UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

FORM 10-Q


[X]		QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002


[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to ______________________

Commission file number 333-0214

HORSESHOE GAMING HOLDING CORP.

(Exact name of registrant as specified in its charter)


Delaware		88-0425131

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


18454 South West Creek Drive, Tinley Park, IL			60477

(Address of principal executive office)			(Zip Code)

(708) 429-8300

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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.

Yes X No ___

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION
	Item 1. FINANCIAL STATEMENTS
		CONSOLIDATED CONDENSED BALANCE SHEETS
		CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
		CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. Quantitative and Qualitative Disclosure About Market Risk
PART II OTHER INFORMATION
	Item 1. LEGAL PROCEEDINGS
	Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 10.1
EXHIBIT 99.1
EXHIBIT 99.2

HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets as of June 30, 2002 and December 31, 2001	3

	Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2002 and 2001	4

	Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2002 and 2001	5

	Notes to Consolidated Condensed Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 6.	Exhibits and Reports on Form 8-K	20

SIGNATURES		21

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(unaudited)
(in thousands, except for share data)


					June 30,			December 31,
					2002			2001

				ASSETS
Current assets
	Cash and cash equivalents				$	90,508		$	220,817
	Restricted cash					14,152			14,059
	Accounts receivable, net of allowance for doubtful accounts of $8,357 and $13,160, respectively					12,660			13,516
	Inventories					4,392			5,031
	Prepaid expenses and other					9,622			12,152

		Total current assets				131,334			265,575

Property and equipment, net						472,312			482,379
Goodwill						254,413			254,413
Other, net						56,054			54,892

					$	914,113		$	1,057,259

			LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Accounts payable				$	6,212		$	13,426
	Accrued expenses and other					84,186			81,428
	Current maturities of long-term debt					—			9,823

		Total current liabilities				90,398			104,677

Long-term liabilities
	Long-term debt, less current maturities					593,675			729,698
	Other long-term liabilities					9,074			10,699

		Total long-term liabilities				602,749			740,397

Commitments and contingencies
Stockholders’ equity
	Common stock, $.01 par value, 50,000 shares authorized, 25,000 shares issued, 23,145 shares outstanding					—			—
	Additional paid-in capital					59,808			59,808
	Retained earnings					213,943			205,162

						273,751			264,970
	Treasury stock, at cost, 1,855 shares					(52,785	)		(52,785	)

		Total stockholders’ equity				220,966			212,185

					$	914,113		$	1,057,259

The accompanying notes are an integral part of these
consolidated condensed financial statements.

HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)
(in thousands)


			Three months ended June 30,						Six months ended June 30,

			2002			2001			2002			2001

Revenues
	Casino		$	209,531		$	255,942		$	417,464		$	515,085
	Food and beverage			19,717			23,451			40,247			47,577
	Hotel			7,321			7,549			14,457			15,061
	Retail and other			5,016			5,722			9,780			11,096

				241,585			292,664			481,948			588,819
	Promotional allowances and other			(28,141	)		(30,643	)		(56,686	)		(63,326	)

		Net revenues		213,444			262,021			425,262			525,493

Expenses
	Casino			115,257			148,749			225,698			293,648
	Food and beverage			6,242			7,338			12,144			15,063
	Hotel			601			749			1,222			1,545
	Retail and other			2,375			2,046			4,237			3,662
	General and administrative			30,468			32,887			56,787			66,463
	Corporate expenses			8,545			6,353			13,400			12,887
	Deferred compensation			4,645			(1,092	)		7,761			(674	)
	Preopening expense			—			3,173			—			4,064
	Net loss on disposal of assets			2,566			529			3,860			470
	Depreciation and amortization			13,893			16,330			27,786			34,847

		Total expenses		184,592			217,062			352,895			431,975

Operating income				28,852			44,959			72,367			93,518
Other income (expense)
	Interest expense			(17,584	)		(22,833	)		(35,263	)		(46,988	)
	Interest income			872			372			1,799			855
	Other, net			—			14			(615	)		464

		Total other income (expense)		(16,712	)		(22,447	)		(34,079	)		(45,669	)

Income before extraordinary loss on early retirement of debt				12,140			22,512			38,288			47,849
Extraordinary loss on early retirement of debt				(9,683	)		—			(9,683	)		—

Net income			$	2,457		$	22,512		$	28,605		$	47,849

The accompanying notes are an integral part of these
consolidated condensed financial statements.

HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,

(unaudited)
(in thousands)


				2002			2001

Cash flows from operating activities
	Net income			$	28,605		$	47,849
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			27,786			34,847
		Net loss on disposal of assets			3,860			470
		Extraordinary loss on early retirement of debt			9,683			—
		Amortization of debt discounts, deferred finance charges and other			1,561			2,240
		Provision for doubtful accounts			1,609			3,641
		Deferred compensation			7,761			(674	)
		Net change in current assets and current liabilities			(16,667	)		(6,490	)

			Net cash provided by operating activities		64,198			81,883

Cash flows from investing activities
	Purchases of property and equipment				(18,488	)		(23,017	)
	Proceeds from sale of property and equipment				205			90
	Net increase in other assets				(3,715	)		(4,504	)

			Net cash used in investing activities		(21,998	)		(27,431	)

Cash flows from financing activities
	Proceeds from long-term debt				60,000			30,000
	Repayments on long-term debt				(206,031	)		(59,711	)
	Payment of call premium to retire debt				(7,457	)		—
	Capital dividends				(19,021	)		(22,913	)

			Net cash used in financing activities		(172,509	)		(52,624	)

Net change in cash and cash equivalents					(130,309	)		1,828
Cash and cash equivalents, beginning of period					220,817			78,133

Cash and cash equivalents, end of period				$	90,508		$	79,961

Supplemental cash flow disclosure
	Interest paid			$	35,721		$	45,034

The accompanying notes are an integral part of these
consolidated condensed financial statements.

HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Horseshoe Gaming Holding Corp., a Delaware corporation, and its subsidiaries (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2001. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows of all periods presented have been made. The results of operations for the six months ended June 30, 2002, are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to the financial statements as previously presented to conform to current classifications.

Note 2 — Goodwill and Other Intangible Assets

On January 1, 2002 the Company adopted Statements of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 changed the accounting for goodwill and intangible assets. 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 Company has concluded its initial impairment tests required pursuant to SFAS 142 and has determined that no impairment charge is required.

A reconciliation of the Company’s reported net income to pro forma net income to give effect to SFAS 142 for the three and six months ended June 30, 2001, is as follows (in thousands):


		Three months ended		Six months ended
		June 30, 2001		June 30, 2001

Reported net income		$	22,512	$	47,849
Add back:
	Goodwill amortization		2,902		6,535
	Indefinite-lived intangibles amortization		—		167

Pro forma net income		$	25,414	$	54,551

Note 3 — Long-Term Debt

In June 2002, the Company redeemed all of its outstanding 9.375% Senior Subordinated Notes for $166.5 million, including call premium. As a result of this redemption, the Company recorded an extraordinary loss on early retirement of debt of $9.7 million in the second quarter of 2002 (see Note 5). In addition, the Company repaid approximately $38.0 million in other debt, bearing interest rates ranging from 9% to 12%. The Company used cash on hand plus $60.0 million of its Senior Secured Revolving Credit Facility (“Credit Facility”) to repay these obligations. As of August 12, 2002, the Company had $50.0 million outstanding under its Credit Facility and $100.0 million of availability.

Note 4 — Deferred Compensation

The Company recorded deferred compensation of $4.6 million and $(1.1) million for the three months ended June 30, 2002 and 2001, respectively, and $7.8 million and $(0.7) million for the six months ended June 30, 2002 and 2001, respectively, related to the appreciation/(depreciation) of vested stock appreciation rights in the Horseshoe Gaming Holding Corp. Equity Incentive Plan.

