ended
December 31, 2003, 2002 and 2001, respectively. 53




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Deferred Compensation Plan The Company maintains a nonqualified deferred compensation plan for
certain key employees. The plan allows participants to defer, on a pre-tax
basis, a portion of their salary and accumulate tax deferred earnings, plus
interest, as a retirement fund. These deferrals are in addition to those
allowed under the Companys 401(k) Savings Plan. All deferred amounts vest
immediately. There are no employer matching contributions made under this plan.
The employer can make discretionary contributions to the plan. The full
amount vested in a participants account will be distributed to a participant
following termination of employment, normal retirement or in the event of
disability or death. NOTE 11 SUPPLEMENTAL CASH FLOW DISCLOSURES The net change in current assets and liabilities consists of the following (in thousands): Years ended December 31,2003
    
    2002
    
    2001(Increase) decrease in assets:Accounts receivable
    
    $
    (5,408
    )
    
    $
    (2,706
    )
    
    $
    (7,975
    )Inventories
    
    
    529
    
    
    
    (387
    )
    
    
    290Prepaid expenses and other
    
    
    1,222
    
    
    
    (1,417
    )
    
    
    405Decrease in liabilities:Accounts payable
    
    
    (2,546
    )
    
    
    (4,579
    )
    
    
    (3,531
    )Accrued expenses and other
    
    
    (11,907
    )
    
    
    (5,729
    )
    
    
    (4,177
    )$
    (18,110
    )
    
    $
    (14,818
    )
    
    $
    (14,988
    )Supplemental Cash Flow Disclosure (in thousands):Cash paid for interest, net of amounts capitalized
    
    $
    47,500
    
    
    $
    60,776
    
    
    $
    80,894Repurchase common stock for debt
    
    
    
    
    
    
    
    
    
    $
    8,043
 NOTE 12 LEASE COMMITMENTS The Company and its subsidiaries lease both real estate and equipment used
in its operations and classifies those leases as operating leases following the
provisions of SFAS No. 13 Accounting for Leases. As of December 31, 2003,
the Company did not have any capital leases. Hammond entered into a lease providing for the right to use the site of
the development and the parking structure, which was conveyed to the City of
Hammond upon completion. The term of the lease automatically extends for a
period equal to each renewal period of the operating license provided that the
total term will not exceed 75 years. Hammond has paid in full the rent for the
amount of $1.00 per year for the term of the lease. Rent expense for the years ended December 31, 2003, 2002 and 2001 was
approximately $5.7 million, $7.9 million and $8.9 million, respectively. 54




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As of December 31, 2003, the Company is obligated under non-cancelable
operating leases to make future minimum lease payments as follows (in
thousands): Year ended December 312004
    
    $
    1,8722005
    
    
    1,2792006
    
    
    8162007
    
    
    3622008
    
    
    297Thereafter
    
    
    1,446Total
    
    $
    6,072
 In addition to these minimum rental commitments, certain of the Companys
operating leases provide for contingent royalty payments based on a percentage
of revenues in excess of specified amounts. NOTE 13 COMMITMENTS AND CONTINGENCIES Harrahs Sale Agreement As discussed in Note 1, the Company is in the process of being purchased
by Harrahs. Pursuant to the Harrahs Sale Agreement, the transaction is
expected to be treated as an asset sale for Federal income tax purposes. In addition to the cash consideration of approximately $915.0 million, the
Harrahs Sale Agreement requires Harrahs to reimburse the Company for approved
capital expenditures up to $51.2 million to the extent such expenditures are
actually made, purchase all of the Companys existing cash, and also reimburse
the Companys stockholders for the difference between ordinary income tax rates
and capital gains tax rates. The resultant sale will trigger the change of control provisions in
certain of the Companys benefit plans, including a retention bonus plan,
employment agreements and executive severance agreements that cover 158 of the
Companys key management. The executive severance agreements provide for,
among other things, a payment of up to 2.99 times the executives annual salary
and bonus, as defined. The estimated amount payable under the executive
severance arrangements is approximately $13.2 million. The retention bonus plan and employment agreements provide for, among
other things, payments ranging from three months to twenty-four months salary.
The estimated amount payable under the retention bonus plan and employment
agreements is approximately $9.6 million. The Companys Equity Incentive Plan also contains a change of control
provision whereby the vesting is accelerated upon a change of control.
Management estimates that approximately $43.8 million will be paid to key
management under the Equity Incentive Plan upon the sale to Harrahs. 55




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In accordance with the terms of the Harrahs Sale Agreement, the Company
could be liable for a payment to Harrahs of approximately $27.5 million should
the Harrahs Sale Agreement be terminated by Harrahs due to a material adverse
effect, as defined, relating to the Company that cannot be cured by the
Company, or due to a breach by the Company or its stockholders, as defined, of
the Harrahs Sale Agreement that would result in the failure of certain closing
conditions described in the Harrahs Sale Agreement. Self-Insurance The Company is partially self-insured for general liability, workers
compensation and employee medical coverage. Insurance claims and reserves
include accruals of estimated settlements for known claims, as well as accruals
of estimates of incurred but not reported claims. These amounts are included
in accrued expenses and other in the accompanying consolidated balance sheets. Litigation The Company and its subsidiaries are from time to time, party to legal
proceedings arising in the ordinary course of business. Except as discussed
below, the Company is unaware of any legal proceedings which, even if the
outcome were unfavorable to the Company, would have a material adverse impact
on either its financial condition or results of operations. On April 18, 2003, a lawsuit was filed in the Circuit Court of Tunica
County, Mississippi. The plaintiffs are personal representatives of the estate
of three individuals who died following a car accident in Tunica County,
Mississippi. The personal representatives allege that the car accident was the
result of an individual driving while under the influence of alcohol and that
the driver was served the alcohol while at Horseshoe Tunica. Tunica and the
Company deny the allegations in the complaint and intend to vigorously contest
the matter. On July 8, 2002, the Common Council of the City of Hammond filed its
Verified Complaint for Preliminary Injunction And Declaratory Judgment And
Petition for Determination Of The Nature Of The City Executive And Legislative
Power By The Court, sitting en Banc in the Lake County Superior Court in Crown
Point, Indiana and captioned as Robert A. Markovich, as President of The
Common Council of the City of Hammond vs. Duane W. Dedelow, Jr., as Mayor of
the City of Hammond, Horseshoe Hammond, Inc., f/k/a Empress Casino Hammond
Corporation, and Hammond Development Corporation. On June 21, 1996, the City
of Hammond and Horseshoe Hammond entered into the Hammond Riverboat Gaming
Project Development Agreement (Development Agreement). Subsequently, the
City of Hammond and Horseshoe Hammond entered into the First Amendment to
Development Agreement in August of 1999, the Second Amendment to Development
Agreement in August of 1999, the Third Amendment to Development Agreement in
December of 2000 and the Fourth Amendment to Development Agreement in October
of 2001 (collectively referred to herein as the Development Agreement
Amendments). Through the Development Agreement Amendments, the City of Hammond
and Horseshoe Hammond agreed, among other things, to allow Horseshoe Hammond to
expand its facilities in exchange for certain payments from Horseshoe Hammond
to certain governmental agencies at the Citys direction. In entering into the
Development Agreement Amendments, the Mayor of the City of Hammond did not seek
approval of the Development Agreement Amendments from the City of Hammond
Common Council. In the Verified Complaint, the Common Council asked the Court
to (i) enjoin the 56