Note 5 — Recently Issued Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 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 standard 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 will adopt SFAS 146 beginning January 1, 2003. The Company does not believe the adoption will have a significant impact on its 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”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company is in the process of evaluating the impact of SFAS 145 on its financial statements and will adopt the provisions of SFAS 145 in the first quarter of 2003.

In 2001, the FASB issued 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. Companies are required to adopt the provisions of SFAS 143 as of the beginning of the entity’s fiscal year beginning after June 15, 2002. The Company is currently evaluating the provisions of SFAS 143 and the impact that adoption will have on the Company’s financial position and results of operations.

Also in 2001, the FASB issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). This statement establishes a single accounting model, based on the framework established by SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” for long-lived assets to be disposed of by sale. SFAS 144, which was adopted by the Company on January 1, 2002, had no impact on the Company’s financial position or results of operations.

Note 6 — Contingencies

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 June 2, 2000, a lawsuit was filed in the United States District Court for the Northern District of Indiana, against the Company and the Company’s subsidiary in Hammond, Indiana (“Horseshoe Hammond or 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 seeks 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. Horseshoe Hammond and the Company deny the allegations in the complaint asserted by the named employees and intend to vigorously contest this matter.

On July 8, 2002, the Common Council of the City of Hammond filed its “Verified Complaint for Preliminary Injunction And Declaratory Judgement 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.” 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 judgement finding that the First, Second, Third and Fourth Amendments to the Development Agreements are not valid. The Company believes that the suit is without merit and will vigorously defend the validity of the Amendments to the Development Agreement. An adverse ruling could delay Horseshoe Hammond’s ability to expand its facility in Hammond, Indiana.

Horseshoe Entertainment (“HE”), the Company’s subsidiary that owns and operates Horseshoe Bossier City, was issued an initial operator’s license by the Louisiana Enforcement Division (the “Enforcement Division”) on November 22, 1993 for a five year period. HE timely submitted its renewal application to the Enforcement Division and on October 20, 1998, the Louisiana Gaming Control Board (the “Gaming Control Board”) granted HE’s license renewal subject to suitability review. HE’s license renewal was extended on October 19, 1999, subject to completion of suitability review. The Enforcement Division filed a Report with the Louisiana Gaming Control Board on May 13, 2002, documenting the results of its suitability review. The Report noted a number of issues in Horseshoe’s history and dealings with the State of Louisiana that, in the view of the Enforcement Division, should be considered by the Gaming Control Board prior to making the final determination on HE’s license renewal application. The Report does not make a recommendation to the Gaming Control Board and, in fact, the Enforcement Division noted that the Gaming Control Board has the authority to renew HE’s license without conditions, to renew HE’s license with such conditions as the Gaming Control Board deems appropriate or to deny HE’s application for a license renewal.

The Gaming Control Board is expected to convene a hearing to act on HE’s license renewal during January 2003. HE believes the Report inaccurately describes certain matters. At that hearing, HE will have an opportunity to present its case for license renewal to the Gaming Control Board and in the process to contest and refute the items in the Report that are critical of HE’s past actions.

Note 7 — Subsequent Events

Indiana Legislative Activities

Recently passed legislation in the State of Indiana increased the gaming tax by 2.5%, effective July 1, 2002. This legislation also allows casinos the option to convert to dockside gaming in exchange for a graduated tax rate ranging from 15% to 35%. All of the casinos in Indiana, including Horseshoe Hammond, have been approved by the Indiana Gaming Commission to convert to dockside gaming. Hammond began dockside operations on August 1, 2002.

Ownership Transactions

In July 2002, the Company purchased 0.29% of its outstanding common stock from a current owner for approximately $2.5 million in cash.

Item 2. 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. References to Bossier City, Tunica, and Hammond (or Horseshoe Hammond) refer to the Company’s wholly owned subsidiaries in Bossier City, Louisiana; Tunica, Mississippi; and Hammond, Indiana, respectively. In addition, the Company owned and operated a casino in Joliet, Illinois (“Joliet”) until July 31, 2001. This discussion should be read in conjunction with the Company’s consolidated condensed financial statements and notes thereto.

This Quarterly Report on Form 10-Q 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, 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, but not limited to risks associated with substantial indebtedness, debt service and liquidity; risks of competition in the Company’s existing and future markets; expected increases in revenues as a result of dockside gaming in Indiana and whether the revenues will actually offset the increase in taxes; failure to obtain or retain licenses or regulatory approvals; and changes in gaming laws and regulations. Further information on these and other applicable risks are included in the Company’s filings with the Securities and Exchange Commission.

Results of Operations
Financial Highlights


		Three months ended June 30,						% Increase/(Decrease)

		2002			2001			2002 vs. 2001

		(dollars in thousands)
Casino revenues
	Bossier City	$	66,360		$	58,977			13	%
	Tunica		67,117			61,410			9	%
	Hammond		76,054			66,912			14	%
	Joliet (a)		—			68,643			(b	)

		$	209,531		$	255,942			-18	%

Net revenues
	Bossier City	$	68,491		$	61,108			12	%
	Tunica		66,640			62,690			6	%
	Hammond		78,313			68,289			15	%
	Joliet (a)		—			69,934			(b	)

		$	213,444		$	262,021			-19	%

Operating income (loss)
	Bossier City (c)	$	11,333		$	7,723			47	%
	Tunica (c)		18,094			16,977			7	%
	Hammond (c)		12,675			7,703			65	%
	Joliet (a)(c)		—			21,165			(b	)
	Corporate expenses		(8,545	)		(6,353	)		35	%
	Preopening expense (d)		—			(3,173	)		(b	)
	Deferred compensation		(4,645	)		1,092			(b	)
	Other		(60	)		(175	)		-66	%

		$	28,852		$	44,959			-36	%

Other information
	Interest expense, net	$	16,712		$	22,461			-26	%
	Extraordinary loss	$	9,683		$	—			(b	)
	Net income	$	2,457		$	22,512			-89	%
Operating margin (operating income/net revenue)(e)
	Bossier City (c)		17	%		13	%	4 pts.
	Tunica (c)		27	%		27	%	0 pts.
	Hammond (c)		16	%		11	%	5 pts.
	Joliet (c)		—			30	%		(b	)
	Consolidated		14	%		17	%	-3 pts.

(a)		Joliet was sold on July 31, 2001.




(b)		Not meaningful.




(c)		Before corporate allocations and other non-recurring items.




(d)		Includes advertising and production costs of $1.9 million.




(e)		The “% Increase/(Decrease)” for operating margin represents the absolute difference in percentage points (pts.) between the two periods.

Three months ended June 30, 2002 and 2001

Due to the sale of Joliet in July 2001, the Company experienced a consolidated 19% decline in net revenues in the second quarter of 2002 versus 2001. Net revenues at the three remaining properties increased a combined 11% when compared to the June 30, 2001 quarter. Excluding the effects of the January 1, 2002 adoption of Statements of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”), as further discussed below, the Company generated second quarter 2002 increases in operating income at its Bossier City, Tunica and Hammond properties.

With the adoption of SFAS 142, the Company ceased amortization on most intangibles, including goodwill, on January 1, 2002. Such amortization expense totaled approximately $2.9 million in the second quarter of 2001. Excluding amortization expense in the prior year period, operating income increased 39%, 5% and 27% in Bossier City, Tunica and Hammond, respectively, in the second quarter of 2002 as compared to the prior year quarter. In addition, operating margins in the second quarter of 2002 were 17%, 27% and 16% for Bossier City, Tunica and Hammond, respectively, as compared to operating margins of 13%, 27% and 15%, respectively, in the 2001 period when calculated on a comparable basis.

Net revenue increases in the 2002 quarter were the result of a combination of both volume and hold percentage improvements in Bossier City, Tunica and Hammond, and were the primary source of increases in operating income for the quarter.