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##### Table of Contents



Mayor from entering into any further agreements providing for payments
from Horseshoe Hammond or spending any of the funds already paid by Horseshoe
Hammond, (ii) determine that the Mayor does not have unilateral authority to
enter into agreements with Horseshoe Hammond and (iii) enter a declaratory
judgment finding the Development Agreement Amendments invalid. During the
fourth quarter of 2002, the parties to the suit entered into a stipulation
which provided that the resolution of the lawsuit shall not affect the validity
or performance of the Development Agreement or the Development Agreement
Amendments. The parties further stipulated that the only effect of the lawsuit
would be to create a claim by the Common Council for repayment from the
recipients of any funds transferred by the Company. In January 2004, the
parties in the lawsuit agreed to its dismissal. On June 2, 2000, a lawsuit was filed in the United States District Court
for the Northern District of Indiana, against the Company and the Horseshoe
Hammond on behalf of current and former employees of Horseshoe Hammond,
alleging that Horseshoe Hammond and the Company are responsible for damages to
current and former employees as a result of poor air quality on the gaming
vessel operating in Hammond, Indiana. The lawsuit alleged certain tort claims
based on poor air quality and sought certification as a class on behalf of
similarly situated current and former employees of Horseshoe Hammond. On May
8, 2002, the United States District Court denied plaintiffs request for class
certification and on October 18, 2002, plaintiffs counsel amended the suit to
add 25 additional plaintiffs. Horseshoe Hammond and the Company deny the
allegations in the complaint asserted by the named employees and intend to
vigorously contest this matter. In 1996, legislation was passed in Louisiana authorizing each parish
Police Jury, including the Bossier Police Jury, the governing body of Bossier
Parish, to impose a boarding fee of $0.50 per patron entering riverboat gaming
facilities in Bossier Parish. In response to this legislation, Horseshoe
Bossier City commenced litigation against the Bossier Police Jury, asserting
that the Bossier Police Jury had previously contracted away their right to
impose an additional $0.50 boarding fee. In January 1997, Horseshoe Bossier
City separately settled with the Bossier Police Jury, and the lawsuit was
dismissed as it relates to Horseshoe Bossier City and the Bossier Police Jury.
As part of the settlement, Horseshoe Bossier City agreed to pay a 1% tax on its
gross casino revenues to Bossier Parish with a minimum annual payment of $1.5
million regardless of actual revenue. Subsequently, legislation was passed
increasing the maximum amount the Bossier Police Jury could collect to $3.00
per person boarding gaming boats in Bossier City. On July 5, 2001, James
Wellborn and Charles J. Nickel filed a lawsuit in the 26th Judicial Court
(Bossier Parish) against the Municipality of Bossier City, Louisiana asking the
Court to (i) order the City to collect a $3.00 per person boarding fee from
Horseshoe Bossier City, (ii) invalidate a contract fixing the amount paid by
Horseshoe Bossier City to Bossier Parish as opposed to a per person boarding
fee and (iii) certify the suit as a class action on behalf of all citizens and
taxpayers of Bossier Parish. The Company believes the suit is without merit
and will vigorously defend itself in the action, including the validity of the
contract. 57




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##### Table of Contents



In addition, Billy Brooks Hudson, among others, filed a lawsuit seeking
the exact same relief sought in the case filed by Wellborn, as described above.
The suit brought by Hudson had previously been dismissed. However, in August
2002, the Louisiana Court of Appeals found that Billy Brooks Hudson, among
others, have the right as taxpayers to prosecute a suit against the City of
Bossier and others, seeking the same relief sought in the case filed by
Wellborn on July 5, 2001. Accordingly, the Louisiana Court of Appeals directed
that the trial court reinstate in the 26th Judicial District Court, Bossier
Parish Louisiana, the previously dismissed case of Hudson et.al. v. City of
Bossier et.al. The Company believes that, like the Wellborn suit, the Hudson
suit is without merit and the Company will vigorously defend itself in the
action. 
 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. None 
 Item 9A. Controls and Procedures The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Companys Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms,
and that such information is accumulated and communicated to the Companys
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. The Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Companys disclosure controls and procedures as of the end of the period
covered by this report. Based on the foregoing, the Companys Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures were effective. There have been no significant changes in the Companys internal controls
or in other factors that have materially affected, or are reasonably likely to
materially affect, the Companys internal controls over financial reporting
subsequent to the date the Company completed its evaluation. 58




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##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant. The following table sets forth information concerning the Company
executive officers, directors and other key personnel. Age
    
    PositionJack B. Binion
    
    
    67
    
    
    Chairman of the Board of Directors, Chief
Executive Officer and SecretaryPeri N. Howard
    
    
    43
    
    
    Vice Chairperson of the Board of DirectorsLeslie L. Kenny
    
    
    48
    
    
    DirectorRoger P. Wagner
    
    
    56
    
    
    President and Chief Operating OfficerKirk C. Saylor
    
    
    47
    
    
    Senior Vice President  Financial
Officer Treasurer and ChiefDominic F. Polizzotto
    
    
    38
    
    
    Senior Vice President  General CounselChristopher S.
Corrado
    
    
    34
    
    
    Senior Vice President  MarketingDavid S. Carroll
    
    
    48
    
    
    Senior Vice President  Human ResourcesJon C. Wolfe
    
    
    36
    
    
    Senior Vice President  Chief Information OfficerJ. Lawrence Lepinski
    
    
    57
    
    
    General Manager of Horseshoe Bossier CityRobert McQueen
    
    
    50
    
    
    General Manager of Horseshoe TunicaRicky S. Mazer
    
    
    49
    
    
    General Manager of Horseshoe Hammond
 Mr. Binion has served as Chairman of the Board, Chief Executive Officer
and Secretary of the Company since its formation in April 1999. From December
1992 to April 1999, Mr. Binion served as the Chief Executive Officer of various
entities including Horseshoe Gaming, Inc. (HGI), which was the former
managing member of Horseshoe Gaming, LLC, the predecessor in interest to the
Company, and Horseshoe GP, Inc., a wholly owned subsidiary of Horseshoe Gaming,
LLC, which acted as the general partner of RPG and as the general partner of
New Gaming Capital Partnership, which acted as the general partner of Horseshoe
Entertainment. Ms. Howard has been the Companys Vice Chairperson of the Board of
Directors since its inception in April 1999 and previously served as a director
of HGI since January 1997. Ms. Howard has served in various capacities with
Horseshoe Tunica since 1995. Ms. Howard is the daughter of Mr. Binions wife. Ms. Kenny has been one of the Companys directors since its inception in
April 1999 and previously served as director of HGI since September 1998. Ms.
Kenny has been self-employed as a manicurist since 1983. Ms. Kenny is the
daughter of Mr. Binions wife. Mr. Wagner has been the Companys President and Chief Operating Officer
since January 1, 2001. Prior thereto, he served as Senior Vice President and
Chief Operating Officer since the Companys formation in April 1999. Prior
thereto, he served as Senior Vice President and Chief Operating Officer of HGI
since November 1998. Mr. Saylor has been the Companys Senior Vice President, Chief Financial
Officer and Chief Accounting Officer since the Companys formation in April
1999. Prior thereto, he served in the same capacity with HGI since November
1998. 59