Improved results in Bossier City in the second quarter of 2002 were achieved despite an additional 1% increase in gaming taxes that went into effect on April 1, 2002. Bossier City redirected its marketing efforts in the second quarter of 2002 by putting less emphasis on direct mail and more on advertising, primarily in the Dallas, Texas market. Advertising expense exceeded prior year by approximately $0.6 million in the quarter ended June 30, 2002, while direct mail expense in the quarter ended June 30, 2002 was $0.5 million less than the prior year period. As a result, Bossier City experienced a 22% increase in the number of new or reactivated slot patrons from the Dallas, Texas market in the quarter ended June 30, 2002 as compared to the prior year period.

Net revenues in Tunica increased approximately 6% in the quarter ended June 30, 2002 as compared to the prior year quarter, yet margins remained flat. Revenue increases associated with the Tyson/Lewis heavyweight championship fight that was held in Memphis, Tennessee in June 2002, fell short of expectations and did not offset the costs incurred. In addition, prior year net revenues include approximately $2.0 million related to a reduction in the amount of promotional costs incurred for player database marketing.

Hammond continued to show improvements in the quarter ended June 30, 2002 over the prior year quarter. Impacting Hammond’s operating income in the second quarter of 2002 was a $2.5 million charge for assets disposed of during the quarter, primarily related to the write-off of design and option fees on a site upon which the Company no longer plans to utilize.

Corporate expenses increased 35% in the second quarter of 2002, due primarily to the resolution of a 1999 — 2001 Louisiana franchise tax audit. The Company accrued $2.3 million in franchise tax expense plus interest in the quarter ended June 30, 2002, related to this audit. Positively impacting corporate expenses in the June 2002 quarter was a reduction in life insurance expense on a key executive and a reduction in legal expenses due to the completion of the sale of the Joliet property. In addition, the monthly consulting payments to the former owners of Joliet, amounting to $1.0 million per quarter, were included in corporate expense in the 2001 quarter. Upon the sale of Joliet, the present value of the remaining liability was accrued and charged against the gain on the sale of Joliet, thereby excluding those payments from corporate expense in the 2002 quarter.

Deferred compensation increased $5.7 million in the second quarter of 2002 due to appreciation on vested stock appreciation rights.

Interest expense, net decreased 26% in the second quarter of 2002 as compared to the prior year period, primarily due to lower outstanding debt balances during the 2002 quarter.

Results of Operations

Financial Highlights


		Six months ended June 30,						% Increase/(Decrease)

		2002			2001			2002 vs. 2001

		(dollars in thousands)
Casino revenues
	Bossier City	$	130,467		$	119,890			9	%
	Tunica		136,620			127,292			7	%
	Hammond		150,377			133,304			13	%
	Joliet (a)		—			134,599			(b	)

		$	417,464		$	515,085			-19	%

Net revenues
	Bossier City	$	135,026		$	124,137			9	%
	Tunica		135,317			128,034			6	%
	Hammond		154,919			135,772			14	%
	Joliet (a)		—			137,550			(b	)

		$	425,262		$	525,493			-19	%

Operating income (loss)
	Bossier City (c)	$	22,303		$	15,693			42	%
	Tunica (c)		41,587			37,272			12	%
	Hammond (c)		29,459			16,500			79	%
	Joliet (a)(c)		—			40,576			(b	)
	Corporate expenses		(13,400	)		(12,887	)		4	%
	Preopening expense (d)		—			(4,064	)		(b	)
	Deferred compensation		(7,761	)		674			(b	)
	Other		179			(246	)		-173	%

		$	72,367		$	93,518			-23	%

Other information
	Interest expense, net	$	33,464		$	46,133			-27	%
	Extraordinary loss	$	9,683		$	—			(b	)
	Net income	$	28,605		$	47,849			-40	%
Operating margin (operating income/net revenue)(e)
	Bossier City (c)		17	%		13	%	4 pts.
	Tunica (c)		31	%		29	%	2 pts.
	Hammond (c)		19	%		12	%	7 pts.
	Joliet (c)		—			29	%		(b	)
	Consolidated		17	%		18	%	-1 pts.