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##### Table of Contents



Mr. Polizzotto
has been the Companys Senior Vice President - General
Counsel since January 2001. Prior thereto he was a partner in the law firm of
Ice Miller in Indianapolis, Indiana since 1997. Mr. Corrado
has been the Companys Senior Vice President - Marketing since
October 2002. Prior thereto, he served as the Companys Vice President of
Advertising and Branding since August 2001. From November 1999 to August 2001,
Mr. Corrado served as Vice President of Marketing for Empress Casino in Joliet,
Illinois. From May 1999 to November 1999, he served as Director of Marketing
for Empress Casino in Joliet, Illinois and from September 1998 to May 1999, Mr.
Corrado was Marketing Manager for KPMG - Business Valuation Division, Chicago,
Illinois. Mr. Carroll
has been the Companys Senior Vice President - Human Resources
since the Companys formation in April 1999. Prior thereto, he served in the
same capacity with HGI since November 1998. Mr. Wolfe
has been the Companys Senior Vice President - Chief Information
Officer since October 2000. Prior thereto, Mr. Wolfe served as the Companys
Vice President - Chief Information Officer since the Companys formation in
April 1999. Prior thereto, he served in the same capacity with HGI since
October 1998. Mr. Lepinski has been General Manager of the Horseshoe Bossier City since
September 1995. Mr. McQueen has been General Manager of the Horseshoe Tunica since July
1996. Mr. Mazer has been General Manager of the Horseshoe Hammond since February
1996. Audit Committee Financial Expert Since the stock of the Company is privately held and not listed on an
exchange, the Company is not required to have an Audit Committee. Therefore, a
financial expert is not required. Code of Ethics The Company is in the process of evaluating the code of ethics
requirements of Item 406 of Regulation S-K of the Exchange Act. If a code of
ethics is adopted by the Company, it will be included as an exhibit to the
Companys next regularly scheduled public filing made after adoption. 60




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Item 11. Executive Compensation. The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the four most highly compensated
executive officers (the Named Executive Officers) for the years ended
December 31, 2003, 2002 and 2001: Summary Compensation Table
(dollars in thousands) Long-TermCompensationAnnual Compensation
    
    Securities Underlying
    
    All OtherName
    
    Year
    
    Salary
    
    Bonus
    
    Options/SARS (#)
    
    Compensation (1)Jack B. Binion
    
    
    2003
    
    
    $
    1,000.0
    
    
    
    
    
    
    
    
    
    
    
    Chairman of the Board
    
    
    2002
    
    
    $
    1,000.0
    
    
    
    
    
    
    
    
    
    
    
    CEO and Secretary
    
    
    2001
    
    
    $
    1,000.0
    
    
    
    
    
    
    
    
    
    
    $
    199.4Roger P. Wagner (2)
    
    
    2003
    
    
    $
    600.0
    
    
    $
    347.7
    
    
    
    43.80
    
    
    $
    141.9President  Chief
    
    
    2002
    
    
    $
    550.0
    
    
    $
    481.3
    
    
    
    40.15
    
    
    $
    39.3Operating Officer
    
    
    2001
    
    
    $
    500.0
    
    
    $
    250.0
    
    
    
    91.35
    
    
    $
    100.7Peri N. Howard (3)
    
    
    2003
    
    
    $
    375.0
    
    
    $
    217.3
    
    
    
    27.40
    
    
    $
    137.8Vice Chairperson
    
    
    2002
    
    
    $
    350.0
    
    
    $
    306.3
    
    
    
    25.55
    
    
    $
    20.32001
    
    
    $
    250.0
    
    
    $
    125.0
    
    
    
    53.35
    
    
    $
    61.2Kirk C. Saylor (4)
    
    
    2003
    
    
    $
    350.0
    
    
    $
    202.8
    
    
    
    25.55
    
    
    $
    198.0Senior Vice President
    
    
    2002
    
    
    $
    300.0
    
    
    $
    262.5
    
    
    
    21.90
    
    
    $
    32.2Chief Financial Officer
    
    
    2001
    
    
    $
    270.0
    
    
    $
    135.0
    
    
    
    57.75
    
    
    $
    61.9Dominic F. Polizzotto (5)
    
    
    2003
    
    
    $
    320.0
    
    
    $
    241.7
    
    
    
    23.40
    
    
    $
    133.0Senior Vice President
    
    
    2002
    
    
    $
    300.0
    
    
    $
    318.7
    
    
    
    21.90
    
    
    $
    16.3General Counsel
    
    
    2001
    
    
    $
    270.0
    
    
    $
    191.2
    
    
    
    89.83
    
    
    $
    179.3
  (1)
    
    Detail of other compensation:
(dollars in thousands) BelowDeferred
    
    
    
    
    
    MarketExecutive
    
    Insurance
    
    Health
    
    401k
    
    Compensation
    
    Relocation
    
    StockName
    
    Year
    
    Medical
    
    Premiums
    
    Club
    
    Match
    
    Contribution
    
    Payments
    
    Options
    
    TotalJack B. Binion
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    
    
    
    $
    199.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    199.4Roger P. Wagner
    
    
    2003
    
    
    $
    9.2
    
    
    $
    19.7
    
    
    $
    1.4
    
    
    $
    8.0
    
    
    
    
    
    
    $
    103.6
    
    
    
    
    
    
    $
    141.92002
    
    
    $
    9.9
    
    
    $
    20.4
    
    
    $
    0.9
    
    
    $
    7.5
    
    
    $
    0.6
    
    
    
    
    
    
    
    
    
    
    $
    39.32001
    
    
    
    
    
    
    $
    18.4
    
    
    $
    0.5
    
    
    $
    6.2
    
    
    
    
    
    
    
    
    
    
    $
    75.6
    
    
    $
    100.7Peri N. Howard
    
    
    2003
    
    
    $
    5.4
    
    
    $
    16.7
    
    
    $
    1.4
    
    
    $
    7.0
    
    
    
    
    
    
    $
    107.3
    
    
    
    
    
    
    $
    137.82002
    
    
    $
    0.6
    
    
    $
    11.8
    
    
    $
    0.9
    
    
    $
    7.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20.32001
    
    
    
    
    
    
    $
    16.1
    
    
    $
    0.5
    
    
    $
    6.8
    
    
    
    
    
    
    
    
    
    
    $
    37.8
    
    
    $
    61.2Kirk C. Saylor
    
    
    2003
    
    
    $
    10.0
    
    
    $
    14.5
    
    
    $
    2.2
    
    
    $
    7.0
    
    
    $
    0.5
    
    
    $
    163.8
    
    
    
    
    
    
    $
    198.02002
    
    
    $
    9.9
    
    
    $
    14.1
    
    
    $
    1.2
    
    
    $
    7.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    32.22001
    
    
    
    
    
    
    $
    13.5
    
    
    $
    0.8
    
    
    $
    6.8
    
    
    
    
    
    
    
    
    
    
    $
    40.8
    
    
    $
    61.9Dominic F. Polizzotto
    
    
    2003
    
    
    $
    5.1
    
    
    $
    12.9
    
    
    $
    1.4
    
    
    $
    7.0
    
    
    $
    0.5
    
    
    $
    106.1
    
    
    
    
    
    
    $
    133.02002
    
    
    $
    2.3
    
    
    $
    6.3
    
    
    $
    0.9
    
    
    $
    6.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16.32001
    
    
    
    
    
    
    $
    4.1
    
    
    $
    0.6
    
    
    $
    6.8
    
    
    
    
    
    
    $
    50.4
    
    
    $
    117.4
    
    
    $
    179.3
 With the exception of Jack B. Binion, the above named officers are all entitled
to 2.99 times their most recent salary and bonus in the event there is a change
in control. 61




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##### Table of Contents



(2)
    
    Included in the Long-Term Compensation column for 2001 are 36.50
options/SARs and 18.35 options/SARs originally issued on January 1, 2001
and 2000, respectively. The exercise price on these options/SARs was
adjusted downward by 25% in 2001 following the sale of Joliet to more
accurately set the exercise price of the options/SARs to an amount
consistent with a pricing that would have been established if the Company
had not owned Joliet when the options/SARs were issued.(3)
    
    Included in the Long-Term Compensation column for 2001 are 18.25
options/SARs and 16.85 options/SARs originally issued on January 1, 2001
and 2000, respectively. The exercise price on these options/SARs was
adjusted downward by 25% in 2001 following the sale of Joliet to more
accurately set the exercise price of the options/SARs to an amount
consistent with a pricing that would have been established if the Company
had not owned Joliet when the options/SARs were issued.(4)
    
    Included in the Long-Term Compensation column for 2001 are 19.70
options/SARs and 18.35 options/SARs originally issued on January 1, 2001
and 2000, respectively. The exercise price on these options/SARs was
adjusted downward by 25% in 2001 following the sale of Joliet to more
accurately set the exercise price of the options/SARs to an amount
consistent with a pricing that would have been established if the Company
had not owned Joliet when the options/SARs were issued.(5)
    
    Mr. Polizzottos employment agreement also required a bonus in the amount
of $56,204 payable on each January 1, 2001, 2002 and 2003. Included in
the Long-Term Compensation column for 2001 are 38.05 options/SARs
originally issued on January 1, 2001, that were repriced on November 26,
2001. The exercise price on these options/SARs was adjusted downward by
25% in 2001 following the sale of Joliet to more accurately set the
exercise price of the options/SARs to an amount consistent with a pricing
that would have been established if the Company had not owned Joliet when
the options/SARs were issued. No other annual compensation or long-term incentive plan payouts were paid
during the year ended December 31, 2003. The following table sets forth certain information regarding grants of
stock options made to the Named Executive Officers during 2003 including
information as to the potential realizable value of such options at assumed
annual rates of stock price appreciation for the remaining option terms. Option/SAR Grants in Last Fiscal Year
(dollars in thousands, except price per share) Potential Realizable
    
    
    
    
    
    Potential RealizableValue at AssumedNumber of
    
    Percent of
    
    
    
    
    
    
    
    Annual Rates of StockSecurities
    
    Total Options/


    
    Exercise
    
    
    
    
    
    Price Appreciation forUnderlyingOptions/SARs
    
    SARs GrantedTo Employees

    
    or BasePrice
    
    Expiration
    
    Option/SAR Term (1)Name
    
    Granted (2)
    
    in 2003
    
    ($/sh.)
    
    Date
    
    5%
    
    10%Jack B. Binion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roger P. Wagner
    
    
    43.80
    
    
    
    6.36
    %
    
    $
    13,545
    
    
    
    1/1/2013
    
    
    $
    373.0
    
    
    $
    945.2Peri N. Howard
    
    
    27.40
    
    
    
    3.98
    %
    
    $
    13,545
    
    
    
    1/1/2013
    
    
    $
    233.3
    
    
    $
    591.3Kirk C. Saylor
    
    
    25.55
    
    
    
    3.71
    %
    
    $
    13,545
    
    
    
    1/1/2013
    
    
    $
    217.6
    
    
    $
    551.4Dominic F. Polizzotto
    
    
    23.40
    
    
    
    3.40
    %
    
    $
    13,545
    
    
    
    1/1/2013
    
    
    $
    199.3
    
    
    $
    505.0
  (1)
    
    The dollar amount under these columns are the result of calculations at
five percent and ten percent rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation. There is no assurance that the value realized by an officer
will be at or near the value estimated above.(2)
    
    Employees vest in the right to exercise these options/SARs over a
four-year period. Options/SARs are subject to certain conditions,
including compliance with terms and conditions of the options/SARs as
approved by the Company. The executive officers listed above received
tandem SARs in conjunction with the listed options. The tandem SARs have
substantially identical terms to the options. 62




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##### Table of Contents



The following table sets forth certain information concerning stock option
exercises during 2003 by the Named Executive Officers and information
concerning option values: Aggregated Option/SAR Exercises in 2003 and December 31, 2003 Option/SAR Values
(dollars in thousands) Number of SecuritiesUnderlying Unexercised
    
    Value of Unexercised,Options/SARs Held
    
    In-the-Money Options/SARsValue
    
    at December 31, 2003
    
    at December 31, 2003 (1)Name
    
    Exercised
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableJack B. Binion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Roger P. Wagner
    
    
    23.74
    
    
    $
    253.2
    
    
    
    4.59
    
    
    
    96.75
    
    
    
    
    
    
    $
    244.8Peri N. Howard
    
    
    14.52
    
    
    $
    172.9
    
    
    
    4.21
    
    
    
    59.90
    
    
    
    
    
    
    $
    130.0Kirk C. Saylor
    
    
    14.52
    
    
    $
    161.6
    
    
    
    4.59
    
    
    
    56.41
    
    
    
    
    
    
    $
    132.5Dominic F. Polizzotto
    
    
    14.93
    
    
    $
    167.7
    
    
    
    4.59
    
    
    
    54.26
    
    
    
    
    
    
    $
    132.5
  (1)
    