(a)		Joliet was sold on July 31, 2001.




(b)		Not meaningful.




(c)		Before corporate allocations and other non-recurring items.




(d)		Includes advertising and production costs of $2.0 million.




(e)		The “% Increase/(Decrease)” for operating margin represents the absolute difference in percentage points (pts.) between the two periods.

Six months ended June 30, 2002 and 2001

The Company experienced a consolidated 19% decline in net revenues in the first six months of 2002 versus 2001 due to the sale of Joliet in July 2001. Net revenues at the three remaining properties increased a combined 10% when compared to the six months ended June 30, 2001. Excluding the effects of the January 1, 2002 adoption of SFAS 142, the Company generated increases in operating income and operating margins at its Bossier City, Tunica and Hammond properties in the first six months of 2002 as compared to the prior year period.

Excluding the $6.7 million in amortization expense that was recorded in the 2001 period, operating income increased 35%, 10% and 40% in Bossier City, Tunica and Hammond, respectively, in the six months ended June 30, 2002 as compared to the prior year period. In addition, operating margins in the first six months of 2002 were 17%, 31% and 19% for Bossier City, Tunica and Hammond, respectively, as compared to operating margins of 13%, 29% and 16%, respectively, in the 2001 period when calculated on a comparable basis.

Net revenue increases at the Company’s three remaining properties in the first six months of 2002 were the result of volume increases in both slots and table games, coupled with a higher slot hold percentage. These revenue increases were the primary source of improvements in operating income at the three properties during the first six months of 2002.

Improved results in Bossier City in the first six months of 2002 were achieved despite an additional 1% increase in gaming taxes that went into effect on April 1, 2002. Due to the redirection of marketing efforts in Bossier City in the first half of 2002, direct mail expense in the six months ended June 30, 2002 was $1.4 million less than the prior year period, while advertising and complimentary expenses exceeded prior year by $1.0 million.

Operating income in Tunica in the six months ended June 30, 2002 includes approximately $1.9 million in positive adjustments related to favorable resolutions on various tax matters. In addition, prior year net revenues in Tunica include approximately $2.0 million related to a reduction in the amount of promotional costs incurred for player database marketing.

Hammond has shown significant improvements in the six months ended June 30, 2002 as compared to the same period in 2001, benefiting from the Horseshoe branding efforts that have evolved since the property was acquired in late 1999.

Corporate expenses increased 4% in the first six months of 2002, due primarily to the resolution of a 1999 — 2001 Louisiana franchise tax audit. The Company accrued $2.3 million in tax franchise expense plus interest in the first six months of 2002, related to this audit. Positively impacting corporate expenses in the 2002 period was a reduction in life insurance expense on a key executive and a reduction in legal expenses due to the completion of the sale of the Joliet property. In addition, the monthly consulting payments to the former owners of Joliet, amounting to $2.0 million for six months, were included in corporate expense in the 2001 period. Upon the sale of Joliet, the present value of the remaining liability was accrued and charged against the gain on the sale of Joliet, thereby excluding those payments from corporate expense in the 2002 period.

Deferred compensation increased $8.4 million in the first six months of 2002 due to additional appreciation on vested stock appreciation rights.

Interest expense, net decreased 27% in the six months ended June 30, 2002 as compared to the prior year period, primarily due to lower outstanding debt balances during 2002.

Liquidity and Capital Resources

As of June 30, 2002, the Company had cash and cash equivalents of $90.5 million. During the six months ended June 30, 2002, cash provided by operating activities was $64.2 million, net cash used in investing activities was $22.0 million and net cash used in financing activities was $172.5 million.