    Amount represents the difference between the aggregate exercise price of
unexercised options/SARs and the value per share price as determined by
the Company pursuant to the Equity Incentive Plan. The per share price
represents the latest available fair market price as determined pursuant
to the plan. Compensation of Directors; Compensation Committee Interlocks and Insider Participation The Bylaws of the Company provide for a six-member Board of Directors.
There are currently three directors. Directors serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified. Vacancies on the Board of Directors may be filled by a majority of
the remaining directors. The Chairman of the Board of Directors and the
directors receive no compensation for their services on the board. Officers
serve at the discretion of the Board. The Board has no Compensation Committee. Employment and Executive Severance Agreements Jack B. Binion serves as Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Binion is not covered under an
employment agreement or executive severance agreement. As of January 1, 2004,
Mr. Binion earns a base salary of one million dollars ($1,000,000). Roger P. Wagner is employed as the President and Chief Operating Officer
of the Company pursuant to an employment agreement with the Company that is
terminable for cause, as defined in the agreement, or without cause with the
payment of an amount equal to one year of base compensation plus pro-rata
bonus. Mr. Wagner is also covered by an executive severance agreement, which
entitles him to 2.99 times his most recent salary and bonus in the event of a
change in control. Mr. Wagner collaborates with Senior Management of the
Company to develop operating objectives that will achieve the Companys
profitability and development goals. He directs and oversees Company operations
at each casino and assures that each operating division is properly organized,
staffed, and directed to fulfill its responsibilities in accordance with
Company standards. As of January 1, 2004, Mr. Wagner earns a base salary of six
hundred thousand dollars ($600,000) and a discretionary bonus. Peri N. Howard serves as Vice Chairperson of the Board of Directors and as
a senior executive of the Company. Ms. Howard is not covered under an
employment agreement; however, she is covered by an executive severance
agreement, which entitles her to 2.99 times her most recent salary and bonus in
the event of a change in control. As of January 1, 2004, Ms. 63




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##### Table of Contents



Howard earns a base salary of three hundred seventy-five thousand dollars
($375,000) and a discretionary bonus. Kirk
C. Saylor is employed as the Senior Vice President - Chief Financial
Officer for the Company pursuant to an employment agreement with the Company
that is terminable for cause, as defined in the agreement, or without cause
with the payment of an amount equal to one year of base compensation plus
pro-rata bonus. Mr. Saylor is also covered by an executive severance
agreement, which entitles him to 2.99 times his most recent salary and bonus in
the event of a change in control. Mr. Saylor is responsible for overseeing the
senior accounting operations of the Companys facilities and assisting in the
opening of any casino and hotel facilities to be developed or acquired by
subsidiaries or affiliates of the Company. As of January 1, 2004, Mr. Saylor
earns compensation of three hundred fifty thousand dollars ($350,000) per year
base salary and a discretionary bonus. Dominic
F. Polizzotto is employed as the Senior Vice President - General
Counsel for the Company pursuant to an employment agreement with the Company
that is terminable for cause, as defined in the agreement, or without cause
with the payment of an amount equal to one year of base compensation plus
pro-rata bonus. Mr. Polizzotto is also covered by an executive severance
agreement, which entitles him to 2.99 times his most recent salary and bonus in
the event of a change in control. Mr. Polizzotto is responsible for overseeing
all legal issues for the Company and its subsidiaries, and developing
compliance and risk management systems. In addition, Mr. Polizzotto is in
charge of investigating new opportunities for expansion of the Companys
operations. As of January 1, 2004, Mr. Polizzotto earns compensation of three
hundred twenty thousand dollars ($320,000) per year base salary and a
discretionary bonus. His employment agreement also included a bonus of $56,204
payable on each January 1, 2001, 2002 and 2003. Report on Executive Compensation The Board of Directors has no Compensation Committee so the entire Board
of Directors is charged with the responsibility to develop and administer
compensation programs for the Companys executive officers. To this end, the
Board of Directors has established the following fundamental philosophy for
executive compensation: To assist the Company in attracting and retaining high
quality talent, the Company shall provide executives with compensation packages
that include a base pay that is competitive in the marketplace and the ability
to substantially increase their compensation through performance. The
performance component of each executives compensation package shall be
established to assist the Company in achieving overall corporate performance
goals that ultimately enhance shareholder value. In accordance with this
philosophy, the Company compensates its executives through three primary
sources; base pay, a performance-based annual bonus, and stock options/SARs.
Under this approach the Company sees that a significant portion of the
compensation for these officers is at risk. Base Pay The Company sets salaries for executives taking into account the
competitive marketplace and a subjective assessment of the nature of the
position. For the Company, this marketplace includes companies of similar size
and companies in the gaming markets. Adjustments to base salaries are based on
recommendations from the Chief Executive Officer. 64




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##### Table of Contents



Management Bonus Plan The Company maintains a management bonus plan that includes the executive
officers. The plan allows for payment of annual cash rewards based on the
accomplishment of goals specified by the Company. If results of operations
exceed the net profitability goals, the amount of the executives bonus may be
increased in the sole discretion of the Companys Board of Directors and if the
results of operations for the year do not achieve such net profitability goals,
the amount of the executives bonus (if any) is within the sole discretion of
the Companys Board of Directors. Stock Options/SARs The Company utilizes stock options/SARs to promote the success of the
Company and enhance its value by linking the personal interests of participants
to those of its stockholders by providing an incentive for outstanding
performance. From time to time the Board of Directors approves the grant of
options/SARs to the executives based on a number of subjective factors,
including performance of the Company and performance of the individual
executives functional area of responsibility. Compensation of the Chief Executive Officer Compensation of the Chief Executive Officer is based upon an understanding
between the Company and Mr. Binion. There is no currently existing employment
agreement, but Mr. Binion provides services to the Company and receives an
annual base salary which has not increased since 1998. Members of the Board of Directors
Jack B. Binion, Chairman
Peri N. Howard, Vice Chairperson
Leslie L. Kenny 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth certain information regarding beneficial
ownership of common stock in the Company, as of March 15, 2004, by each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares, by each director of the Company, each of the named executive officers
and by all directors and executive officers of the Company as a group. PercentageName
    
    Number of Shares
    
    of SharesJack B. Binion
    
    
    23,338
    
    
    
    (1
    )
    
    
    100.00
    %Phyllis M. Cope
    
    
    1,907
    
    
    
    (2
    )
    
    
    8.25Leslie L. Kenny
    
    
    1,194
    
    
    
    (3
    )
    
    
    5.16Peri N. Howard
    
    
    3,652
    
    
    
    (4
    )
    
    
    15.78Scott Hamilton
    
    
    1,272
    
    
    
    (5
    )
    
    
    5.50Wanda Parsons
    
    
    1,907
    
    
    
    (6
    )
    
    
    8.25Roger P. Wagner
    
    
    49
    
    
    
    (7
    )
    
    
    *Kirk C. Saylor
    
    
    31
    
    
    
    (8
    )
    
    
    *Dominic F. Polizzotto
    
    
    31
    
    
    
    (9
    )
    
    
    *Directors and
executive officers
as a group (12)
    
    
    23,338
    
    
    
    (10
    )
    
    
    100.00
 * Indicates less than 1% 65




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##### Table of Contents



The address for each of the persons or entities listed above is c/o the
Company at 9921 Covington Cross Drive, Las Vegas, NV 89144-6835. Unless
otherwise indicated, the shares described below are shares of Class A Common
Stock. (1) Includes 9,779 shares of Class B Common Stock held by Mr. Binion as an
individual of which he has sole voting and investment power. These shares have
a preferential vote such that each share of Class B Common Stock has a vote
equivalent to five shares of Class A Common Stock. Except as otherwise
required by applicable law, the Class A Common Stock and the Class B Common
Stock vote together as one class. Mr. Binion has shared voting power over the
remaining 13,559 shares of Class A Common Stock beneficially owned by him,
which include; (a) the 1,907 shares owned by Phyllis M. Cope; (b) the 3,652
shares owned by Peri N. Howard including 26 shares subject to options that are
currently exercisable or will become exercisable within 60 days; (c) the 1,194
shares owned by Leslie L. Kenney; (d) the 1,272 shares owned by Scott Hamilton;
(e) the 1,907 shares owned by Wanda Parsons; (f) the 1,645 shares held by
members of Mr. Binions family or trusts for the benefit of members of Mr.
Binions family; and (g) the 1,982 shares, including 198 shares subject to
options that are currently exercisable or will become exercisable within 60
days, which are held by other individuals. Mr. Binion shares voting power of
such shares pursuant to a Stockholders Agreement dated as of April 29, 1999
among all shareholders of Horseshoe. Holders of options must enter into the
Stockholders Agreement before they receive shares of options which they have
exercised. Mr. Binion expressly disclaims beneficial ownership of the 13,559
shares not held by him individually. (2) Includes 954 shares held by Phyllis M. Cope, as Trustee of the Ted J.
Fechser Trust, and 953 shares held by Phyllis M. Cope, as Trustee of the Fancy
Ann Fechser Trust. Phyllis M. Cope has sole investment power over these shares
and shares voting power over these shares with Mr. Binion; however, she
expressly disclaims beneficial ownership of any shares held by her as trustee
of such trusts, which are trusts established for the benefit of certain members
of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections
13(d) and 13(g) of the Exchange Act. (3) Includes 1,194 shares held by Leslie L. Kenny individually of which she has
sole investment power and shares voting power over these shares with Mr.
Binion. (4) Includes 275 shares held by Peri N. Howard, as Trustee of the Ted J.
Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the Fancy Ann
Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the James
Christopher Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the
Robert Daniel Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of
the Katie ONeill Trust, 275 shares held by Peri N. Howard, as Trustee of the
Kellie ONeill Trust, 275 shares held by Peri N. Howard, as Trustee of the
Rachel Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the Ben
E. Johnson Trust, 55 shares held by Peri N. Howard, as Trustee of the Bonnie
Binion Trust, and 55 shares held by Peri N. Howard, as Trustee of the Benny
Behnen Trust; 55 shares held by Peri N. Howard, as Trustee of the Jack Behnen
Trust, 1,261 shares held by Peri N. Howard as an individual and 26 shares
subject to options that are currently exercisable or will become exercisable
within 60 days. Peri N. Howard has sole investment power over these shares and
shares voting power over these shares with Mr. Binion; however, she expressly
disclaims beneficial ownership of any shares held by her as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act. (5) Includes 636 shares held by Scott Hamilton, as Trustee of the James C.
Fechser Trust, and 636 shares held by Scott Hamilton, as Trustee of the Rachel
Fechser Trust. Scott Hamilton has sole investment power over these shares and
shares voting power over these shares with Mr. Binion; however, he expressly
disclaims beneficial ownership of any shares held by him as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act. (6) Includes 954 shares held by Wanda Parsons, as Trustee of the Katie ONeill
Trust, and 953 shares held by Wanda Parsons, as Trustee of the Kellie ONeill
Trust. Wanda Parsons has sole investment power over these shares and shares
voting power over these shares with Mr. Binion; however, she expressly
disclaims beneficial ownership of any shares held by her as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act. 66




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##### Table of Contents



(7) Includes 39 shares subject to options that are currently exercisable or
will become exercisable within 60 days. (8) Includes 26 shares subject to options that are currently exercisable or
will become exercisable within 60 days. (9) Includes 25 shares subject to options that are currently exercisable or
will become exercisable within 60 days. (10) Includes 224 shares subject to options that are currently exercisable
or will become exercisable within 60 days. Equity Compensation Plan Information The following table summarizes the Companys equity compensation plan
under which equity securities of the Company are authorized for issuance as of
December 31, 2003. (a)
    
    (b)
    
    (c)Number of
    
    
    
    Number ofsecurities to be issued
    
    Weighted-average
    
    securities remainingupon exercise of
    
    exercise price of
    
    available for futureoutstanding options,
    
    outstanding options,
    
    issuance under equityPlan Category
    
    warrants and rights
    
    warrants and rights
    
    compensation plans (1)Equity compensation plans
approved by stockholders (2)
    
    
    526
    
    
    $
    14,307
    
    
    
    1,614Equity compensation plans not
approved by stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    526
    
    
    $
    14,307
    
    
    
    1,614
  (1)
    
    Excluding securities reflected in column (a).  (2)
    
    Includes the Horseshoe Gaming Holding Corp Equity Incentive Plan, a
description of which is set forth in Note 10 to the consolidated financial
statements set forth on pages 52 through 54. Change in Control On September 10, 2003, the Company and its stockholders entered into a
definitive Stock Purchase Agreement (the Harrahs Sale Agreement) with
Harrahs Entertainment, Inc. (Harrahs). Under the terms of the Harrahs
Sale Agreement, the stockholders of the Company agreed to sell all of the
outstanding capital stock of the Company to Harrahs, subject to customary
conditions, for $1.45 billion, including the assumption of debt. The
transaction is subject to regulatory approvals and is expected to be completed
in the second quarter of 2004. The sale of the Company to Harrahs, pursuant
to the Harrahs Sale Agreement, will result in a change in control. 
 Item 13. Certain Relationships and Related Transactions. None. 67




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##### Table of Contents



Item 14. Principal Accounting Fees and Services. The following table summarizes the aggregate fees paid or accrued by the
Company to Deloitte & Touche LLP during 2003 and 2002 (in thousands): 2003
    
    2002Audit fees
    
    $
    328
    
    
    $
    343Audit related fees (a)
    
    
    79
    
    
    
    23Tax fees (b)
    
    
    181
    
    
    
    203Other fees
    
    
    2
    
    
    
    31Total
    
    $
    590
    
    
    $
    600
  (a)
    
    Audit related fees include fees for quarterly revenue audits as required
by certain state gaming regulations, fees for Sarbanes-Oxley related
planning services and fees for the Companys 401(k) plan audit.(b)
    
    Tax fees include $105,000 and $100,000 in 2003 and 2002, respectively for
tax compliance services. The remaining tax fees are for tax planning and
advice. Since the Company is not required to have an Audit Committee, the
Companys Chief Financial Officer approves all accounting fees and services. 68




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##### Table of Contents



PART IV 
 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Financial Statements of the Company filed as part of this report are listed below:  (a)(1)
    
    Independent Auditors Report
Report of Independent Public Accountants
Consolidated Financial Statements     Balance
sheets as of December 31, 2003 and 2002     Statements
of income for the years ended December 31, 2003, 2002 and 2001     Statements
of stockholders equity for the years ended December 31,
2003, 2002 and 2001     Statements
of cash flows for the years ended December 31, 2003, 2002
and 2001     Notes
to consolidated financial statements(2)
    
    All schedules have been omitted as the required information is
inapplicable or not present in amounts sufficient to require submission
of the schedule, or because the information is presented in the
consolidated financial statements or related notes thereto. The
exhibits listed on the accompanying Exhibit Index are filed as part of
this Form 10-K.(3)
    
    Exhibits ExhibitNumber
    
    
    
    Description2.1
    
    (n.)
    