In June 2002, the Company redeemed all of its outstanding 9.375% Senior Subordinated Notes for $166.5 million, including call premium. As a result of this redemption, the Company recorded an extraordinary loss on early retirement of debt of $9.7 million in the second quarter of 2002. In addition, the Company repaid approximately $38.0 million in other debt, bearing interest rates ranging from 9% to 12%. The Company used cash on hand plus $60.0 million of its Senior Secured Revolving Credit Facility (“Credit Facility”) to repay these obligations. As of August 12, 2002, the Company had $50.0 million outstanding under its Credit Facility.

Management believes that the Company’s cash and cash equivalents, cash from operations and $100.0 million in available borrowing capacity on its Credit Facility will be adequate to meet the Company’s debt service obligations and capital expenditure commitments for the next twelve months.

Indiana Legislative Activities

Ownership Transactions

In July 2002, the Company purchased 0.29% of its outstanding common stock from a current owner for approximately $2.5 million in cash.

Contingencies

On June 2, 2000, a lawsuit was filed in the United States District Court for the Northern District of Indiana, against Horseshoe Hammond and the Company 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 seeks 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. Horseshoe Hammond and the Company deny the allegations in the complaint asserted by the named employees and intend to vigorously contest this matter.

Horseshoe Entertainment (“HE”), the Company’s subsidiary that owns and operates Bossier City, was issued an initial operator’s license by the Louisiana Enforcement Division (the “Enforcement Division”) on November 22, 1993 for a five year period. HE timely submitted its renewal application to the Enforcement Division and on October 20, 1998, the Louisiana Gaming Control Board (the “Gaming Control Board”) granted HE’s license renewal subject to suitability review. HE’s license renewal was extended on October 19, 1999, subject to completion of suitability review. The Enforcement Division filed a Report with the Louisiana Gaming Control Board on May 13, 2002, documenting the results of its suitability review. The Report noted a number of issues in Horseshoe’s history and dealings with the State of Louisiana that, in the view of the Enforcement Division, should be considered by the Gaming Control Board prior to making the final determination on HE’s license renewal application. The Report does not make a recommendation to the Gaming Control Board and, in fact, the Enforcement Division noted that the Gaming Control Board has the authority to renew HE’s license without conditions, to renew HE’s license with such conditions as the Gaming Control Board deems appropriate or to deny HE’s application for a license renewal.

Recently Issued Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As of June 30, 2002 there were no material changes to the information incorporated by reference in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

PART II OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Item 6. EXHIBITS AND REPORTS ON FORM 8-K


Exhibit
Number		Description

3.1 (a)		Certificate of Incorporation of Horseshoe Gaming Holding Corp.

3.2 (a)		By-laws of Horseshoe Gaming Holding Corp.

10.1 (b)		Purchase Agreement dated July 1, 2002 between Horseshoe Gaming Holding Corp. and G.A. Robinson, III.

99.1 (b)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 (b)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(a)		Filed as an Exhibit to Horseshoe Gaming Holding Corp.’s Form S-4 Registration Statement filed on June 15, 1999.

(b)		Included herein.

Reports on Form 8-K filed during the quarter:

On May 31, 2002, a Form 8-K was filed to announce the Company’s dismissal of Arthur Andersen, LLP as its independent public accountants and the engagement of Deloitte & Touche, LLP as its new independent public accountants.

SIGNATURES

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


	HORSESHOE GAMING HOLDING CORP. a Delaware corporation

Date: August 13, 2002	By:	/s/ Kirk C. Saylor

		Kirk C. Saylor Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX


Exhibit
Number		Description

3.1 (a)		Certificate of Incorporation of Horseshoe Gaming Holding Corp.
3.2 (a)		By-laws of Horseshoe Gaming Holding Corp.
10.1 (b)		Purchase Agreement dated July 1, 2002 between Horseshoe Gaming Holding Corp. and G.A. Robinson, III.
99.1 (b)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 (b)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.






(a)	Filed as an Exhibit to Horseshoe Gaming Holding Corp.’s Form S-4 Registration Statement filed on June 15, 1999.




(b)	Included herein.

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HORSESHOE GAMING HOLDING CORP 10-Q