    Stock Purchase Agreement by and among Harrahs Entertainment, Inc., Horseshoe Gaming Holding Corp. and each of
the Stockholders of Horseshoe Gaming Holding Corp., dated as of September 10, 2003.2.2
    
    (h.)
    
    Agreement and Plan of Merger by and among Argosy Gaming Company, Joliet Acquisition Corporation, Empress Casino
Joliet Corporation, and Horseshoe Gaming Holding Corp. dated as of April 12, 2001.3.1
    
    (c.)
    
    Certificate of Incorporation of Horseshoe Gaming Holding Corp.3.2
    
    (c.)
    
    By-laws of Horseshoe Gaming Holding Corp.4.1
    
    (c.)
    
    Indenture, dated as of May 11, 1999, by and between Horseshoe Gaming Holding Corp. and U.S. Trust Company,
National Association.4.2
    
    (c.)
    
    Second Supplemental Indenture, dated as of May 11, 1999, to Indenture, dated as of October 10, 1995, by and
between Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership and U.S. Trust Company, National
Association.4.3
    
    (c.)
    
    Amendment No. 1 to Second Ship Mortgage on the whole of the Horseshoe Casino & Hotel, Tunica executed by Robinson
Property Group Limited Partnership, as Owner and Mortgagor, in favor of Horseshoe Gaming, L.L.C. and United Trust
Company of New York.4.4
    
    (n.)
    
    Intercompany Note due May 15, 2009 executed by Horseshoe Hammond, Inc. in favor of Horseshoe Gaming Holding Corp.4.5
    
    (e.)
    
    Horseshoe Gaming Holding Corp. Credit Agreement, dated as of June 30, 1999, by and among Horseshoe Gaming Holding
Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce.4.6
    
    (f.)
    
    Amendment No. 1 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 18, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.4.7
    
    (f.)
    
    Amendment No. 2 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 30, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.4.8
    
    (f.)
    
    Amendment No. 3 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of January 20, 2000, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.
 69




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##### Table of Contents



ExhibitNumber
    
    
    
    Description4.9
    
    (j.)
    
    Amendment No. 4 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of July 20, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial Bank
of Commerce.4.10
    
    (k.)
    
    Amendment No. 5 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of September 1, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial Bank
of Commerce.10.1
    
    (c.)
    
    Horseshoe Note Pledge and Security Agreement, dated as of and on May 11, 1999, by and among Horseshoe Gaming
Holding Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company, National Association.10.2
    
    (c.)
    
    Guarantee, dated as of May 11, 1999, by Robinson Property Group, Limited Partnership for the benefit of Horseshoe
Gaming Holding Corp.10.3
    
    (c.)
    
    Guarantee, dated as of May 11, 1999, by Horseshoe Entertainment for the benefit of Horseshoe Gaming Holding Corp.10.4
    
    (c.)
    
    Stockholders Agreement for Horseshoe Gaming Holding Corp., dated as of April 29, 1999, by and among Horseshoe
Gaming Holding Corp. and parties listed therein.10.5
    
    (a.)
    
    Exclusive License Agreement, dated July 2, 1998, by and between Horseshoe Gaming, L.L.C. and Horseshoe License
Company.10.6
    
    (b.)
    
    Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe
Entertainment, LP, and New Gaming Capital Partnership; Jack B. Binion; The Robin Group, Inc. and August Robin.10.7
    
    (b.)
    
    Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe
Entertainment, LP, and New Gaming Capital Partnership; Jack B. Binion; Wendell Piper; Cassandra Piper; and Robert
E. Piper, Jr.10.8
    
    (d.)
    
    Consulting Agreement, dated as of July 23, 1999, by and between Horseshoe Gaming, L.L.C. and Empress
Entertainment, Inc.10.9
    
    (f.)
    
    Equity Incentive Plan dated as of January 1, 1999 by and
between Horseshoe Gaming Holding Corp. and certain employees.10.10
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November
30, 2001, by and between Horseshoe Gaming Holding Corp. and Roger P.
Wagner.10.11
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between Horseshoe Gaming Holding
Corp. and Kirk C. Saylor.10.12
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between
Horseshoe Gaming Holding Corp. and Peri N. Howard.10.13
    
    (k.)
    
    Executive Severance Agreement, dated November 30, 2001 by and between Horseshoe Gaming Holding
Corp. and Dominic F. Polizzotto.10.14
    
    (g.)
    
    Horseshoe Gaming Holding Corp. Deferred Compensation Plan.10.15
    
    (k.)
    
    First, Second, Third and Fourth Amendments of the Horseshoe Gaming Holding Corp. Deferred
Compensation Plan.10.16
    
    (l.)
    
    Fourth Amendment to the Hammond Riverboat Gaming Project Development Agreement, dated as of
October 26, 2001.10.17
    
    (l.)
    
    Horseshoe Gaming Holding Corp. Executive Supplemental Medical Plan, effective January 1, 2002.10.18
    
    (l.)
    
    First Amendment to the Horseshoe Gaming Holding Corp. Equity Incentive Plan.10.19
    
    (l.)
    
    Second Amendment to the Horseshoe Gaming Holding Corp. Equity Incentive Plan.10.20
    
    (m.)
    
    Stipulation, dated March 18, 2003, in regards to Horseshoe Entertainment and the Louisiana
Gaming Control Board.21.1
    
    (o.)
    
    Subsidiaries of Horseshoe Gaming Holding Corp.31.1
    
    (o.)
    
    Certification of Jack B. Binion, Chief Executive Officer, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    (o.)
    
    Certification of Kirk C. Saylor, Chief Financial Officer, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    (o.)
    
    Certification of Jack B. Binion, Chief Executive Officer, pursuant to 18 United States Code
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    (o.)
    
    Certification of Kirk C. Saylor, Chief Financial Officer, pursuant to 18 United States Code
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   (a.)
    
    Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1999.(b.)
    
    Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q filed on May 3,
1999. 70




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##### Table of Contents



(c.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp.s Form S-4
Registration Statement filed on June 15, 1999.(d.)
    
    Filed as an Exhibit to Amendment No. 1 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on July 30, 1999.(e.)
    
    Filed as an Exhibit to Amendment No. 2 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on August 2, 1999.(f.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 30, 2000.(g.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on April 2, 2001.(h.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on April 19, 2001.(i.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on August l4, 2001.(j.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2001.(k.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 21, 2002.(l.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 7, 2002.(m.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 24, 2003.(n.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on September 16, 2003.(o.)
    
    Filed herewith. Reports on Form 8-K: None 71




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Horseshoe Gaming Holding Corp.
a Delaware corporationDate: March 17, 2004
    By:
    /s/ Jack B. BinionJack B. BinionIts:
    Chief Executive Officer,
Secretary and Chairman of the
Board of Directors Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated. Signature
    
    Title
    
    Date/s/ Jack B. Binion

Jack B. Binion
    
    Chief Executive Officer, Secretary and
Chairman of the Board of Directors
(Principal Executive Officer)
    
    March 17, 2004/s/ Peri N. Howard

Peri N. Howard
    
    Director
    
    March 17, 2004/s/ Leslie L. Kenny

Leslie L. Kenny
    
    Director
    
    March 17, 2004/s/ Kirk C. Saylor

Kirk C. Saylor
    
    Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
    
    March 17, 2004
 72




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##### Table of Contents



Supplemental Information to Be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants which have not registered Securities Pursuant
to Section 12 of the Act. No annual report or proxy material will be provided to security holders by the
Company. 73




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##### Table of Contents



Exhibit Index ExhibitNumber
    
    
    
    Description2.1
    
    (n.)
    
    Stock Purchase Agreement by and among Harrahs Entertainment, Inc., Horseshoe Gaming Holding Corp. and each of
the Stockholders of Horseshoe Gaming Holding Corp., dated as of September 10, 2003.2.2
    
    (h.)
    
    Agreement and Plan of Merger by and among Argosy Gaming Company, Joliet Acquisition Corporation, Empress Casino
Joliet Corporation, and Horseshoe Gaming Holding Corp. dated as of April 12, 2001.3.1
    
    (c.)
    
    Certificate of Incorporation of Horseshoe Gaming Holding Corp.3.2
    
    (c.)
    
    By-laws of Horseshoe Gaming Holding Corp.4.1
    
    (c.)
    
    Indenture, dated as of May 11, 1999, by and between Horseshoe Gaming Holding Corp. and U.S. Trust Company,
National Association.4.2
    
    (c.)
    
    Second Supplemental Indenture, dated as of May 11, 1999, to Indenture, dated as of October 10, 1995, by and
between Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership and U.S. Trust Company, National
Association.4.3
    
    (c.)
    
    Amendment No. 1 to Second Ship Mortgage on the whole of the Horseshoe Casino & Hotel, Tunica executed by Robinson
Property Group Limited Partnership, as Owner and Mortgagor, in favor of Horseshoe Gaming, L.L.C. and United Trust
Company of New York.4.4
    
    (n.)
    
    Intercompany Note due May 15, 2009 executed by Horseshoe Hammond, Inc. in favor of Horseshoe Gaming Holding Corp.4.5
    
    (e.)
    
    Horseshoe Gaming Holding Corp. Credit Agreement, dated as of June 30, 1999, by and among Horseshoe Gaming Holding
Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce.4.6
    
    (f.)
    
    Amendment No. 1 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 18, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.4.7
    
    (f.)
    
    Amendment No. 2 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 30, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.4.8
    
    (f.)
    
    Amendment No. 3 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of January 20, 2000, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.




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##### Table of Contents



ExhibitNumber
    
    
    
    Description4.9
    
    (j.)
    
    Amendment No. 4 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of July 20, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial Bank
of Commerce.4.10
    
    (k.)
    
    Amendment No. 5 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of September 1, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial Bank
of Commerce.10.1
    
    (c.)
    
    Horseshoe Note Pledge and Security Agreement, dated as of and on May 11, 1999, by and among Horseshoe Gaming
Holding Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company, National Association.10.2
    
    (c.)
    
    Guarantee, dated as of May 11, 1999, by Robinson Property Group, Limited Partnership for the benefit of Horseshoe
Gaming Holding Corp.10.3
    
    (c.)
    
    Guarantee, dated as of May 11, 1999, by Horseshoe Entertainment for the benefit of Horseshoe Gaming Holding Corp.10.4
    
    (c.)
    
    Stockholders Agreement for Horseshoe Gaming Holding Corp., dated as of April 29, 1999, by and among Horseshoe
Gaming Holding Corp. and parties listed therein.10.5
    
    (a.)
    
    Exclusive License Agreement, dated July 2, 1998, by and between Horseshoe Gaming, L.L.C. and Horseshoe License
Company.10.6
    
    (b.)
    
    Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe
Entertainment, LP, and New Gaming Capital Partnership; Jack B. Binion; The Robin Group, Inc. and August Robin.10.7
    
    (b.)
    
    Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe
Entertainment, LP, and New Gaming Capital Partnership; Jack B. Binion; Wendell Piper; Cassandra Piper; and Robert
E. Piper, Jr.10.8
    
    (d.)
    
    Consulting Agreement, dated as of July 23, 1999, by and between Horseshoe Gaming, L.L.C. and Empress
Entertainment, Inc.10.9
    
    (f.)
    
    Equity Incentive Plan dated as of January 1, 1999 by and
between Horseshoe Gaming Holding Corp. and certain employees.10.10
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November
30, 2001, by and between Horseshoe Gaming Holding Corp. and Roger P.
Wagner.10.11
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between Horseshoe Gaming Holding
Corp. and Kirk C. Saylor.10.12
    
    (k.)
    
    Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between
Horseshoe Gaming Holding Corp. and Peri N. Howard.10.13
    
    (k.)
    
    Executive Severance Agreement, dated November 30, 2001 by and between Horseshoe Gaming Holding
Corp. and Dominic F. Polizzotto.10.14
    
    (g.)
    
    Horseshoe Gaming Holding Corp. Deferred Compensation Plan.10.15
    
    (k.)
    
    First, Second, Third and Fourth Amendments of the Horseshoe Gaming Holding Corp. Deferred
Compensation Plan.10.16
    
    (l.)
    
    Fourth Amendment to the Hammond Riverboat Gaming Project Development Agreement, dated as of
October 26, 2001.10.17
    
    (l.)
    
    Horseshoe Gaming Holding Corp. Executive Supplemental Medical Plan, effective January 1, 2002.10.18
    
    (l.)
    
    First Amendment to the Horseshoe Gaming Holding Corp. Equity Incentive Plan.10.19
    
    (l.)
    
    Second Amendment to the Horseshoe Gaming Holding Corp. Equity Incentive Plan.10.20
    
    (m.)
    
    Stipulation, dated March 18, 2003, in regards to Horseshoe Entertainment and the Louisiana
Gaming Control Board.21.1
    
    (o.)
    
    Subsidiaries of Horseshoe Gaming Holding Corp.31.1
    
    (o.)
    
    Certification of Jack B. Binion, Chief Executive Officer, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    (o.)
    
    Certification of Kirk C. Saylor, Chief Financial Officer, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    (o.)
    
    Certification of Jack B. Binion, Chief Executive Officer, pursuant to 18 United States Code
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    (o.)
    
    Certification of Kirk C. Saylor, Chief Financial Officer, pursuant to 18 United States Code
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   (a.)
    
    Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1999.(b.)
    
    Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q filed on May 3,
1999.




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##### Table of Contents



(c.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp.s Form S-4
Registration Statement filed on June 15, 1999.(d.)
    
    Filed as an Exhibit to Amendment No. 1 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on July 30, 1999.(e.)
    
    Filed as an Exhibit to Amendment No. 2 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on August 2, 1999.(f.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 30, 2000.(g.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on April 2, 2001.(h.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on April 19, 2001.(i.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on August l4, 2001.(j.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2001.(k.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 21, 2002.(l.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 7, 2002.(m.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 24, 2003.(n.)
    
    Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on September 16, 2003.(o.)
    
    Filed herewith. Reports on Form 8-K: None